ONTARIO SUPERIOR COURT OF JUSTICE

Court File and Parties

COURT FILE NO.: CV-17-575025

DATE: 20201005

B E T W E E N:

UNITED STATES OF AMERICA

Plaintiff

• and -

myron gushlak

Defendant

BEFORE: F.L. Myers J.

COUNSEL: Malcolm N. Ruby and Marco S. Romeo, for the Plaintiff

Marie-Andrée Vermette and Vipal Jain, for the Defendant

READ: October 5, 2020

endorsement

[1] This motion was heard in writing pursuant to the endorsement of Vella J. The plaintiff moves under Rule 39.02 (2) to allow it to deliver affidavits exhibiting numerous documents after it has already conducted cross-examinations on a scheduled motion for summary judgment. The plaintiff says it needs to put the additional documents into evidence by affidavit because the defendant did not admit the documents that he ought to have admitted during his cross-examination.

[2] In this action, the United States of America seeks to enforce civilly a restitution order made against the defendant in a criminal case in which the defendant was found guilty of securities fraud and conspiracy to commit money laundering. He was also sentenced to 72 months imprisonment and a USD $25 million fine.

[3] The Government of Canada has granted permission for this claim to be brought as required by the Mutual Legal Assistance in Criminal Matters Act (Canada).

[4] In accordance with the schedule set for the plaintiff’s motion for summary judgment, the motion is ready to be heard. Both sides have delivered their factums.

[5] In the defendant’s factum on the motion for summary judgment, he took objection to the plaintiff relying on documents that its counsel produced shortly before or at his cross-examination that were not admitted by the defendant. The documents were marked as lettered exhibits for identification only. They were not admitted by the defendant or his counsel as authentic nor for the truth of their contents.

[6] The plaintiff now seeks to have the documents admitted into evidence through an affidavit of an investigator who pulled many of the documents from public US court files. There is also an affidavit of a law clerk in the plaintiff’s lawyers’ office concerning other documents that one would expect the defendant to have.

[7] The documents at issue, if available for the truth of their contents, are all relevant to the issues on the motion. They go to undermining the evidence of Mr. Gushlak concerning his assets (or lack thereof) and his entitlement under a trust to which he refers in his own affidavit.

[8] In the ordinary course, one would expect the parties to agree on the authenticity and use to be made of virtually all of the documents - especially items like transcripts of US proceedings and the trust documents concerning a trust to which Mr. Gushlak refers in his affidavit.

[9] But Mr. Gushlak is a convicted fraudster. He denies that he and his wife are beneficiaries of a trust when the documents in the plaintiff’s possession seem to say otherwise. He denies that he has the documents and did not admit the documents put to him on cross-examination by the plaintiff. This seems to have caught the plaintiff by surprise and left it without the evidence on which it wished to rely to establish what it says is the truth.

[10] The defendant argues that it is too late to add to the evidentiary record now. He also argues that none of the documents are admissible through the investigator and law clerk. They are hearsay at best and double, triple, or quadruple hearsay in some cases. The plaintiff is proffering witnesses who effectively say “[h]ere are documents that I found in various credible places”. The defendant says that none of the documents can be admissible for the truth of their contents based on such evidence.

[11] The plaintiff retorts that the question of admissibility is for the judge hearing the motion. In addition, it argues that the documents are reliable and necessary in the alternative.

[12] There are two issues on the motion:

a. Has the plaintiff met the test for admitting late evidence under Rule 39.02 (2); and

b. What is the role of admissibility in the above determination?

[13] The parties agree that the test for admission of evidence for a motion after cross-examinations have been held was articulated by the Divisional Court in First Capital Reality Inc. v Centrecorp, [2009] 75631 at para. 9 (Div. Ct.). The court will consider the following factors:

(1) is the evidence relevant;

(2) does the evidence respond to a matter raised on the cross-examination, not necessarily raised for the first time;

(3) would granting leave to file the evidence result in non-compensable prejudice that could not be addressed by imposing costs, terms, or an adjournment; and

(4) did the moving party provide a reasonable or adequate explanation for why the evidence was not included at the outset.

[14] I also agree with Stinson J. that the context for assessing this type of motion is important. In Brock Home Improvement Products Inc. v Corcoran, 2002 49425 at para. 8, he observed:

Rule 39.02(1) and (2) are an important and integral part of the procedural code governing the conduct of motions and applications. These rules are designed to place finite limits on the evidentiary element of those proceedings, an element that is all-too frequently time-consuming, expensive and drawn-out. These rules oblige the parties to consider the issues and to put all relevant evidence forward before embarking upon cross-examination of the opposite party’s witnesses. This is the approach mandated by the rules to achieve the “just, most expeditious and least expensive determination” of motions and applications. Consistent with that approach, it is only in exceptional cases that resort should be had to rule 39.02(2).

[15] This discussion is particularly apt for motions for summary judgment. While a motion for summary judgment is an important mechanism for the court to deliver timely and affordable civil justice, it can also become an expensive and slow process that achieves the exact opposite outcome. The need for case management of summary judgment motions was recognized in Hryniak v Mauldin, 2014 SCC 7 at para. 72 to avoid this very risk.

[16] I have already determined above that all of the evidence proposed is or would be relevant if admissible. There is no question that the issue of admissibility of evidence on a motion is best left to the hearing judge. However, in my view, I cannot determine the issues set out in First Capital without some consideration of admissibility. There is no point in speaking of whether proposed evidence is relevant and responsive to issues raised in cross-examination unless the evidence is admissible. Similarly, considering whether a party has a reasonable explanation for why inadmissible evidence was not included in its initial motion material is a non sequitor.

[17] However, it seems to me that I can resolve the issue under R. 39.02 (2) by simply assuming that the evidence under discussion is admissible and then leaving the actual decision on admissibility to the motion judge. If I grant leave to deliver evidence that the motion judge later says is inadmissible, there is no injustice to the defendant. However, if I refuse leave to deliver evidence on the basis of a premature decision on admissibility, there is a risk of doing injustice to the proffering plaintiff. The motion judge will read and hear all of the evidence on the summary judgment motion. She might well be in a better position than me to determine whether the evidence is admissible. This is particularly the case for assessing the necessity and reliability of the evidence under the principled approach to hearsay exceptions.

[18] The difficulty that I have with this motion is not so much the question of admissibility as the issue of why the material was dealt with as it was. Knowing that the defendant is a convicted fraudster who is fighting enforcement of the civil penalty, the plaintiff chose to try to introduce documents through the defendant rather than doing so itself. They had to have known that if the defendant simply refused to confirm the authenticity of the documents, they had an evidence problem.

[19] Why did the plaintiff not attach the documents that it says it needs to an affidavit delivered prior to the cross-examination?

[20] The plaintiff’s counsel makes the following submissions in its factum:

33. The Gushlak Affidavit was sworn on 9 January 2020, about six weeks before the cross-examination took place in the third week of February 2020.

34. The United States would have no occasion to assemble the documents appended to the two affidavits until the cross-examination, when the documents were used to test the truth of statements in the Gushlak Affidavit. There was no reason for the United States to obtain the documents until after receipt of the Gushlak Affidavit and before the cross-examination. Some documents, in particular the Crossroads Deed of Trust and related documents, were not obtained until after Gushlak’s counsel refused, for example, to produce any documents relating to the Crossroads Trust in response to a Request to Inspect Documents before the cross-examination was commenced in February 2020.

[21] These factual assertions in the factum are not supported by any affidavit evidence. They are ostensibly inadmissible. Moreover, they do not answer the question posed in First Capital.

[22] I cannot accept that six weeks is not enough time for the United States of America to obtain documents from US court files. Even accepting that some lateness was due to the defendant’s counsel’s unanticipated failure or refusal to produce documents voluntarily as alleged, once the documents were in hand, why were the documents not put into the short affidavits of the investigator and law clerk and delivered the day before the cross-examination? A few were produced in advance with no affidavit. Others were held back for the examination. The answer is either the plaintiff’s lawyer was concerned that if he adduced late affidavits before the cross-examination, he might be giving the defendant a basis to cancel the examination and delay the motion or, the plaintiff’s lawyer wanted to surprise the witness on cross.

[23] Regardless of the precise rationale for the decision to put the documents to the witness instead of putting them in through an affidavit even the day before the cross-examination, it is clear that the plaintiff’s counsel made a strategic choice that backfired.

[24] The plaintiff relies upon case law that says that it is especially important for motions for summary judgment to be conducted on a full evidentiary base. It also argues that it is not in the interests of justice to leave Mr. Gushlak’s evidence intact when it can be proven to be false in material ways. I accept both of those submissions. But it is also incumbent on a party moving for summary judgment to “put its best foot forward”. Summary judgment is also not the mechanism best suited for determination of factual disputes. No doubt, courts are entitled to make factual inferences and credibility findings on motions for summary judgment in appropriate cases. However, the court also must avoid turning motions for summary judgment into trials in a box. A trial cannot be dumped on a motions judge in banker’s boxes leaving the judge to wade through scads of complex, conflicting testimony in her chambers with minimal guidance from counsel.

[25] In my view, if the plaintiff wanted to put into evidence the documents appended to the two new affidavits, it ought to have done so by affidavit prior to the cross-examination. If the defendant would not produce documents appropriately, a case conference was available. In addition, if the plaintiff now finds itself with a serious factual contest that it was not expecting, arguing that the defendant is outright lying, perhaps the parties should be considering a form of summary trial to deal with the few, key credibility issues raised in the motion.

[26] In my view, a party cannot hold documents back and then say that the issues arose in cross-examination to satisfy point (2) from First Capital. An issue does not have to be new. But it cannot be an anticipated issue which the examiner raises himself in the cross-examination. Moreover, there is no evidence before the court providing a reasonable explanation for why the matters are being raised now and were not dealt with in affidavit evidence in reply to Mr. Gushlak’s affidavit. Even accepting the unsupported submission in the plaintiff’s factum, it is not a satisfactory explanation.

[27] Accordingly, the motion is dismissed.

[28] As I am not granting leave for the evidence to be admitted, I can comment on admissibility without risk of interfering with the motion judge’s jurisdiction. For completeness and in case a court might find that I have improperly failed to carry out a gatekeeper function concerning evidence admissibility, I would have found the evidence proffered inadmissible in any event. A person with no personal knowledge of the contents of a document cannot plunk it on the table and assert the contents to be true. The plaintiff says they are “necessary” to expose the untruthfulness of Mr. Gushlak’s testimony. That does not explain at all the necessity for the documents to be admitted through hearsay, double hearsay etc. Court reporters can prove transcripts. Authors can prove emails. Drafters and parties can prove legal documents. Administrators can prove regulatory documents. Law clerks, Legal Assistants, and students can prove correspondence between the lawyers not documents of which they have no personal knowledge and whose authenticity is in issue.

[29] I invite the plaintiff to consider whether its motion ought to proceed in the absence of the documents that are the subject of this decision. Might a case conference be appropriate to consider a customized process for resolving factual disputes before resolution of narrow legal questions by summary judgment?

[30] This does not appear to me to be a case for costs. The defendant is legally entitled to put the plaintiff to its burden of proof. But, in my view, he should not be rewarded for refusing to admit court transcripts or trust documents that appear on their faces to probably be authentic and that may undermine his sworn testimony. The documents may not come in as late evidence on a summary judgment motion, but that does not mean that they will not come into evidence in another way. Both sides are wrapped up in strategic approaches rather than trying to find the most efficient, affordable, and proportionate manner to fairly bring the issues in this proceeding to resolution.

F.L. Myers J.

Date: October 5, 2020