COURT FILE NO.: 1665/17; 2802/17; 4749/17
DATE: 2021 05 07
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Court File No.: 1665/17
THE REGIONAL MUNICIPALITY OF HALTON
Talia Gordner, for the Plaintiff
Plaintiff
- and -
NICOLAS REWA, MARION REWA, REWA CONSULTANT LIMITED and 1103882 ONTARIO LIMITED
No one appearing for the Defendants
Defendants
AND BETWEEN:
Court File No.: 2802/17
THE REGIONAL MUNICIPALITY OF HALTON
Talia Gordner, for the Plaintiff
Plaintiff
- and -
F. GRECO & SONS LIMITED O/A GRECO CONSTRUCTION, MICHAEL GRECO, JOHN FRANK GRECO, JOHN PAUL GRECO, SIRRON SYSTEMS INCORPORATED, SIRRON SYSTEMS INC., SIRRON GROUP INTERNATIONAL, SIRRON ELECTRICAL CONTRACTING CORPORATION, DAVID ALLAN NORRIS, MEEHAN’S INDUSTRIAL MAINTENANCE LTD., PATRICK VINCENT MEEHAN, JASON MATTHEW MOTE, GIULIO (JULIO) CERELLI, CANIAN PRECISION MACHINE SHOP LIMITED, WAHAN AGHAIAN, ELI ISHKHANIAN and LISA SNOWBALL
David Allan Norris, on his own behalf and on behalf of the defendants Sirron Systems Incorporated, Sirron Systems Inc., Sirron Group International and Sirron Electrical Contracting Corporation
No one appearing for the other Defendants
Defendants
AND BETWEEN:
Court File No.: 4749/17
THE REGIONAL MUNICIPALITY OF HALTON
Talia Gordner, for the Plaintiff
Plaintiff
- and -
DAVID ATSUSHI OHASHI, PAMELA GLORIA OHASHI, SYNTEG INC., SYPAR LIMITED LIABILITY COMPANY, MARINO WOO, FLOVAL EQUIPMENT LTD., TODD McLAREN, JOHN DOE INC. AND JOHN DOE
No one appearing for the Defendants
Defendants
Peter Entecott, for the Non-Party, Ministry of the Attorney General
HEARD: March 25, 2020 via video conference
DECISION ON MOTION FOR INTERIM PRESERVATION ORDER
PURSUANT TO RULE 45.01
Daley J.
I BACKGROUND
[1] The plaintiff The Regional Municipality of Halton ("Halton") has instituted several actions against multiple defendants seeking the payment of damages of more than $20 million, relating to alleged fraud, conversion, breach of trust and conspiracy to commit such breaches by the defendants in the within and related actions.
[2] Halton in the three referenced actions has brought a Wagg Motion for production and forensic imaging of the documents, electronic records, electronic devices and other things seized by the Halton Regional Police Service (“HRPS”) in relation to the activities of the defendants described in these reasons below, pursuant to the Criminal Code Production Orders, search warrants and other means (“Halton’s Wagg Motion”).
[3] Halton’s Wagg motion in respect of the three actions is scheduled for June 14, 2021.
[4] On the present motion Halton seeks an interim order with respect to both HRPS and alternatively the Crown to continue preserving and maintaining custody and control of any documents, electric records, electronic devices and other things seized by HRPS pending the final determination of Halton’s Wagg, motion including any appeals. The order is sought in order to maintain the current status quo and to reduce the likelihood that any items seized by or in the possession of HRPS or the Crown are destroyed, altered, whether deliberately or unintentionally, until Halton’s Wagg motion can be finally determined.
[5] The motions have been brought in these three related actions in part as a result of a request by the defendant David Norris (“Norris”) in action number 2802/17 forwarded to HRPS and the Crown seeking the return of certain Wagg items seized from him and his companies, namely Sirron Systems Inc., Sirron Group International, and Sirron Electrical Contracting Corporation (the “Norris Defendants”).
[6] The defendant Norris has opposed Halton’s motion herein for an interim preservation order pursuant to rule 45.01 of the Rules of Civil Procedure. A temporary interim preservation order was granted on March 19, 2021 in respect of these actions pending the determination of these motions.
[7] Both HRPS and the Crown are not opposing these motions and the relief sought and HRPS is agreeable to continuing to preserve and maintain custody of the Wagg items.
[8] The Lancaster Defendants, as defined below are not opposing the motions in these actions.
[9] The Greco Defendants in action number 2802/17, filed no material and did not attend on the return of these motions.
II Judicial History
[10] It is notable that no material was filed by any party in opposition to Halton’s interim preservation motions and as such there is little or no controversy over the judicial history relating to the parties
[11] The Defendant Norris in action number 2802/17 and his corporations herein before described were at the material times referenced in these actions, an approved vendor of the plaintiff municipality.
[12] The defendants Michael Greco, John Frank Greco and John Paul Greco are alleged to have been at all times material to these actions directors of F. Greco & Sons Limited O/A Greco Construction (“Greco Defendants”)
[13] Norris and his companies as well as the Greco Defendants have filed statements of defence.
[14] On April 11, 2017, Norris and others were criminally charged with a variety of offensives in connection with their activities in relation to the plaintiff. Norris was convicted of certain criminal offences with which he was charged on June 21, 2019 and his sentence was imposed on January 12, 2021. No appeals have been taken from either the convictions or the sentence imposed.
[15] Halton has in addition to the within actions, commenced several other actions related to the fraud referenced in these actions including: The Regional Municipality of Halton v. Rewa action number 1665/17 (the “Rewa Action”); The Regional Municipality of Halton v. Ohashi, action number 4749/17 (the “Ohashi Action”); and The Regional Municipality of Halton v. R. E. D. Welding and Fabricating Limited, Action Number CV–19-2946 (the “Red Welding Action”).
[16] The defendant Nicolas Rewa, a former employee of Halton and his spouse Marion Rewa are defendants in the Rewa Action.
[17] The defendant David Ohashi is also a former employee of Halton and a defendant in the Ohashi action.
[18] The Rewa Defendants and the defendant Ohashi were each charged with several offences under the Criminal Code in connection with their involvement with Halton.
[19] Following a guilty plea, the defendant Nicolas Rewa agreed to forfeit in excess of $2 million in favour of Halton and he was sentenced to three years in custody commencing July 2018.
[20] The defendant Ohashi was convicted of several criminal fences following his trial with his co-defendant Norris.
[21] The Lancaster Defendants include Glendon Lancaster, Lancaster Business Services Inc., LBS Accounting & Financial Services Inc., Stefan Du Chaussee, Melissa Alexis Lancaster and Melissa Lancaster. These parties are related parties and they are represented by the same counsel in the Red Welding Action. Some or all of the Lancaster Defendants were at the material time accountants for the defendant Norris and his corporations.
[22] In April 2017, the Court, on motion by Halton issued an order requiring the defendants in the Rewa Action to preserve certain documents, records, programs, software and property relevant to the allegations contained in the statement of claim in that action and required the defendants in that action to turn over to Halton certain categories of documents and records relating to Sirron Systems Inc. and Greco construction.
[23] The terms of the said preservation order remained in effect on the consent of the parties and an order was issued in July 2018 maintaining the preservation order in place until otherwise ordered by the court or as agreed upon by the parties.
[24] In the course of HRPS criminal investigation of the events giving rise to the plaintiff’s alleged losses, HRPS seized documents electronic records, and electronic devices from the defendants in these actions and pursuant to Production Orders issued under the Criminal Code, R.S.C., 1985, c. C-46, s. 487.014, as well as by way of search warrants. The material collected pursuant to these authorizations became part of the Crown’s Brief which was used in the prosecution of Norris and the other defendants.
[25] Some or all of the electronic records contained in the seized electronic devices have not yet been extracted by the HRPS or the Crown and it is asserted by the plaintiff that there is likely material relevant to the within actions contained in those devices. The electronic devices seized from Norris and his related companies, the Greco defendants and the Lancaster defendants are currently in the custody of HRPS.
[26] Halton’s Wagg motion in respect of these actions came before the court in April 2019. On its motion Halton sought production of documents, electronic records, electronic devices and things that were seized by HRP’s in connection with the investigation of the defendants’ activities allegedly resulting in the losses to Halton.
[27] The plaintiff has adduced evidence from its forensic accountant investigating the fraud to the effect that items seized and in the possession of HRP’s or the Crown in relation to the prosecution of Norris, or Ohashi may be relevant to the allegations in one or more of the civil actions due to the connection between the impugned activities of those parties.
[28] On the plaintiff’s Wagg motion hearing before Fitzpatrick J. on April 11, 2019, the plaintiff’s motion was adjourned to August 14, 2019, which, at that time, was after the completion of the criminal trial of the defendants Norris and Ohashi and the applicable appeal period. Fitzpatrick J. ordered that both the Crown and HRPS were to notify Halton 30 days prior to the release or return of any documents, electronic records, electronic devices or other items relating to the prosecution of Norris, the Rewas and Ohashi.
[29] The Norris defendants are opposing the pending Halton Wagg motion.
[30] The Lancaster defendants are not opposing the relief sought in Halton’s Wagg motion and the Greco defendants have not disclosed their position with respect to the motion.
[31] The Crown and HRPS have advised that they will not be opposing the relief sought in Halton’s Wagg motion, however their position with respect to the relief involving forensic imaging and production of material on the electronic devices has yet to be disclosed.
[32] The evidence proffered by the plaintiff in support of its position that an interim preservation order was necessary is uncontradicted.
EVIDENTIARY RECORD:
[33] On February 24, 2021, in accordance with the order of Justice Fitzpatrick, HRPS notified Halton that Norris, through his counsel, had requested that either HRPS or the Crown return to him Wagg items in their possession.
[34] In its motion record the plaintiff has adduced evidence in support of its position that an interim preservation order should be granted pending the Wagg motions, which are scheduled for June 14, 2021.
Wagg Items – Norris Defendants’ & Lancaster Defendants’ Conduct:
[35] In the course of HRPS’ criminal investigation of Norris Defendants the police seized a tablet computer from the garbage outside the offices of Norris Defendants’ accountants, the Lancaster defendants. It is asserted that the tablet computer was disposed of for the purpose of destroying evidence relating to the alleged fraud.
[36] During the police investigation, a Norris Defendants’ computer server was seized and without Halton’s knowledge it was returned to Norris Defendants. During an attendance in court before Justice Gray the defendant Norris was directed to “hang on to” evidence on the server and in response to the court’s direction Norris stated that it was “too late” as he may have already sold the server.
[37] It is asserted on behalf of the plaintiff that if the server was sold by the defendant Norris, he did so for the purpose of spoiling evidence that may be material to the claims made in the pending actions.
Wagg Items – Greco Defendants’ Conduct
[38] In the course of the police executing on a search warrant of the Greco business offices, the evidence discloses that the Greco Defendants appeared to know about the impending search. When the police arrived to conduct the search there were no staff in the defendants’ office other than Michael Greco and at that time he produced to the police a folder which he had prepared advising the officers that “this is what you’re looking for” or words to that effect. The file folder contained a limited number of documents which were not in keeping with the amount of work associated with construction at the defendants Rewa’s home. It was also noted by the police that there were a scant number of computers and records in the office.
[39] It was urged on behalf of Halton that the Greco Defendants were likely intending on hiding or destroying evidence relating to the alleged fraud.
Prejudice to the Defendants & the Plaintiff:
[40] The plaintiff has offered evidence that if computers, hard drives and phones were returned to any of the defendants pending the granting of a Wagg order the use of such devices would likely alter or destroy the electronic records sought to be preserved and potentially produced if Halton was successful on its Wagg motions.
[41] No evidence has been adduced by the responding defendants that would indicate that they would suffer any prejudice arising from the interim preservation order sought by Halton.
[42] On the other hand, Halton has adduced evidence that it potentially would suffer significant prejudice if the Wagg items were not properly preserved as that could result in the destruction of important, relevant and necessary evidence that would be considered in determining the outcome of the pending actions.
Applicable Legal Framework:
[43] The plaintiff moves pursuant to rule 45.01 (1) for an interim preservation order. The rule reads as follows:
The court may make an interim order for the custody or preservation of any property in question in a proceeding or relevant to an issue in a proceeding, and for that purpose may authorize entry on or into any property in the possession of a party or of a person not a party.
[44] The Court of Appeal has recently affirmed and restated the relevant principles and the appropriate test under rule 45.01 (1) in its decision in BMW Canada Inc. v. Autoport Limited, 2021 ONCA 42 (“BMW Canada”).
[45] Under rule 45.01 (1) parties can move for preservation of any property “in question” or “relevant” to a proceeding. The property sought to be preserved may be the subject matter of the litigation, such as an asset or ownership of property, or property that is relevant to a determination of the claim such as evidence.
[46] In BMW Canada, the van Rensburg JA, for the court, identified two very important considerations that had not been applied in the earlier decision of Taribo Holdings Ltd. v. Storage Access Technologies Inc., [2002] O.J. No. 3886. Firstly, in that decision, the court was considering a motion for a preservation order with respect to the actual subject matter of the dispute and not evidence that may be relevant and probative in the adjudication of the outcome.
[47] Secondly, van Rensburg JA considered the question as to whether or not there is a prima facie obligation on a litigant to preserve evidence.
[48] The court made some very important observations with respect to the doctrine of spoliation and the principle of trial fairness, which had not been previously addressed within the context of a motion under rule 45.01, at paras. [48] and [49] as follows:
[48] The courts have long recognized the doctrine of spoliation of evidence: see McDougall v. Black & Decker Canada Inc., 2008 ABCA 353, 302 D.L.R. (4th) 661 for a useful summary of the case law and principles. Underlying the doctrine is the trial fairness principle that parties to litigation are expected not to destroy important evidence, at least until the opposing party has had a fair opportunity to examine that evidence. The remedies are informed by considerations of trial fairness: the imposition at trial of a rebuttable presumption of fact that the missing evidence, had it been preserved, would have been unfavourable to the party who destroyed it, and other possible remedies to “level the playing field”, such as the exclusion of expert reports: see Gutbir v. University Health Network, 2010 ONSC 6752, at para. 13; McDougall, at paras. 18, 29; Stilwell v. World Kitchen Inc., 2013 ONSC 3354, 47 C.P.C. (7th) 345, at para. 55; and Endean v. Canadian Red Cross Society (1998), 157 D.L.R. (4th) 465 (B.C.C.A.), at para. 32, leave to appeal granted but appeal discontinued, [1998] S.C.C.A. No. 260. The debate in the cases about whether there is a standalone tort of spoliation, and whether remedies are available for negligent spoliation (the cases are summarized at paras. 19 to 22 of McDougall), does not undermine the animating principle: that the destruction of evidence can be harmful to trial fairness.
[49] Rule 45.01 permits the court to address trial fairness concerns that would arise if property constituting evidence were to be destroyed prior to its destruction, and so avoid the kind of harm in the litigation process that spoliation remedies address.
[49] In BMW Canada the Court of Appeal rejected the three-part test from Taribo Holdings as applied to a rule 45.01 (1) motion seeking the preservation of property relevant to an issue in a proceeding. The court acknowledged that the three-part test was appropriate where a rule 45.01 motion was brought to preserve property that the moving party was claiming in its litigation, however the court stated that the three-part test is not to be applied or adapted for all motions for interim preservation of property. It was further held that the Taribo Holdings test focusing on “serious issue to be tried” and “balance of convenience” was neither necessary nor appropriate in a case where the motion sought to preserve evidence and to permit inspection of the property.
[50] The court in BMW Canada provided a non-exhaustive list of factors to be considered in the context of a motion for an interim preservation of property. Halton, in its submissions, requested that two additional considerations be examined namely, the likelihood of alteration or destruction of the Wagg items, if an interim preservation order was not granted, and the potential prejudice to Halton.
[51] The following are the considerations enumerated by the court in BMW Canada: (1) the nature of the issues in dispute in the action; (2) the relevance and materiality of the property as evidence in the proceeding; (3) the purpose and proposed duration of the interim preservation order; (4) the benefits and harm or prejudice to the interests of each party in the litigation.
Analysis:
The Issues in Dispute and the Action:
[52] This action arises from an alleged fraud perpetrated by the Rewa Defendants, Norris Defendants, the Greco Defendants, the Lancaster Defendants, and Ohashi and others.
[53] The criminal charges against the defendants Rewas, Norris and Ohashi relate to the same activities that are the subject of these and the related civil actions.
[54] Although there are varying versions of the fraud scheme alleged by Halton, it is alleged in general terms that these defendants would submit invoices to Halton for services and materials that were purportedly for work carried out for the benefit of Halton. The invoices would be approved by Nicholas Rewa, Ohashi or other employees of Halton and Halton would thereby be induced to pay these invoices. The services and materials claimed to have been provided to Halton were not in fact provided or were exaggerated, the amounts charged on the invoices were inflated, or the work in fact related to services rendered with respect to renovations at the Rewas’ personal residence. The proceeds of the schemes would then be shared between the involved parties. These facts all favour the granting of an interim preservation order.
The Relevance and Materiality of the Property as Evidence:
[55] The documents in electronic records seized by the HRPS became part of the Crown’s prosecution of the Rewas, Norris and Ohashi. As a result of the connections between the impugned activities of those defendants and the Defendants in the other Halton related actions, the Wagg items are all very likely relevant to the allegations in one or more of the civil actions. I am satisfied on the uncontradicted evidence that the Wagg items referenced in these motions are very likely relevant to the allegations in one or more of the outstanding civil actions. I am further satisfied that this evidence is necessary for Halton to be able to ascertain the full nature and scope of its losses result of the activities of the defendants and this fact has been confirmed by Halton’s forensic accountant.
[56] It is evident from the record submitted by the plaintiff that some of the electronic records contained in the seized electronic devices and things were not extracted by either HRPS or the Crown despite likely being relevant to the issues in the within actions. Halton seeks to forensically image all of these electronic devices and the things in Halton’s Wagg motion for preservation and production purposes because of their potential relevance to these actions. Again, on the record adduced I am satisfied that these considerations form a foundation for the granting of an interim preservation order.
The Purpose and Proposed Duration of the Interim Preservation Order:
[57] Halton submits that the purpose of the interim preservation order sought is to ensure relevant and important evidence remains available, safe and free from destruction for the trial of this and the related actions. Specifically, Halton seeks to ensure that the Wagg items are preserved and not altered or destroyed in any way pending the determination of Halton’s Wagg motion and any related appeals.
[58] Although the exact duration of the interim preservation order has not been specified by Halton, following the determination of the pending Wagg motions, if successful, the duration of any such preservation order will be established in this complex litigation. Again, I have concluded that the facts under this consideration favour the granting of the interim preservation order.
The Benefits and Harm or Prejudice to the Interests of the Parties and the Litigation:
[59] As already noted, there is no evidence adduced by any of the responding parties on this motion to the effect that they will suffer any hardship or prejudice if the order sought is granted. The Wagg items were seized by the police in 2017 and have remained in the possession of the HRPS or the Crown since that time. There is no evidence of any urgency with respect to the respondents’ request for the return of this property. The Wagg motions are presently scheduled for June 14, 2021.
[60] The potential prejudice to Halton is clear if the evidence contained in the Wagg items is not preserved as this could result in the destruction of important, relevant and necessary evidence for the determination of the actions. Furthermore, the potential alteration or destruction of Wagg Items already covered by a preservation order would undermine the intention of that order and prejudice Halton pending the adjudication of the Wagg motions.
Likelihood of Alteration or Destruction of Wagg Items If Interim Preservation Order Not Granted:
[61] On the uncontradicted record adduced by the plaintiff, I have concluded that given the nature of the items and their vulnerability to tampering or destruction and further given the evidence with respect to the real risk of loss or destruction of these items, the evidence favours the granting of an interim preservation order. This conclusion is supported by the evidence outlined above involving the disposing of a laptop in the Lancaster defendants’ garbage as well as in statements made by Norris to the effect that he may have sold or disposed of a computer server.
[62] As considered by the court in BMW Canada, the doctrine of spoliation of evidence on the basis of destruction of evidence can be harmful to trial fairness. Parties are expected not to destroy important evidence or to tamper with it. Any preservation order made with respect to the subject property would simply maintain the status quo and protect against the very real risk of spoliation of evidence contained in the Wagg items.
[63] In the result, I have concluded that an interim order shall issue that HRPS, or alternatively, the provincial Crown shall preserve and maintain custody and role of WAGG items until such time as Halton’s Wagg motion is finally determined, including any appeals. The plaintiff shall submit to me draft orders for my signature in each of the three actions, prepared in accordance with these reasons.
The Norris Defendants’ Intended Motion under the Charter of Rights and Freedoms – Section 8 Search:
[64] During the submissions on this motion for an interim preservation order, the defendants Norris advised that he intended on bringing a Charter motion seeking to exclude from evidence certain items of property seized by HRPS on the basis of an alleged unlawful search and seizure. He submitted that he wished to proceed with such a Charter motion in advance of the court considering the pending Wagg motions. When he raised this on the hearing of this motion he indicated that he had consulted with counsel, however subsequently he advised the court and counsel opposite that he had not yet retained counsel to assist him with such a motion. As the Norris Defendants proposed Charter motion to exclude certain evidence relates to the admissibility of evidence at trial and not the outcome of the plaintiff’s Wagg motions, the Norris Defendants’ Charter motion will be scheduled for a hearing date following a decision on the Wagg motions. It is notable that the Norris Defendants have to this date failed to confirm that they will seek to proceed with the Charter motion.
[65] With respect to the issue of costs, counsel for the plaintiff shall serve and file costs submissions of no longer than three pages plus a cost outline within 20 days from the date of release of these reasons. The respondents shall serve and file similar submissions within 20 days thereafter. No reply submissions shall be filed.
Released: May 7, 2021
COURT FILE NO.: 1665/17; 2802/17; 4749/17
DATE: 2021 05 07
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
REGIONAL MUNICIPALITY OF HALTON
- and -
NICOLAS REWA, MARION REWA, REWA CONSULTANT LIMITED and 1103882 ONTARIO LIMITED
MOTION FOR INTERIM PRESERVATION ORDER PURSUANT TO RULE 45.01
Daley J.
Released: May 7, 2021