COURT FILE NO.: 4749/17
DATE: 2021 10 12
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
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
Paul Starkman, for the Ohashi Defendants
Defendants
HEARD: June 14, 2021
REASONS FOR DECISION ON RULE 30.10 MOTION
Daley J.
INTRODUCTION
[1] The plaintiff municipality (“Halton”) moves pursuant to rule 30.10 of the Rules Of Civil Procedure, R.R.O. 1990, Reg. 194, for the production of certain financial records in the possession of non-party financial institutions, which are in the name of or connected with the defendants David Atsushi Ohashi and Pamela Gloria Ohashi (the “Ohashi Defendants”).
[2] This action arises from alleged fraudulent conduct on the part of the defendants and others whereby the plaintiff was defrauded of approximately $2.5 million as a result of the manipulation of its procurement processes.
[3] This action is one of several pending actions involving 55 defendants, who were allegedly involved in a complex series of fraudulent transactions whereby the plaintiff sustained very significant financial loss, in excess of $20 million in total. The defendants include now former employees of Halton, as well as former approved suppliers and vendors.
[4] The non–party financial institutions who have been served with this motion do not oppose the relief sought.
[5] The only defendants opposing this motion are the Ohashi Defendants.
[6] The Amended Amended Statement of Claim asserts many causes of action against the Ohashi Defendants and their co-defendants, including fraud, civil conspiracy, breach of the defendant David Ohashi’s employment contract, misuse of confidential information, unlawful manipulation of the plaintiff’s contracting and procurement process, conversion, and breach of fiduciary duty.
EVIDENTIARY RECORD
[7] The defendant, David Ohashi, was a Halton employee in the period from March 9, 1999 to January 22, 2016. The defendant, Pamela Ohashi, is his spouse.
[8] The plaintiff engaged the services of a forensic accountant, Edward Nagel (“Nagel”) of Nagel + Associates, Inc., in 2015 to conduct an investigation with respect to the underlying circumstances of the fraud alleged in this and the related actions.
[9] The forensic accountant was tasked with quantifying the plaintiff’s losses, as well as locating, tracing, and recovering the unlawfully taken funds. The investigation remains ongoing at this time.
[10] It is alleged in the Amended Amended Statement of Claim that since December 2003, the Ohashi Defendants and others colluded to hinder Halton’s competitive bidding process, as well as induce Halton to pay for goods and services that were nonexistent, overpriced, never received or of no value to the plaintiff.
[11] It is stated in the evidence offered by Nagel that this fraudulent scheme was carried on over approximately 12 years and involved eight current or former Halton vendors along with their directors, officers, and principals.
[12] Nagel’s opinion evidence also shows that based on the accountant’s review of Halton’s internal records David Ohashi influenced the awarding of certain contracts to vendors, approved payments for nonexistent or worthless services, and disclosed confidential information to various vendors, including during an open tender process. He also received benefits in the form of cash and various goods and services from those vendors in exchange for his participation with them in the fraudulent scheme.
[13] The evidence of the accounting investigation further discloses that David Ohashi received benefits from the fraudulent scheme during at least the period from May 2010 to September 2015 and that benefits received included cash and cash equivalents.
[14] It is alleged that cash benefits were received from vendors. However, the full particulars of the cash benefits have not yet been quantified due to the unavailability of financial records.
[15] In addition to the cash benefits that are alleged to have been received by the Ohashi Defendants, it is also alleged that those defendants received electronics, home renovations, travel tickets, entertainment, and other goods and services from various Halton vendors.
[16] Ohashi was arrested and charged with several criminal offences in connection with the alleged fraudulent scheme and, on June 21, 2019, he was found guilty of fraud over $5,000, fraud under $5,000, and uttering a forged document. He was sentenced on January 12, 2021 and no appeals have been taken from his conviction or sentence.
[17] Various financial records and documents have been obtained by the plaintiff pursuant to Wagg orders related to the criminal proceedings involving David Ohashi and one David Allan Norris, as well as in the related actions. However, it is the evidence of Nagel that the records available at this time are insufficient to conduct and complete a comprehensive financial investigation and ascertain the full extent of Halton’s financial losses.
[18] In his affidavit of November 12, 2020, Nagel produced a chart outlining the type of financial records and documents that Nagel states are required to complete his investigation. He included examples of the documents and statements along with a statement as to the relevance of each category of document to his ongoing investigation with respect to Halton’s alleged losses.
[19] The evidence offered by Nagel states that in the accountant’s opinion the plaintiff’s losses which are attributable to the defendant David Ohashi’s conduct and the fraudulent scheme involving others amount to at least $994,000 CAD and $265,000 USD. However, the quantification of these losses is said to be understated based on the limited information and documentation available to the accountant at this time.
[20] As to the relevance of the documents required by the plaintiff, including the financial and banking records in the hands of the non-party respondents on this motion, Nagel deposes that the information contained in the records sought are relevant and necessary to allow for the quantification and tracing of assets and for the purpose of recovering the funds allegedly misappropriated.
[21] As set out in his affidavit, it is Nagel’s opinion that David Ohashi’s involvement in the alleged fraudulent scheme commenced as far back as December, 2003 and it is asserted that benefits may have been paid to David Ohashi following the termination of his employment with the plaintiff.
[22] Based on the opinion provided by Nagel, the plaintiff seeks production of the financial records from the non-parties for the period from December 2003 to July 2016, that date being six months after the termination of David Ohashi’s employment with the plaintiff.
[23] An ex parte interim preservation order was obtained by the plaintiff on November 18, 2018 that required the respondent financial institutions, namely the Bank of Montréal, the Canadian Imperial Bank of Commerce, the Toronto Dominion Bank, the Royal Bank of Canada, and the Bank of Nova Scotia, to preserve all records related to the defendants. The initial order was varied on consent on November 27, 2019 and the plaintiff is required to reimburse the third party financial institutions for the reasonable costs associated with preserving the financial records in question.
[24] In response to the affidavit material filed by the plaintiff on this motion, the Ohashi Defendants filed two affidavits from the defendants’ counsel’s law clerk dated April 27 and June 8, 2021. In these affidavits, documentary evidence was introduced in the form of the Information issued as against David Ohashi by the investigating police officer as well as the Reasons for Sentence of Chozik J., delivered on January 12, 2021.
[25] As David Ohashi was found guilty by a jury, in accordance with s. 724 of the Criminal Code, R.S.C., 1985, c. C-46, Chozik J. made certain findings of fact, from the trial evidence, that would be relevant to the determination of a fit sentence and those findings of fact are set out in her Reasons for Sentence.
[26] According to the Reasons for Sentence, the jury found David Ohashi guilty of fraud under $5,000 (count 1), uttering a forged document (count 2) and fraud over $5,000 (count 3). Chozik J. imposed a suspended sentence with probation for 18 months.
[27] The accused David Norris, who is a defendant in a related action, and who was tried together with David Ohashi, was found guilty of fraud over $5,000 (count 4) municipal corruption (count 5) and of paying secret commissions to a municipal official (count 6). This accused was sentenced at the same time as David Ohashi and the court imposed a conditional sentence of incarceration of two years less a day to be served in the community.
[28] A rule 30.10 motion was brought by Halton, in the related action, where it sought production of certain financial records connected to David Norris in the hands of various financial institutions. David Norris and the financial institutions did not oppose the granting of an order requiring the production of those records.
POSITIONS OF THE PARTIES
Position of the Plaintiff:
[29] The plaintiff seeks an order requiring the third-party financial institutions to produce certain financial records relating to the Ohashi Defendants on the basis that those records are relevant to a material issue at stake in this action and it would be unfair for the plaintiff to proceed to trial without having discovery of those records. It is further the position of the plaintiff that production of these third-party records is necessary in advance of examinations for discovery in order to allow for meaningful discovery and to avoid multiple and lengthy attendances on examinations related to undertakings that may be given relating to the production of additional documents.
Position of the Ohashi Defendants:
[30] These defendants oppose the plaintiff’s motion on several grounds, including that the evidence adduced by the plaintiff on this motion does not meet the requirements of rule 30.10 as to both the relevance and necessity of the documents sought, and with respect to the alleged unfairness to the plaintiff if the matter were to proceed to trial without discovery of these documents.
[31] The defendants further submit that the plaintiff’s motion must be dismissed since an order requiring production of the third-party financial institutions’ records would violate their constitutionally protected privacy interest in those records.
[32] As considered below in these reasons, the Ohashi Defendants have raised certain evidentiary objections as to the admissibility of the Nagel affidavit, and they have submitted that the Reasons for Sentence of Chozik J. are admissible as evidence on this motion and that the findings of fact made by the trial judge are admissible – although not binding on this court – and must be taken into account in weighing the evidence as a whole on the motion.
LEGAL FRAMEWORK
[33] The plaintiff’s motion for the production of documents from the non-party financial institutions is brought pursuant to rule 30.10 (1) of the Rules of Civil Procedure which provides as follows:
30.10 (1) The court may, on motion by a party, order production for inspection of a document that is in the possession, control or power of a person not a party and is not privileged where the court is satisfied that,
(a) the document is relevant to a material issue in the action; and
(b) it would be unfair to require the moving party to proceed to trial without having discovery of the document.
[34] This rule requires that the moving party satisfy both branches of the rule.
[35] As to the examination of the first branch of the rule, which requires the moving party to demonstrate that the document is relevant to a material issue in the action, reference to the pleadings and the allegations made is necessary.
[36] Relevance exists as a relationship between an item of evidence and the proposition sought to be established. It cannot exist in the abstract: Zimmerman v. McNaull, 2021 ONSC 3436, 155 O.R. (3d) 680, at para. 59.
[37] A piece of evidence is relevant to a proposition in issue if, as a matter of common sense and human experience, the evidence makes the proposition slightly more or less probable than it would be without the evidence: R. v. Luciano, 2011 ONCA 89, 273 O.A.C. 273, at para. 204.
[38] It has been held that when production of documents is sought and they are in the hands of a non-party, the test for relevance is higher than in the discovery context: Walker v. Doxtator, 2018 ONSC 2112, at para. 12.
[39] As to materiality, an issue material to the action is one which, if determined in favour of the party, would influence the court toward finding in favour of such party in the action: Ontario (Attorney General) v. Ballard Estate et al., [1995] O.J. 1854 (Gen. Div.), at para. 11.
[40] The evidentiary burden resting on a party seeking an interim preservation order pursuant to rule 45.01 is significantly lower than the evidentiary burden resting on a party seeking production of documentation from a non-party pursuant to rule 30.10 (1). Preservation orders have been granted in this action and the related actions.
[41] Orders providing for the disclosure and production of records in the hands of non-parties pursuant to rule 30.10 are exceptional remedies in the context of civil litigation and such orders are not routinely granted and on such motions a robust review of the considerations under this rule is called for.
[42] The second branch of rule 30.10 (1) requires that the moving party demonstrate that it would be unfair to proceed to trial without production of the records in question. In Ontario (Attorney General) v. Ballard Estate, 1995 CanLII 3509 (ON CA), 129 D.L.R (4th) 52 (“Ballard”), the Court of Appeal set out six factors to be considered by the court in determining whether the second part of the test under this rule has been satisfied. The factors are as follows:
(a) the importance of the documents in the litigation;
(b) whether production at the discovery stage of the process, as opposed to production at trial, is necessary to avoid unfairness to the moving party;
(c) whether the discovery of the defendants with respect to the issues to which the documents are relevant is adequate, and if not, whether responsibility for that inadequacy rests with the defendants;
(d) the position of the non-parties with respect to production;
(e) the availability of the documents or their informational equivalent from some other source which is accessible to the moving parties;
(f) the relationship of the non-parties from whom production is sought to the litigation and the parties to the litigation. Non-parties who have an interest in the subject matter of the litigation and whose interests are allied with the party opposing production should be more susceptible to a production order than a true “stranger” to the litigation: Ballard, at p. 56-57.
PRELIMINARY EVIDENTIARY ISSUES
(A) Defendants’ Objection to Admissibility of the Nagel Affidavit:
[43] The defendants submit that the Nagel affidavit filed on behalf of the plaintiff must be struck for noncompliance with rules 4.06 (2) and 39.01 (4). It is the position of the defendants that the affidavit is not based on the deponent’s personal knowledge and fails to provide details of his findings and to produce documents relevant to the evidence offered.
[44] Nagel states in this affidavit that he and his firm were retained by the plaintiff to conduct an investigation of the alleged fraudulent schemes and that he has personal knowledge of the matters in his affidavit. Furthermore, in his affidavit, he offers an opinion regarding the fraudulent scheme based on a review of relevant and available financial and other records.
[45] It is urged on behalf of the plaintiff that the Nagel affidavit is compliant with the requirements of rule 30.10 (1) in that it explains the nature, scope and status of the forensic accounting investigation and provides evidence as to why the financial records sought are relevant and necessary.
[46] Having considered the submissions made on behalf of the defendants in opposing the admissibility of the Nagel affidavit, it is clear that the complaints made really relate to the sufficiency of the evidence adduced in the affidavit and not its admissibility. Notably, the defendants elected not to cross-examine Nagel on his affidavit.
[47] It is clear from the Nagel affidavit that the accountant’s investigation of the alleged fraudulent scheme is ongoing and that there are various documents, including the financial records that are sought on this motion, that are not presently available to the accountants These records would allow them to complete their review of the alleged fraudulent scheme for the purposes of identifying all persons involved in the scheme, quantifying the funds allegedly taken or defrauded, tracing the funds and identifying those who have benefited from the fraudulent scheme.
[48] There is no requirement that a moving party on a motion under rule 30.10 prove the allegations contained in the statement of claim. The sufficiency of the evidence adduced on the motion is a matter for the court to consider and weigh in determining the outcome of the motion.
[49] For these reasons, the defendants’ request that the Nagel affidavit be struck is denied.
(B) Admissibility of Sentencing Judge’s Reasons
[50] It was submitted on behalf of the defendants that the findings of fact made by the court as set out in the Reasons for Sentence released by Chozik J. are admissible in evidence in response to the plaintiff’s motion. The defendants’ purpose in seeking the admissibility of the Reasons for Sentence is to, among other things, demonstrate that the findings of the sentencing court did not demonstrate, as alleged in this action, that the fraud involved millions of dollars.
[51] It is notable that it was the defendants who adduced the evidence with respect to the charges brought against David Ohashi and the resulting convictions following a jury trial.
[52] The rule in Hollington v. F. Hewthorn & Co., [1943] 1 K.B. 587, [1943] 2 All E.R. 35, provided that proof of a previous conviction was not admissible in a civil case as evidence of the underlying facts upon which the conviction was based. This evidentiary rule was displaced by the provisions of s. 22.1 of the Ontario Evidence Act, R.S.O. 1990, c. E.23, which provides as follows:
22.1 (1) Proof that a person has been convicted or discharged anywhere in Canada of a crime is proof, in the absence of evidence to the contrary, that the crime was committed by the person, if,
(a) no appeal of the conviction or discharge was taken and the time for an appeal has expired; or
(b) an appeal of the conviction or discharge was taken but was dismissed or abandoned and no further appeal is available.
[53] Section 22.1 provides that where a person has been convicted of an offence and the commission of that offence is relevant to an issue in a civil action, then, whether or not that person is a party to the action, proof of the conviction or the finding of guilt is admissible in evidence for the purpose of proving that person committed the offence.
[54] The conviction is admissible not only as evidence against the party convicted, but also against any other party to the proceeding, whether or not the person convicted is a party in the subsequent proceeding: Q. v. Minto Management Ltd. (1984), 1984 CanLII 2118 (ON SC), 46 O.R. (2d) 756 (“Q v. Minto”), leave to appeal refused, (1984), 44 C.P.C. 6 at 13 (SCC).
[55] Although a conviction of an offence constitutes prima facie proof of that offence, an acquittal of an offence in a criminal proceeding is inadmissible in a subsequent civil proceeding as proof that the party did not commit the offence: Rizzo v. Hanover Insurance Co., 1993 CanLII 8561 (ON CA), 14 O.R. (3d) 98 (C.A), at paras. 6–7; cited with approval in R. v. Mahalingan, 2008 SCC 63, [2008] 3 S.C.R. 316, at para. 136.
[56] At the conclusion of the criminal trial of David Ohashi, the trial judge granted directed verdicts of acquittal on three counts and left with the jury the three remaining counts in the indictment, which this defendant was ultimately convicted of. The directed verdicts of acquittal are inadmissible on this motion as proof that the defendant did not commit the offence as alleged.
[57] Furthermore, the reasons for a directed verdict of acquittal are irrelevant to a subsequent civil suit for damages based on the same alleged misconduct. A judicial finding to be made by a criminal court is whether the case has been proved beyond a reasonable doubt. That burden of proof is the touchstone of the criminal trial and is the lens through which the facts are viewed and findings made. Any findings by the trial judge must be understood in that context: Polgrain Estate v. Toronto East General Hospital, 2008 ONCA 427, 90 O.R. (3d) 630, at para. 24.
[58] It was further submitted on behalf of the defendants that the sentencing judge’s Reasons for Sentence are admissible in evidence on this motion on the basis of the decision of the Supreme Court of Canada in British Columbia (Attorney General) v. Malik, 2011 SCC 18, [2011] 1 S.C.R. 657 (“Malik”).
[59] In Malik, the accused made a Rowbotham application to the court in 2003 for state funding of the legal costs of his defence of certain criminal charges associated with the bombing of two aircraft. The application was dismissed on the basis that Malik failed to establish his eligibility for funding under the relevant test.
[60] Following the denial of that application, the province of British Columbia entered into an agreement with Malik and his counsel whereby he would be provided with temporary financial assistance to cover his defence costs until such time as he could liquidate assets in order to raise the necessary funds.
[61] In 2007, when Malik failed to comply with the payment terms under this temporary funding agreement with the province, the province instituted an action against him, and it also sought and obtained an ex parte Anton Piller order. The motion material submitted by the province on the ex parte motion included the court’s decision in dismissing Malik’s Rowbotham application, which was accepted in evidence by the court as prima facie proof based on the findings made by the application judge.
[62] Malik was unsuccessful in setting aside the Anton Piller order on the basis that the motions judge improperly admitted in evidence the findings from the Rowbotham decision. The matter ultimately proceeded to the Supreme Court of Canada where the court concluded that the motions judge had not erred in admitting into evidence the findings in the Rowbotham decision.
[63] It was urged by counsel for the defendants in the present matter that based on the court’s decision in Malik, the reasons for decision of the sentencing judge in respect of the convictions registered against David Ohashi must be admitted in evidence on this motion. It was not submitted that the findings of the sentencing judge were conclusive and binding upon this court on this motion, but simply that the sentencing decision and the findings made by the sentencing judge should be admitted and considered as part of the evidentiary record as a whole.
[64] In Malik, Binnie J., for the court, stated the following:
[7] In my view, for the reasons that follow, a judgment in a prior civil or criminal case is admissible (if considered relevant by the chambers judge) as evidence in subsequent interlocutory proceedings as proof of its findings and conclusions, provided the parties are the same or were themselves participants in the prior proceedings on similar or related issues. It will be for that judge to assess its weight. The prejudiced party or parties will have an opportunity to lead evidence to contradict it or lessen its weight (unless precluded from doing so by the doctrines of res judicata, issue estoppel or abuse of process).
[49] In my view the chambers judge did not err in treating as admissible the Rowbotham decision on the interlocutory applications. The earlier proceeding had been initiated by Mr. Malik and involved the other respondents. The same series of family transactions, and allegations of asset manipulation, had earlier been examined by a judge of the Supreme Court of British Columbia. The underlying issue in the Rowbotham case, as it is here, is whether the Malik family was playing games with the Province (and the B.C. courts) with respect to their financial affairs. The question in that case was whether Mr. Malik was without financial resources to fund his defence. The issue in this case is whether Mr. Malik is without funds to pay his debt to the Province as a result of asset manipulation and fraudulent dealings within the Malik family as initially explored in the Rowbotham application, and according to the Houston affidavit, has continued ever since. These issues cannot be answered at an eventual trial without access to the underlying documents. The history of dealings between the Province and the Malik family justifies serious concern whether such evidence would be made available by the Malik family in the ordinary course of discovery.
[52] More significantly in this case, for the reasons already discussed, I do not regard a prior judicial decision between the same or related parties or participants on the same or related issues as merely another controversy over hearsay or opinion evidence. The court’s earlier decision was a judicial pronouncement after the contending parties had been heard. It had substantial effect on their legal rights. It would have been wasteful of litigation resources and potentially productive of mischief and inconsistent findings (as discussed in Toronto (City) v. C.U.P.E., Local 79) to have required the chambers judge to put aside Stromberg-Stein J.’s judgment and require the Province to litigate the Rowbotham facts de novo on an interlocutory motion. Of course the Hollington v. F. Hewthorn & Co. doctrine and its civil offshoots are not just about hearsay. They are also about inadmissible opinion evidence — opinion piled on hearsay. But for the reasons already discussed I would decline to give effect to the arguments made in Hollington v. F. Hewthorn & Co. They give rise to unnecessary inefficiencies and any alleged unfairness can be addressed on a case-by-case basis according to the circumstances.
[65] In my view, the decision in Malik is distinguishable from the facts and circumstances in the present case.
[66] Firstly, Halton was not a party in the criminal prosecution of David Ohashi. It was simply the victim of his criminal conduct and as such the plaintiff had no standing before the court, at the trial of that defendant. Similarly, Halton had no standing or right to participate in, review, or appeal the judicial findings made by the trial judge in her sentencing decision. Apart from victim impact submissions, it played no other role at the trial or sentencing hearing.
[67] Secondly, even if the sentencing decision was admitted in evidence and certain findings of fact made by the sentencing judge were considered as part of the evidentiary record, that decision does not constitute a prior judicial decision between the same or related parties on the same or related issues. The present motion is brought for a narrow purpose under rule 30.10, namely, for the production of financial records in the hands of third parties and nothing more.
[68] In the result, I have concluded that the sentencing judge’s decision relating to the convictions registered against David Ohashi is admissible in evidence for a limited purpose, namely, as evidence that he was found guilty of the three offences involving crimes of dishonesty, including fraud, involving the plaintiff as a victim. None of the factual findings made by the sentencing judge contained in her reasons for decision are otherwise admissible on this motion.
ANALYSIS
[69] The plaintiff must satisfy both branches of rule 30.10 (1), by establishing that the documents sought are “relevant to a material issue in the action” and by establishing that it would be “unfair to require the moving party to proceed to trial without having discovery of the document”.
[70] The Ohashi Defendants have opposed the plaintiff’s motion on two grounds. Firstly, on the basis that the plaintiff has failed to satisfy the two branches of rule 30.10 (1) and, secondly, on the basis that, quite apart from the requirements of that rule, the defendants’ constitutionally protected privacy rights favour dismissal of the plaintiff’s motion.
Assessment of Plaintiff’s Position under Rule 30.10 (1)
First Branch of Rule 30.10 (1) – Relevance & Materiality
[71] As to the first branch of this rule, which requires the moving party to demonstrate that the records are relevant to a material issue in the action, the statement of claim must be examined with respect to the threshold question of relevancy.
[72] Relevancy is engaged where a piece of evidence is connected to a proposition in issue, if as a matter of common sense and human experience, the evidence makes the proposition slightly more or less probable than it would be without the evidence: Luciano, at para. 204.
[73] Further, relevance arises where the information sought is logically probative of a material issue in the action: Walker, at para. 12.
[74] In support of the allegations made in the statement of claim in this action, the plaintiff has adduced evidence from the forensic accountant that prima facie demonstrates that there were numerous transactions spanning approximately 12 years involving multiple parties in the provision of unlawful benefits to the Ohashi Defendants.
[75] It is alleged in the statement of claim that David Ohashi was party to several types of fraudulent activities and that the Ohashi Defendants both personally benefited by the receipt of money or assets received by them as a result of the fraudulent activities.
[76] It is further alleged that the Ohashi Defendants both benefited financially and materially as a result of the defendant David Ohashi fraudulently manipulating the plaintiff’s tendering process, whereby certain vendors referred to in the statement of claim were approved as vendors for the plaintiff.
[77] The statement of claim sets out detailed particulars as to the Ohashi Defendants’ alleged fraudulent activities and how they benefited from the conduct. However, full particulars of the financial or monetary harm caused to the plaintiff and the benefits allegedly received by the Ohashi Defendants are not detailed due to the lack of financial records, as is asserted by counsel for the plaintiff.
[78] The fact of David Ohashi’s convictions for fraud is established in the motion record and the convictions are admissible in evidence as against the defendant Pamela Gloria Ohashi: see Q v. Minto.
[79] Although the defendants submit that the time span over which the records are sought, namely from December 1, 2003 up to and including July 31, 2016 is overbroad, the evidence adduced on behalf of the plaintiff demonstrates that this is the relevant time period during which the defendants are alleged to have carried out the fraudulent activities and this evidence is uncontradicted.
[80] In his affidavit, Nagel states that the financial records sought are necessary to: (a) ascertain the full nature and scope of the plaintiff’s losses as a result of the fraudulent schemes; (b) identify other parties who were involved in carrying out or concealing the fraudulent schemes; and (c) trace the funds unlawfully taken from the plaintiff in order to enable their recovery.
[81] The circumstances of this case are such that the level of relevance to a material issue at stake in the action has been very significantly heightened by the fact that David Ohashi was convicted of two counts of fraud and as such his guilt for the offences of fraud have been prima facie established within the context of this action and this motion. Furthermore, the convictions of fraud related directly to the plaintiff as the victim of that unlawful conduct.
[82] This is not a case where a simple bald allegation of civil fraud has been made without any proof.
[83] Thus, the financial records sought are in my view highly relevant to a material issue in this action as framed by the statement of claim.
[84] The records in question are logically probative of the allegations that these defendants defrauded the plaintiff and in turn received significant financial benefits which likely would be disclosed in those records. The records are relevant as to identifying what monies may have been taken, who was involved in the alleged frauds and where the monies may be located. Furthermore, the banking records may also be exculpatory of any alleged misconduct on the part of the defendants. The issues of relevance and materiality are addressed in the Nagel affidavit and there is no evidence offered by the responding defendants to the contrary.
Second Branch of Rule 30.10 (1) – Would Non-production Prior to Oral Discoveries Be Unfair
[85] In considering the second branch of rule 30.10 (1), the six Ballard factors must be examined.
[86] Importance of the Documents in the Litigation – considering the allegations made in the statement of claim, the uncontradicted evidence of the plaintiff’s forensic accountant, and notably the fraud convictions against the defendant David Ohashi, the financial records sought from the third party financial institutions are important to this litigation as they will be probative of the financial activities of the Ohashi Defendants and as such consideration of this factor favours disclosure. Further, it is the evidence of Nagel that the accountants will be unable to complete a comprehensive financial investigation of the alleged fraudulent scheme without the financial records in order to assess the full nature and extent of the scheme including determining what other parties participated in it, the identity of financial accounts and assets in the hands of the Ohashi Defendants, the extent of the benefits received by the defendants, and quantification of the plaintiff’s losses resulting from the fraudulent scheme.
[87] Whether the Production of Documents Pre-Discovery Is Necessary – I have concluded that pre-discovery production of the records is required in this case in order to allow the plaintiff’s forensic accountant to conduct his further investigation and provide an expert opinion on the nature and extent of the fraud alleged and on the defendants’ liability.
[88] I have reached this conclusion given the large and complex fraudulent scheme as alleged, the amounts allegedly taken from the plaintiff, and the timeline of the alleged fraudulent scheme. It would be unfair to require the plaintiff to proceed to trial without production of the financial records at this pre-discovery stage, as the records may be necessary to assist in establishing liability of the defendants not only after judgement but for tracing purposes as well: Popov v. Jones, 2011 ONSC 665 at para. 8; aff’d, 2011 ONSC 3594.
[89] Further, in exercising discretion in the circumstances, I have concluded that it will be far more economical and practical for all parties involved that these records be produced prior to discovery in order to avoid multiple undertakings, possible motions, and further attendances on examination for discovery relating to the records in question.
[90] Whether Examination for Discovery of the Defendants without Prior Production of Documents Is Adequate – for the reasons outlined above, I have further concluded that discovery of the defendants at this stage, without production of the documents, would be inadequate and as such this conclusion favours production of the records at this time.
[91] Position of the Responding Third-Party Financial Institutions – the third-party financial institutions do not oppose the plaintiff’s motion for production.
[92] Relationship of Third Party Financial Institutions to Litigation – the financial institutions, who are respondents on this motion, are not strangers to this action. It has been held that where a bank receives funds allegedly procured by fraud or where such funds may have been transferred out of that bank, the bank is “involved in the events” and as such this factor favours production of the financial records: Popov , at para. 103.
[93] I have concluded therefore that the plaintiff has satisfied both branches of rule 30.10 (1). However, the Ohashi Defendants assert an overarching constitutionally protected privacy right which they argue should prevail over the plaintiff’s interest in obtaining the financial records.
Scope of Ohashi Defendants’ Privacy Rights in Financial Records
[94] The Ohashi Defendants have offered no evidence of prejudice in the event the plaintiff’s motion was granted. However, they assert that their privacy rights stand above the plaintiff’s disclosure rights in this litigation.
[95] It is urged on behalf of the Ohashi Defendants that they have a privacy interest in the financial records that are the subject of this motion, given that they may reveal intimate and personal information about them, their lifestyles, or their experiences and, on this basis, it is submitted that the plaintiff’s motion should be dismissed.
[96] The defendants rely upon the decision of the Supreme Court of Canada in Sherman Estate v. Donovan, 2021 SCC 25, 458 D.L.R. (4th) 361, and the provisions of the Personal Information Protection and Electronic Documents Act, S.C. 2000, c. 5 (the “PIPEDA “).
[97] Contrary to the submissions made on behalf of the defendants, the PIPEDA does not provide protection from the production of the financial records sought. Under Part 1 – Protection of Personal Information in the Private Sector – of the legislation, section 7 (3) (c) expressly exempts the application of the legislation to private information in the form of records ordered to be produced by a court pursuant to the court’s rules.
[98] While counsel for the Ohashi Defendants submitted that they were entitled to constitutional privacy protection, presumably pursuant to s. 8 of the Canadian Charter of Rights and Freedoms, Constitution Act, 1982, he did not expressly say so. The protections afforded under this section deal principally with Canadian citizens’ freedom from unlawful search and seizure by a governmental authority. The protections afforded by the section generally do not relate to civil disputes between citizens or corporations, where there is no governmental action involved.
[99] The defendants’ reliance upon the court’s decision in Sherman Estate is misplaced. The court’s decision did not alter in any way the law with respect to the open court principle, as well as the necessity for full and fair disclosure in litigation as measured against the privacy interests of individual litigants.
[100] The decision in Sherman Estate added further clarity on the open court principle and restated that the public openness in legal proceedings will only yield in circumstances where there is a serious risk to an important public privacy interest. Individual privacy interests, such as privacy interests that may arise from the disclosure of otherwise private information in a civil legal proceeding, will not override the presumption of openness in the administration of justice by the courts.
[101] Kasirer J., on behalf of the court, considered when the court may conclude that a significant public interest is engaged such that the court would place an individual litigant’s privacy rights over and above the open court principle. In Sherman Estate, at paras. 33 and 34, he noted the following:
[33] Personal information disseminated in open court can be more than a source of discomfort and may result in an affront to a person’s dignity. Insofar as privacy serves to protect individuals from this affront, it is an important public interest relevant under Sierra Club. Dignity in this sense is a related but narrower concern than privacy generally; it transcends the interests of the individual and, like other important public interests, is a matter that concerns the society at large. A court can make an exception to the open court principle, notwithstanding the strong presumption in its favour, if the interest in protecting core aspects of individuals’ personal lives that bear on their dignity is at serious risk by reason of the dissemination of sufficiently sensitive information. The question is not whether the information is “personal” to the individual concerned, but whether, because of its highly sensitive character, its dissemination would occasion an affront to their dignity that society as a whole has a stake in protecting.
[34] This public interest in privacy appropriately focuses the analysis on the impact of the dissemination of sensitive personal information, rather than the mere fact of this dissemination, which is frequently risked in court proceedings and is necessary in a system that privileges court openness. It is a high bar — higher and more precise than the sweeping privacy interest relied upon here by the Trustees. This public interest will only be seriously at risk where the information in question strikes at what is sometimes said to be the core identity of the individual concerned: information so sensitive that its dissemination could be an affront to dignity that the public would not tolerate, even in service of open proceedings.
[102] In my view, the issues at stake on the plaintiff’s motion do not give rise to or in any way engage public or privacy interests such that the Ohashi Defendants’ privacy interests would overtake the open court principle with the result that their financial records in the hands of the third-party financial institutions would be insulated from disclosure in this litigation.
[103] It is important to note that the responding defendants offered no evidence whatsoever in support of their assertion that the disclosure of the financial records was not necessary for the purpose of the proper administration of justice in this case or that it would in any way constitute a breach of privacy.
[104] The defendants referred to several decisions of this court where the production of third-party records had been sought and denied. Notably, the decisions in Stewart v. Kempster, 2012 ONSC 7236, 114 O.R. (3d) 151, and Knox v. Applebaum Holdings Limited, 2013 ONSC 7895, as cited by counsel, did not address issues of privacy but rather related to the two-part test in rule 30.10 (1) and specifically the question of relevancy.
[105] I have therefore concluded that there is no right to privacy being asserted by the Ohashi Defendants that would warrant any special protection in the circumstances of this case. The potential invasion of privacy that may arise from the production of the financial records will be completely of a personal privacy concern and will not engage any public interest that would justify nondisclosure of the records. Further, the records produced would be protected by the deemed undertaking rule: Longo v. Tricom Security Services Inc., 2020 ONSC 4160.
Conclusion
[106] For the reasons set out, an order shall issue directing the non-parties, Canadian Imperial Bank of Commerce, the Toronto-Dominion Bank, the Royal Bank Of Canada, the Bank of Montréal, the Bank of Nova Scotia, President’s Choice Financial, PCN Bank, and any other non-party as may be reasonably necessary to give full effect to this order, to immediately produce to the plaintiff the financial records as defined in the plaintiff’s notice of motion, relating to Bank and other accounts in the name of or in connection with the defendants David Atsushi Ohashi and Pamela Gloria Ohashi for the period from December 1, 2003 and up to and including July 31, 2016.
[107] As to the cost of this motion, counsel for the plaintiff shall deliver costs submissions of no longer than three pages plus a costs outline within 20 days from the date of release of these reasons, followed by similar submissions on behalf of the Ohashi Defendants within 20 days thereafter. No reply submissions shall be filed.
Daley J.
Released: October 12, 2021