COURT FILE NO.: CV-20-00649470-00CL

DATE: 20220907

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, Plaintiff

AND:

SANJAY MADAN (a.k.a. SADANAND MADAN), SHALINI MADAN, CHINMAYA MADAN, UJJAWAL MADAN, INTELLISOURCES INC., NEWGEN SOLUTINS INC., 1058350 CANADA LTD., 1846932 ONTARIO INC., VIDHAN SINGH and WANG & ASSOCIATES PROFESSINAL CORPORATION, AVPS HOLDINGS INC., AVPS RECRUITING INC., AVPS INVESTMENTS INC., AVPS PROPERTIES INC., 2305509 ONTARIO INC., 1784357 ONTARIO INC., 6875459 CANADA INC. Defendants

BEFORE: Justice Cavanagh

COUNSEL: Christopher Wayland and Nansy Ghobrial for the Plaintiff

Christopher Du Vernet and Carlin McGoogan for the defendants Sanjay Madan, Shalini Madan, Ujjawal Madan, Chinmaya Madan

Matt Maurer for Vidhan Singh

Bobby Sachdeva and Madeleine Dusseault for Koteswara Chittaluri, Kotch Soft Solutions Inc., and Technocrat Consultants Inc.

Marshall Reinhart for Jitendra Mehta, Babita Mehta, and IT Collaborative Inc.

Manny Rai for Shalinder Chopra and Dendritech Inc.

Gregory M. Sidlofsky and Adin Wagner for Igor Vaisman and Olymp Technologies Inc.

Sumit Tangri for RS Tec Systems Inc. and Rajiv Kataray

Alan Honner for Sandeep Singal and Prorax Consultants Inc.

Yan David Payne and James Clark for Shikha Walia and Manik Walia and 7307390 Canada Inc. and 7298528 Canada Inc.

HEARD: June 9, 2022

ENDORSEMENT

[1] The Plaintiff, Her Majesty the Queen in Right of Ontario (“Ontario”), moves for leave to amend its Amended Amended Statement of Claim and to file the amended pleading as a “Fresh as Amended Statement of Claim”.

[2] The motion is opposed by the defendants Sanjay Madan, Shalini Madan, Chinmaya Madan and Ujjawal Madan (together, the “Madan Defendants”).

[3] The motion is also opposed by the proposed added defendants.

[4] With respect to the Madan Defendants, the principal objections to the proposed pleading are made by Shalini Madan, Chinmaya Madan, and Ujjawal Madan. These three defendants are in a different position than Sanjay Madan because they contend that they are entirely innocent of the allegations fraudulent conduct. I refer to these three defendants as the “three Madan Defendants” to distinguish them from the Madan Defendants, including Sanjay Madan.

Procedural background

[5] Ontario has brought civil proceedings to recover funds it alleges were stolen from the Province as a result of two frauds: the misappropriation of funds from the Support for Families Program (“SFFP”); and kickbacks associated with the Crown’s hiring of Information Technology (IT) fee-for-service consultants. Ontario seeks to amend its Amended Amended Statement of Claim and to file a Fresh as Amended Statement of Claim to increase the damages claimed, provide further particulars of the kickback schemes, and to add additional defendants.

[6] Ontario commenced this action by a statement of claim issued in October 2020. Ontario seeks damages for fraud, theft, conversion, conspiracy, and unjust enrichment. Ontario amended its statement of claim on January 29, 2021 to add additional defendants, add particulars, and advance allegations related to the kickback schemes. Ontario also increased the damages sought. In October 2021, Ontario filed a further Amended Amended Statement of Claim containing further particulars of its unjust enrichment claims.

[7] To date, the parties have not negotiated a discovery plan or exchanged affidavits of documents. The action is that the pleading stage.

Analysis

Legal Principles

[8] Rule 26.01 of the Rules of Civil Procedure provides that “[o]n motion at any stage in an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment”.

[9] Rule 25.06(1) of the Rules of Civil Procedure provides that “[e]very pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, not the evidence by which those facts are to be proved”.

[10] Rule 25.06 mandates a minimum level of material fact disclosure such that a defendant is aware of the material facts that the plaintiff intends to prove to establish the elements of the cause of action. A court considering proposed amendments to a pleading must review the facts pleaded to determine whether the minimum level of material fact disclosure has been made. See Dawson v. Baker, 2017 ONSC 6477, [2017] O.J. No. 5617, at paras. 43-44.

[11] In 1588444 Ontario Ltd. v. State Farm Fire and Casualty Company, 2017 ONCA 42 the Court of Appeal, at para. 25, summarized the principles that apply on motions for leave to amend pleadings. The Court of Appeal confirmed that rule 26.01 of the rules “requires the court to grant leave to amend unless the responding party would suffer non-compensable prejudice; the amended pleadings are scandalous, frivolous, vexatious or an abuse of process; or the pleading discloses no reasonable cause of action”.

[12] On this type of pleadings motion, it is necessary to read the pleading generously and with some allowance for drafting deficiencies: Klassen v. Beausoleil, 2019 ONCA 407, at paras. 25, 30.

[13] In R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, McLachlin C.J., writing for the Court, at paras. 22-24, addressed the requirements for a proper pleading by a claimant (in the context of a motion to strike out a claim on the ground that it discloses no reasonable cause of action):

22. … It is incumbent on the claimant to clearly plead the facts upon which it relies in making its claim. A claimant is not entitled to rely on the possibility that new facts may turn up as the case progresses. The claimant may not be in a position to prove the facts pleaded at the time of the motion. It may only hope to be able to prove them. But plead them it must. The facts pleaded are the firm basis upon which the possibility of success of the claim must be evaluated. If they are not pleaded, the exercise cannot be properly conducted.

23. Before us, Imperial and the other tobacco companies argue that the motion to strike should take into account, not only the facts pleaded, but the possibility that as the case progressed, the evidence would reveal more about Canada’s conduct and role in promoting the use of low-tire cigarettes. This fundamentally misunderstands what a motion to strike is about. It is not about evidence, but the pleadings. The facts pleaded are taken as true. Whether the evidence substantiates the pleaded facts, now or at some future date, is irrelevant to the motion to strike. The judge on the motion to strike cannot consider what evidence adduced in the future might or might not show. To require the judge to do so would be to gut the motion to strike of its logic and ultimately render it useless.

24. This is not unfair to the claimant. The presumption that the facts pleaded are true operates in the claimant’s favour. The claimant chooses what facts to plead, with a view to the cause of action it is asserting. If new developments raise new possibilities - as they sometimes do - the remedy is to amend the pleadings to plead new facts at that time.

[14] I first address the objections of the Madan Defendants to the proposed amended pleading.

Madan Defendants’ Objections to proposed amended pleading

[15] The Madan Defendants do not seek particulars on this motion. The Madan Defendants oppose the proposed amendments on three main grounds which I address below.

(a) Use of “and/or” formulation makes it impossible for the three Madan Defendants to know the specific allegations against each of them

[16] The Madan Defendants object to certain proposed amendments on the ground that in some of the proposed amendments, Ontario uses the formulation “and/or other defendants”, or similar formulations. The Madan Defendants submit that the use of this formulation makes it impossible for them to know what is being alleged against which defendants.

[17] With respect to the pleaded allegations of the alleged fee for service fraud, Ontario submits that the particular amendments in the proposed amended pleading must be read in the context of the proposed pleading read as a whole. Ontario submits that the proposed pleading clearly identifies the defendants against whom allegations are made (defined in paragraph 11 as the “Kickback Scheme Defendants”), and that the definition excludes the three Madan Defendants. Ontario does plead that significant assets held in the names of the three Madan Defendants were paid for by Secret Commissions (a defined term) received by Sanjay through the fee for service fraud. Ontario pleads that the three Madan Defendants were thereby unjustly enriched.

[18] An example of the Madan Defendants’ objection to the use of the “and/or” formulation is paragraph 13 of the proposed pleading which reads:

13. The persons and related entities that received improper SFFP payments include, but are not limited to, Sanjay Madan, Shalini Madan, Chinmaya Madan, Ujjawal Madan, Intellisources Inc. and Vidhan Singh (“Singh”). The persons who paid or received Secret Commissions, and/or who improperly received other benefits pursuant to one or more of the Kickback Schemes, include, but are not limited to, the Kickback Scheme Defendants and/or companies they directly or indirectly controlled. (new underlined).

[19] The Madan Defendants submit that it is not clear from this paragraph who is alleged to have received improper SFFP payments and who is alleged to have improperly received Secret Commissions or other benefits pursuant to one or more of the “Kickback Schemes”.

[20] Ontario has clearly identified the four Madan Defendants as having received allegedly improper SFFP payments and, in any event, the language to which the Madan Defendants object (“include, but are not limited to,”) is not new and was included in the prior pleading to which they consented. In this paragraph, Ontario alleges that the Kickback Scheme Defendants (defined to exclude the three Madan Defendants) paid or received Secret Commissions and/or improperly received other benefits pursuant to the Kickback Schemes (as defined). Paragraph 13 meets the minimum level of factual disclosure as it relates to the three Madan Defendants.

[21] The Madan Defendants also oppose the requested amendment in paragraphs 45-46 of the proposed amended pleading which read:

45. The defendants acted in combination and/or were complicit in the wrongdoing detailed herein. They knew or ought to have known that injury to the plaintiff would occur from their improper conduct. In the alternative, they were unjustly enriched.

46. Between April and August 2020, Sanjay and/or others at his direction opened thousands of accounts in various ways at various financial institutions in the names of Sanjay, Shalini, Chinmaya, and/or Ujjawal, Sadanand Madan, and/or others, individually or jointly. These accounts, together with other accounts that had been opened prior to April 1, 2020, and an Intellisources Inc. account, are hereinafter referred to as the “Madan Accounts”.

[22] The Madan Defendants submit that it is impossible for them to discern from these allegations who is alleged to have opened accounts, in whose names they were allegedly opened, or whether “others” includes them or other defendants.

[23] Ontario submits that paragraph 45 is an introductory paragraph that provides context for more particular pleadings that follow and must be read with the proposed pleading as a whole. I accept that paragraph 45 is a pleading of allegations against the defendants “in the wrongdoing detailed herein” and must be read generously and in the context of the pleading read as a whole. If this was the only objection, I would grant leave to Ontario to amend its pleading.

[24] With respect to paragraph 46, Ontario submits that the Madan Defendants, and not Ontario, have knowledge of who Sanjay engaged and that without this knowledge, it is not necessary for Ontario to specify which defendants are alleged to have opened accounts at Sanjay’s direction. Ontario submits that paragraph 46 has sufficient particulars for the Madan Defendants to plead.

[25] I disagree with Ontario’s submission with respect to proposed paragraph 46. The three Madan Defendants are entitled to know whether each is alleged to have opened accounts at Sanjay’s direction. Ontario may not now be in a position to prove the facts pleaded and may only hope to be able to prove them. But, if Ontario intends to prove that the three Madan Defendants opened accounts at the direction of Sanjay Madan, it must so plead. See Imperial Tobacco, at para. 22. The proposed paragraph 46 does not meet the minimum level of factual disclosure without Ontario specifying whether the three Madan Defendants are included within the meaning of the term “others” and are alleged to have opened accounts at the direction of Sanjay Madan.

[26] The Madan Defendants also object on this ground to paragraph 47 which reads:

Between April and August 2020, Sanjay and/or the other defendants caused false applications for SFFP payments to be made in the names of fictitious persons and caused SFFP payments in respect of those Applications to be paid by the plaintiff into the Madan Accounts. Over 43,000 SFFP payments were properly deposited into the Madan Accounts , totaling over $10.8 million.

[27] Ontario submits that the use of the “and/or” formulation in this paragraph is not amended from the prior pleading to which the Madan Defendants consented, and it is not open to them to object to this paragraph on this motion. I disagree. Through deletion of the word “the”, the proposed pleading is now unclear as to whether the allegation is being made against all defendants or only some of them. The defendants are entitled to know with clarity whether an allegation is made against him or her. This paragraph does not meet the minimum level of factual disclosure.

[28] The Madan Defendants object to paragraphs 52-53 of the proposed amended pleading. These paragraphs read:

52. Sanjay and/or the other defendants also improperly caused SFFP payments to be paid to the defendant 1846932 Ontario Inc.

53. Further particulars of the defendants’ tortious conduct and/or unjust enrichment are known to the defendants and will be sought from them during the discovery process.

[29] Ontario submits that paragraph 52, except for deletion of the word “and” (before the word “other”), was included in the prior pleading to which the Madan Defendants consented and that the deletion of the word “the” does not change the meaning of this paragraph. I disagree. Without inclusion of the word “the” to make it clear that the pleaded allegations are made against all of the other defendants, it is not clear whether the allegation in paragraph 52 is made against all of the defendants and, if not, against which defendants the allegations are made. The three Madan Defendants are entitled to know with clarity whether allegations of fraudulent conduct are made against them. This paragraph does not meet the minimum level of factual disclosure.

[30] A further example of the Madan Defendants’ objection to the proposed pleading because of the “and/or formulation” is paragraph 63 which reads:

63. In addition, in some instances, Sanjay Madan and/or other defendants fraudulently caused the plaintiff to make payments under FFSCs pursuant to which no or only minimal work was done. The plaintiff is entitled to recover as damages the full amounts paid pursuant to those FFSCs together with any related costs.

[31] The Madan Defendants submit that the use of the phrase “and/or other defendants” makes it impossible for them to determine whether Ontario is making the pleaded allegations against them or one or more of the other defendants.

[32] Ontario submits that this paragraph must be read with paragraph 11 which, through the use of the defined term “Kickback Scheme Defendants”, makes it clear that the allegations in paragraph 63 are not made against the three Madan Defendants who are not identified as “Kickback Scheme Defendants”. The paragraph would have been clearer if Ontario, instead of using the phrase “other defendants”, had used the defined term “Kickback Scheme Defendants” (and clearly pleaded which of the “Kickback Scheme Defendants” are alleged to have caused Ontario to make payments under fee for service contracts pursuant to which no or only minimal work was done).

[33] In the context of the proposed pleading read as a whole, I regard this as a drafting deficiency. If this was the only objection, I would allow the proposed amended pleading as it relates to the three Madan Defendants. The language should, however, be clarified in Ontario’s new proposed amended pleading.

[34] The Madan Defendants cite paragraph 67 of the proposed amended pleading as another example of a pleading that is deficient because of the use of the “and/or” formulation. Paragraph 67 reads:

67. Sanjay, directly or indirectly through others, diverted some or all of the Secret Commissions to others, including the defendants, his family members and/or into assets owned by him and/or others some or all of his family members. Without limiting the generality of the foregoing, significant assets, including real estate, held in the names of Sanjay and/or companies he directly or indirectly controls, and/or in the names of Shalini, Chinmaya, and/or Ujjawal Madan were paid for, directly or indirectly, in whole or in part, by Sanjay’s ill-gotten gains.

[35] The Madan Defendants submit that it is unclear from this paragraph who are the “others” referenced in the first line of this paragraph through whom Sanjay allegedly diverted secret commissions. and who is alleged to have received “Secret Commissions” or “significant assets”,

[36] Ontario submits that the language in the first sentence of paragraph 67 is not new and that it is not open to the Madan Defendants, having consented to the prior pleading, to now object to the same pleading. Ontario submits that it has set out the facts based on information it has at present and that if it were to plead more particularly, it would be met with an objection that the facts pleaded are speculative. Ontario wishes to reserve its right to inquire on discovery who the “others” are and to amend its pleading later to plead facts obtained on discovery.

[37] I do not agree that Ontario’s proposed pleading in the first sentence of this paragraph pleads facts with sufficient precision. To reiterate, Ontario must plead the facts it alleges, even if it only hopes to be able to prove them. It is not proper for Ontario to plead broadly and generally, for the purpose of allowing it to seek evidence on discovery to allow it to properly plead facts which meet the minimum level of material fact disclosure.

[38] The Madan Defendants submit that it is unclear from paragraph 67 whether the alleged recipients include any one or more of the three Madan Defendants. Ontario responds that it is clear from reading the full paragraph that Ontario pleads that all of the three Madan Defendants are included within the term “family members” pleaded in the first sentence.

[39] I regard this objection to be one that relates to drafting deficiencies. When read fairly and generously, it is clear that the three Madan Defendants are included within the meaning of the term “family members” in this paragraph. This paragraph satisfies the minimum level of factual disclosure.

(b) Alleged irrelevant and prejudicial allegations

[40] The Madan Defendants object to some proposed amendments on the ground that the new allegations are irrelevant to the claim being advanced and they are prejudicial.

[41] The Madan Defendants object to the last sentence of proposed paragraph 11 on this ground. Paragraph 11 reads:

11. As described below, certain of the defendants engaged in frauds or improper schemes involving the improper payment of secret commissions and/or kickbacks (the “Kickback Schemes”). Herein, the expression “Kickback Scheme Defendants” shall refer to all defendants except Shalini Madan, Chinmaya Madan, and Ujjawal Madan. However, by use of this definition for convenience, the plaintiff does not admit that any of Shalini Madan, Chinmaya Madan, or Ujjawal Madan were innocent of, or ignorant of, the improper schemes described below.

[42] The three Madan Defendants submit that through this pleading, Ontario seeks to cast aspersions on them by expressly refusing to admit that they were “innocent of, or ignorant of, the improper schemes” alleged against other defendants.

[43] Ontario submits it does not wish to be in the situation in the future that if it learns of evidence that shows that the three Madan Defendants were involved in the “Kickback Schemes” (as defined), it may be taken to be resiling from an admission if it seeks to amend its pleading to make allegations in respect of the fee for service fraud against them. Ontario submits, for this reason that its pleading is not improper.

[44] I do not agree with Ontario that by not making allegations against the three Madan Defendants of knowledge of or involvement in the fee for service fraud, Ontario may be taken to be admitting that these defendants had no such involvement. Ontario is in control of its claim as pleaded. Ontario decides what allegations of fact to make against each defendant. As was noted in Imperial Tobacco, at para. 24, if new facts are discovered during the litigation, Ontario may seek to amend its pleading to plead the new facts. The second sentence of paragraph 11 is irrelevant and may be read as casting aspersions on the three Madan Defendants against whom no allegation of knowledge or involvement in the alleged “Kickback Schemes” is made. For this reason, the proposed pleading is improper. I would not allow this proposed amendment.

[45] The Madan Defendants also object to the statement in paragraph 50 of the proposed pleading in which Ontario pleads:

50. ... Given that the SFFP allows only a single one-time payment per eligible child, the total payments to the Madan Accounts are the equivalent of SFFP payments for approximately 43,000 to 54,000 children.

[46] The Madan Defendants submit that the reference to 43,000 to 54,000 children is embarrassing because there is no allegation that children were affected by the alleged fraud in any way. They submit that the sole purpose of the pleading is to cast the Madan Defendants in a negative light by implying that children were somehow harmed by the defendants.

[47] Ontario submits that the facts pleaded are capable of proof and that the facts are relevant to the gravity and scope of the alleged fraud. I agree with Ontario. The facts as pleaded do not include any allegation that children were harmed by the alleged fraud. The proposed pleading in this paragraph does not make an allegation that is irrelevant and should be disallowed.

(c) Claim for damages

[48] The Madan Defendants object to Ontario’s claim in paragraph 2 of the proposed pleading for “damages … in an amount estimated to be at least $75 million”. The number “75” replaces the number “30” in the prior pleading.

[49] Rule 25.06(9) provides that where damages are claimed, the amount claimed for each claimant in respect of each claim shall be stated. The court does not have jurisdiction to award damages that exceed the amount claimed in the statement of claim.: Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520, at para. 32.

[50] Ontario agrees that its claim for damages is limited to $75 million. The proposed amended pleading should be revised to remove the “at least” language and state the precise amount claimed for damages. If Ontario learns in the future that the amount claimed is not enough, it may seek leave to amend its claim.

Objections to proposed amended pleading by other proposed added defendants

[51] The proposed added defendants also object to certain of the proposed amendments to the Amended Amended Statement of Claim on various grounds.

[52] I first address the submissions made by the proposed defendants Igor Vaisman and Olymp Technologies Inc. (the “Proposed Vaisman Defendants”). Their submissions were adopted by the other proposed added defendants.

[53] The Proposed Vaisman Defendants oppose Ontario’s motion on the grounds that:

a. adding them as defendants at this stage of the action will cause non-compensable and significant prejudice to them given:

i. Ontario seeks to add them after a nearly two year delay and Ontario has not provided an adequate explanation for why steps were not taken to add them months ago.

ii. there have been substantive decisions made in the action that would be prejudicial to the Proposed Vaisman Defendants;

iii. joining the Proposed Vaisman Defendants and requiring the claims against them to be tried with the claims asserted against the current defendants will result in significant delays and added costs; and

b. the proposed amendments concerning the Proposed Vaisman Defendants are deficient, vague and lacking in particularity to the point that the claims constitute an abuse of process.

[54] I address each of these grounds in turn.

Will the proposed added defendants suffer non-compensable prejudice because of delay by Ontario in seeking to add them as defendants?

[55] The Proposed Vaisman Defendants submit that Ontario has delayed in seeking to add them as defendants, without an adequate explanation, and that such delay constitutes an abuse of process.

[56] In response, Ontario relies on the affidavit of Sarah Truscott, the Chief of Staff and Private Secretary to the Lieutenant Governor of Ontario, sworn May 30, 2022. Ms. Truscott deposes that on August 10, 2020, she was advised that the Department of Education (“EDU”) was contacted by Bank of Montreal to advise of a potential fraud relating to the SFFP that may involve Sanjay Madan. Ms. Truscott states that she started to take steps to address the alleged fraud the next day. Ms. Truscott deposes that on or about August 19, 2020 her office learned that approximately 12-14 fee for service consultants that reported to Sanjay Madan suddenly terminated their contracts with the Ministry of Education. Ms. Truscott deposes that this appeared unusual and as a result she asked the Forensic Investigations Unit of the Treasury Board Secretariat to investigate the matter further. Ms. Truscott took steps to retain KPMG to assist with the investigation into the SFFP fraud and, when KPMG was retained, she asked the firm to look into the issues relating to termination of fee-for-service contracts. Ms. Truscott deposes that prior to August 2020, neither she nor the Deputy Minister for EDU had any concerns or suspicions relating to procurement of fee for service consultants by Sanjay Madan, including any of the persons Ontario seeks to add as defendants.

[57] The proposed added defendants Sandeep Singal and Prorax Consultants Inc. (the “Proposed Singal Defendants”) submit that the proposed amendments should not be granted because the alleged fees for service fraud goes back 10 years or more and, on the facts pleaded, the claims are statute barred. They submit that there is no evidence of due diligence.

[58] The Proposed Singal Defendants rely on Burtch v. Barnes Estate, 2006 CanLII 12955 (ON CA) in which the Court of Appeal addressed the discoverability principle in the context of a motion to add a defendant:

To take advantage of the discoverability principle, the plaintiffs had to show that before they sought to add Muskoka as a defendant, they neither knew, nor by reasonable diligence could have known, that they had a claim against Muskoka. Here, Muskoka does not suggest that the plaintiffs knew they had a claim against it before the fall of 2004. It focuses on the reasonable diligence requirement. It submits that on this record there was no evidence that the plaintiffs acted diligently. Thus, they should not be entitled to add Muskoka as a defendant at this late stage.

[59] The Court of Appeal, at para. 27, held that if the plaintiffs put forward some evidence of their due diligence, the question of whether they exercised due diligence cannot be decided at the pleading stage.

[60] The Proposed Singal Defendants submit that the evidence presented by Ontario does not show due diligence by Ontario.

[61] In Manicelli v. Royal Bank of Canada, 2018 ONCA 544, the Court of Appeal allowed an appeal from an order denying the plaintiffs’ motion to add parties as defendants on the basis that the claim against them was statute barred. Hoy J.A., writing for the Court, explained that when a person opposes a plaintiff’s motion to add it as a defendant on the basis of the apparent expiry of a limitation period, the motion judge is entitled to examine the record to determine whether, as a question of fact, there is a reasonable explanation on proper evidence as to why the plaintiff could not have discovered its claim through the exercise of reasonable diligence. The evidentiary threshold that must be met by a plaintiff on such a motion is low. See Manicelli, at paras. 23-24.

[62] I am satisfied that through the affidavit of Ms. Truscott, Ontario has met the low evidentiary threshold on this motion of showing that, in the circumstances, there is a reasonable explanation for why Ontario could not have discovered its claim through the exercise of reasonable diligence. I would not dismiss Ontario’s motion on the basis that it has failed to produce evidence of due diligence. The question of whether claims against the proposed added defendants are statute barred must be decided at trial or on a motion for summary judgment.

[63] I am not satisfied that Ontario has unduly delayed in seeking to add the Proposed Vaisman Defendants, or other proposed added defendants, as parties in the circumstances, having regard to the unchallenged affidavit evidence given by Ms. Truscott. The Proposed Vaisman Defendants have not shown that they will suffer non-compensable prejudice as a result of the timing of Ontario’s motion to add them as defendants.

Will the proposed added defendants suffer non-compensable prejudice because there have been substantive decisions made in the action without their participation?

[64] The Proposed Vaisman Defendants submit that they will suffer non-compensable prejudice as a consequence of an Order made by Gilmore J. dated March 10, 2022 striking out certain paragraphs of the pleadings of the Madan Defendants in which, among other pleadings, they pleaded that Ontario was contributorily negligent in failing to detect Sanjay Madan’s fraud. The three Madan Defendants have appealed this Order.

[65] The Proposed Vaisman Defendants, if they were to be added as defendants, intend to include a claim for contributory negligence on the basis that Ontario was negligent in failing to take reasonable steps to ensure that Sanjay Madan was not taking advantage of consultants or requiring them to pay kickbacks in return for getting work. They submit that they would be prejudiced by being added as defendants when such a claim has already received negative treatment by the court.

[66] The proposed added defendants were not parties to the action when the Order of Gilmore J. was made. They have not shown that they would be bound by this Order through the operation of the doctrine of issue estoppel or otherwise. The proposed added defendants are not precluded from pleading claims based on contributory negligence because of application of the doctrines of issue estoppel.

[67] The Order of Gilmore J. is a precedent that may be persuasive on the question of whether a pleading of contributory negligence by the Proposed Vaisman Defendants should be struck out, if a motion were to be brought to do so. However, this Order would be a precedent whether the Proposed Vaisman Defendants are added as defendants to this action or sued in a separate action. In this respect, the decision of Gilmore J. is a one that, like any other judicial decision, should be given proper consideration as a possible precedent when it is raised in a judicial proceeding.

[68] I am not satisfied that the Proposed Vaisman Defendants have shown that they would suffer non-compensable prejudice if they were added as parties to this action because of the Order of Gilmore J.

Will the proposed added defendants suffer non-compensable prejudice because joining them and requiring the claims against them to be tried with the claims asserted against the current defendants will result in significant delays and added costs

[69] The Proposed Vaisman Defendants submit that their addition as defendants at this stage of this litigation will be prejudicial to them and contrary to the principles of fairness and judicial efficiency. They submit that they will be forced to participate in months of examinations for discovery and review many documents with respect to issues that may not concern them.

[70] Rule 5.04(2) of the Rules of Civil Procedure provides that “[a]t any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result compensated for by costs or an adjournment”.

[71] Under rule 5.04(2), courts retain a discretion to deny an amendment, even in the absence of non-compensable prejudice, when it is sought to change the parties to a proceeding: Mazzuca v. Silvercreek Pharmacy Ltd., 2001 CanLII 8620 (ON CA), at para. 30.

[72] In Plante v. Industrial Alliance Life Insurance Co., 2003 CanLII 64295 (ON SC), the motion judge summarized the test for adding a party:

The tests for adding a party under rule 5.04 (2) may therefore be stated as follows:

(a) The proposed amendment must meet all of the tests under rule 26.01.

(b) Joinder should be appropriate under rule 5.02(2) or required under rule 5.03. The addition of the party should arise out of the same transaction or occurrence (rule 5.02(2)(a)), should have a question of law or fact in common (rule 5.02(2)(b)), or the addition of the party should promote the convenient administration of justice (rule 5.02(2)(e)). Adding a party will be particularly appropriate if it is unclear which of the original defendant or the proposed defendant may be liable (rules 5.02 (2)(c) or (d)), or if it is necessary that the proposed defendant be bound by the outcome of the proceeding or his or her participation is otherwise necessary to allow the court to adjudicate effectively (rule 5.03(1)).

(c) Joinder should not be inappropriate under rule 5.03(6) or 5.05. The addition of a party should not unduly delay or complicate a hearing or cause undue prejudice to the other party. In a case-managed proceeding, it may also be appropriate to withhold consent if it will cause significant disruption to the court-ordered schedule: Belsat Video marketing Inc. v. Astro Communications Inc. (1999) 1999 CanLII 1092 (ON CA) , 86 C.P.R. (3d) 413, 118 O.A.C. 105 (C.A.) [See Note 12 below]

(d) Addition of a party will not be permitted if it is shown to be an abuse of process. Abuse of process will exist where the addition of a party as for an improper purpose such as solely to obtain discovery from them, to put unfair pressure on the other side to settle, to harass the other party or for purely tactical reasons. [citations omitted]

[73] The Proposed Vaisman Defendants submit that this action against the Madan Defendants and other defendants involves both the alleged SFFP fraud and the alleged fee-for-service fraud, and that no pleaded allegations are proposed to be made against them in relation to the SFFP fraud. They submit that it would be unfair, and prejudicial to them, if they are required to be defendants in the action and participate in an action, including reviewing thousands of documents, participating in motions, and attending at examinations for discovery, in relation to significant claims which do not involve them.

[74] I am not satisfied that the Proposed Vaisman Defendants would suffer non-compensable prejudice in this way if they were to be added as defendants. The alleged fee-for-service fraud involves the Madan Defendants and the proposed added defendants. The claims against the proposed added defendants in relation to the alleged fee-for-service fraud arise out of the same factual circumstances as the claims in respect of this alleged fraud against the Madan Defendants. There will undoubtedly be common questions of fact and law in respect of these claims. If the claims against the proposed added defendants were to be made in a separate action, there would be a risk of inconsistent decisions. For these reasons, I am satisfied that having claims against the Madan Defendants and against the proposed added defendants heard and adjudicated in the same action will promote the convenient administration of justice.

[75] To the extent that there are steps taken in the action in relation to the SFFP fraud which do not involve the proposed added defendants, the defendants may limit their participation. If needed, case management directions from the Court in this regard may be sought.

Are the requested amendments concerning the Proposed Vaisman Defendants deficient, vague and lacking in particularity to the point that the claims constitute an abuse of process?

[76] The Proposed Vaisman Defendants submit that the allegations against them in Ontario’s proposed amended pleading are completely vague and do not clearly set out what they are alleged to have done, how their conduct was improper, and how Ontario suffered damages as a result of anything the Proposed Vaisman Defendants did. They submit that as such, the proposed amended pleading does not give them proper notice of the claims against them or the precise remedies sought.

[77] The Proposed Vaisman Defendants submit that the deficiencies in Ontario’s proposed amended pleading are such that the proposed claim discloses no reasonable cause of action against them.

[78] The Proposed Vaisman Defendants object to paragraph 8 of Ontario’s proposed pleading on this basis. This pleading makes allegations against “[s]ome or all of the defendants referred to at paragraph 1” of the proposed pleading. Paragraph 1 of the proposed pleading does not identify the Proposed Vaisman Defendants. This is not a valid objection.

[79] The Proposed Vaisman Defendants object on this basis to paragraphs 47, 52 and 54 of Ontario’s proposed pleading. These paragraphs include allegations in respect of the SFFP fraud. Read in context, these paragraphs do not make allegations against the Proposed Vaisman Defendants or other proposed added defendants. Their objection to these paragraphs is not valid.

[80] The Proposed Vaisman Defendants cite, as other examples of their complaints with respect to the inadequacy of Ontario’s proposed amended pleading, paragraphs 63, 64, and 65 thereof which read:

63. In addition, in some instances, Sanjay Madan and/or other defendants fraudulently caused the plaintiff to make payments under FFSCs pursuant to which no or only minimal work was done. The plaintiff is entitled to recover as damages the full amounts paid pursuant to those FFSCs together with any other related costs.

64. In some other instances, Sanjay Madan and/or other defendants fraudulently caused the plaintiff to make payments for time charged by contractors in excess of the hours they in fact worked. The plaintiffs are entitled to recover as damages the cost of all such time paid for but not worked together with any other related costs.

65. Singh and Sanjay and/or the companies each of them directly or indirectly controlled were unjustly enriched as a result of the Secret Commissions they received. All the Kickback Scheme Defendants were unjustly enriched by reason of having improperly obtained contracts or other benefits from the plaintiff in exchange for the payment, directly or indirectly, of Secret Commissions.

[81] The Proposed Vaisman Defendants submit that paragraphs 63 and 64 are vague and do not meet the minimum level of factual disclosure because they do not allege with particularity which of the “other defendants” are alleged to have caused Ontario to make payments under fee-for-service contracts for which “no or minimal work was done”.

[82] Ontario submits that these paragraphs particularize information now known to Ontario in relation to the fee-for-service fraud. Ontario submits that it anticipates that evidence uncovered in the course of this litigation will reveal who, if any, of the proposed added defendants carried out the acts pleaded in these paragraphs in relation to the alleged fee-for-service fraud and that the claim can be then amended to provide additional particulars. Ontario submits that additional particulars are not now within its knowledge but they are within the knowledge of the proposed added defendants. For this reason, Ontario submits that these paragraphs of the proposed pleading are not improper.

[83] I disagree. The proposed added defendants are entitled to know with clarity and precision the allegations made against them. Ontario may not have evidence to prove that a given proposed added defendant participated on the fee for service fraud but if it seeks to prove that a given party participated, it must so plead. See Imperial Tobacco, at paras. 22-24.

[84] Ontario also submits that the words “and/or other defendants” as they appear in paragraphs 63-64 should be read as meaning “and all other Kickback Defendants”. In support of this submission, Ontario points to the definition of “Kickback Scheme Defendants” in paragraph 11 of the proposed pleading. Ontario submits that in the context of the proposed pleading as a whole, this defined term should be read into paragraphs 63 and 64.

[85] In paragraphs 63 and 64, Ontario does not plead with particularity which of the proposed added defendants are included within the term “and/or other defendants”, with the result that none of the proposed added defendants knows whether an allegation of fraud is being made in these paragraphs against this party. These paragraphs do not satisfy the minimum required level of factual disclosure.

[86] The Proposed Vaisman Defendants submit that the proposed pleading in paragraph 65, at least as it pertains to them, is deficient because it fails to set out how they were enriched, who suffered a deprivation or what the deprivation was, and makes no mention of whether there was a lack of juristic reason for the enrichment.

[87] Paragraph 65 of the proposed pleading reads:

65. Singh and Sanjay and/or the companies each of them directly or indirectly controlled were unjustly enriched as a result of the Secret Commissions they received. All the Kickback Scheme Defendants were unjustly enriched by reason of having improperly obtained contracts or other benefits from the plaintiff in exchange for the payment, directly or indirectly, of Secret Commissions.

[88] In response, Ontario submits that paragraph 65 of the proposed pleading must be read with its proposed pleading as a whole. Ontario submits that when it is so read, it is clear that Ontario has pleaded sufficient facts to satisfy the minimum level of factual disclosure to support a claim for damages for unjust enrichment.

[89] To put the claims against the proposed added defendants in context, I set out paragraphs 11, 12 and 13 of the proposed pleading:

11. As described below, certain of the defendants engaged in frauds or improper schemes involving the improper payment of secret commissions and/or kickbacks (the “Kickback Schemes”). Herein, the expression “Kickback Scheme Defendants” shall refer to all defendants except Shalini Madan, Chinmaya Madan, and Ujjawal Madan. However, by use of this definition for convenience, the plaintiff does not admit that any of Shalini Madan, Chinmaya Madan, or Ujjawal Madan were innocent of, or ignorant of, the improper schemes described below.

12. The Kickback Scheme Defendants, or some of them, conspired and agreed together, one with the other or with persons unknown, to fraudulently cause, and/or in fact fraudulently caused, the plaintiff to enter into contracts with certain VORs that, unbeknownst to the plaintiff, resulted in the payment of improper kickbacks/secret commissions (“Secret Commissions”) to the defendant Sanjay Madan (“Sanjay”) and/or to companies he directly or indirectly controlled, in various ways known to the Kickback Scheme Defendants (“Conspiracy”). Over the course of the past ten years or more, the plaintiff paid out over $40 million pursuant to FFSCs resulting from the Kickback Schemes. The Kickback Commissions totalled at least $35 million. As a result of the Conspiracy, the plaintiff suffered damages of at least $75 million.

13. The persons and related entities that received improper SFFP payments include, but are not limited to, Sanjay Madan, Shalini Madan, Chinmaya Madan, Intellisources Inc., and Vidhan Singh (“Singh”). The persons who paid or received Secret Commissions, and/or who improperly received other benefits pursuant to one or more of the Kickback Schemes, include, but are not limited to, the Kickback Scheme Defendants and/or companies they directly or indirectly control.

[90] With respect to the claim against the Proposed Vaisman Defendants, Ontario points to paragraph 40 of the proposed pleading:

Igor Vaisman acted from time to time as an iAccess FFS Consultant and was the directing mind and Director and Officer of Olymp Technologies Inc. (“Olymp”), an Ontario corporation. At the relevant time, Olymp was a VOR. In furtherance of the Conspiracy, Igor Vaisman and/or Olymp paid Secret Commissions to Sanjay and/or to companies he directly or indirectly controlled in respect of contracts and/or other benefits awarded directly or indirectly to Igor Vaisman and/or to Olymp and/or to other companies that Igor Vaisman directly or indirectly controlled.

[91] Similar pleadings are made against the other proposed added defendants.

[92] When paragraph 65 is read in the context of Ontario’s proposed amended pleading as a whole, I am satisfied with respect to this paragraph, subject to my conclusion with respect to paragraphs 63 and 64, that Ontario has otherwise met the minimum level of factual disclosure to disclose a cause of action for unjust enrichment against the proposed added defendants.

Objections to proposed amendments by other proposed added defendants

[93] The proposed defendants Shikha Walia, Manik Walia and 7307390 Canada Inc. and Axis Consulting Inc. and 7298528 Canada Inc. (the Proposed Walia Defendants”) object to paragraph 58 of Ontario’s proposed amended pleading.

[94] Paragraph 58 (it appears as paragraph 59 in the proposed Fresh as Amended Statement of Claim) reads:

As set out above, the Kickback Scheme Defendants, or some of them, conspired and agreed, together with one another and/or with persons unknown, to fraudulently cause, and/or in fact fraudulently cause, the plaintiff to enter into contracts with certain VORs resulting in the payment of Secret Commissions to Sanjay and/or to companies he directly or indirectly control, in various ways known to the kickback Scheme Defendants including, but not limited to, one or all of the following ways:

Secret Commissions paid by VOR to Singh and from Singh to Sanjay:

a) a Kickback Scheme Defendant was, or directly or indirectly controlled, the relevant VOR. Sanjay caused the plaintiff to enter into a FFSC with the VOR. In exchange, the Kickback Scheme Defendant caused the VOR, and/or another company that the Kickback Scheme Defendant directly or indirectly controlled, who in turn paid a Secret Commission to Sanjay and/or to companies that Sanjay directly or indirectly controlled;

Secret Commissions Paid by VOR to Sanjay:

b) a Kickback Scheme Defendant was, where directly or indirectly controlled, the relevant VOR. Sanjay because the plaintiff to enter into a FFSC with the VOR. In exchange, the Kickback Scheme Defendant caused the VOR, and/or another company that the Kickback Skiing Defendant directly or indirectly controlled to pay Secret Commission to Sanjay and/or to companies that Sanjay directly or indirectly controlled;

Secret Commissions Paid by VOR Subcontractor to Sanjay:

c) the Kickback Scheme Defendant was, or directly or indirectly controlled, a VOR Subcontractor. Sanjay, knowing that the VOR would subcontract the work to the VOR Subcontractor, caused the plaintiff to enter into a FFSC with the VOR, which in turn subcontractor the work to the VOR Subcontractor. The Kickback Skiing Defendant caused the VOR Subcontractor, and/or another company that the Kickback Scheme Defendant control, to pay a Secret Commission to Sanjay and/or to companies that Sanjay directly or indirectly controlled.

[95] The Proposed Walia Defendants object to this paragraph on the ground that the minimum level of factual disclosure has not been satisfied.

[96] Ontario is required to identify which of the “Kickback Scheme Defendants” is alleged to have “conspired and agreed” to fraudulently cause Ontario to enter into contracts with particular VORs resulting in payment of Secret Commissions to Sanjay or to particular companies he allegedly directly or indirectly controlled. With respect to its pleading in fraud, Ontario is required to plead with clarity and precision the material facts of such agreements and actions including the time frame within which they are alleged to have occurred, with whom, and the material terms of such agreements. See Economical Insurance Co. v. Fairview Assessment Centre Inc., 2013 ONSC 4037, at paras. 5-6. The lack of knowledge of Ontario in asserting its claims is not a sufficient reason for the lack of particularity. See Vicor Mechanical Ltd. v. Pegah Construction Ltd., 2009 CarswellOnt 7682, at paras. 8-9, and Imperial Tobacco, at paras. 22-24.

[97] The allegations in this paragraph do not meet the minimum level of factual disclosure that is required.

Disposition

[98] For these reasons, I do not grant Ontario’s motion to amend its pleading in the form proposed. Ontario’s motion is dismissed.

[99] I grant leave to Ontario to renew its motion to amend its Amended Amended Statement of Claim in a form that addresses the issues I have referenced in this endorsement. If a timetable is needed for Ontario to send its proposed amended pleading to other parties, I may be spoken to after counsel have conferred.

[100] I urge the parties to confer and make diligent efforts to resolve costs. If they are unable to do so, the parties may make written submissions (no longer than 4 pages, double spaced, by each party (excluding costs outline)) with brief reply submissions (2 pages) according to a timetable to be agreed upon and approved by me.

Cavanagh J.

Date: September 7, 2022