Court File and Parties
COURT FILE NO.: CV-20-3911
DATE: 20221007
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
IDA COVELLO Plaintiff
– and –
2624221 ONTARIO INC. (o/a Westhaven Income Inc.), PETER GROCCIA, SABINE PUCCIARELLI aka SABINE BARRIGAN aka SABINE BARRAGAN aka SABINE COLARUSSOM aka SABINE QUATROCCIOCHI, DIAMOND CAPITAL INVESTMENTS INC., 2605336 ONTARIO INC., 2404056 ONTARIO INC., DOMINION LENDING CENTRE, MATTEO DAMASO and MARIA INES CHINELLI Defendants
COUNSEL:
Granville Cadogan for the Plaintiff
Jason Beitchman and Daniel Cohen for Sabine Pucciarelli, Adamas Financial Corporation (incorrectly named as Diamond Capital Investments Inc.), 2605336 Ontario Inc., 2404056 Ontario Inc. and Dominion Lending Centre
Aoife Quinn for 2624221 Ontario Inc., Peter Groccia and Matteo Damaso
John Lo Faso for Maria Ines Chinelli
HEARD: July 22, 2022 by videoconference
RUling on the defendants’ motionS to strike the plaintiff’s claim
boswell j.
OVERVIEW
[1] Ida Covello is the former registered owner of a residential property municipally known as 181 Wigwoss Drive, Vaughan, Ontario. Ms. Covello asserts that she has been the victim of mortgage fraud. She sues a number of parties she says were co-conspirators in an elaborate scheme to defraud lenders and property owners alike, including her.
[2] Each of the defendants moves to strike out Ms. Covello’s claims against them, without leave to re-plead. They say the claim does not comply with the rules applicable to pleadings and further that the claims advanced are frivolous, vexatious and/or an abuse of process.
[3] After a lengthy period of case management and delays associated with Ms. Covello’s efforts to retain counsel, the motions were heard on July 22, 2022.
[4] At the outset of the hearing, I was advised that the action against Ms. Chinelli was to be dismissed, on consent, on a without costs basis. I signed an order to that effect in accordance with a draft provided by counsel.
[5] I advised the remaining counsel that I intended to strike Ms. Covello’s claim on the basis that it is unduly prolix and I undertook to provide written reasons for that decision. These are those reasons.
[6] Counsel’s arguments otherwise focused on the issue of whether Ms. Covello should be granted leave to re-plead. These reasons explain why I have granted her leave to re-plead some aspects of her claim but have struck others without leave to re-plead.
THE CLAIM
[7] Ms. Covello commenced her action against the defendants by a statement of claim dated December 28, 2020 and issued on December 31, 2020. The claim identifies Ms. Covello as being a self-represented party. Whether she had any assistance from a lawyer in the preparation of her claim is not known to me.
[8] The claim is some 60 paragraphs long over 29 pages, though to be fair the substantive part of the claim does not begin until page 4.
[9] The claim is remarkable in its breadth.
[10] Ms. Covello seeks, amongst other things:
(a) $2 million in general damages, plus $500,000 in punitive damages;
(b) An injunction restraining any of the defendants from dissipating any of their assets;
(c) A certificate of pending litigation over seven properties located throughout south-central Ontario (the “Listed Properties”);
(d) An order declaring certain mortgages registered over some of the Listed Properties to be fraudulent;
(e) An order requiring the defendants, Sabine Pucciarelli and Maria Chinelli, to pay into court the sum of $2.3 million; and,
(f) A variety of other declaratory relief.
[11] The significant players in the action, in addition to the plaintiff, are as follows:
(a) Though not named as a defendant, a solicitor named Anthony Maniaci plays a central role in Ms. Covello’s complaints;
(b) Peter Groccia is described as a mortgage broker;
(c) Sabine Pucciarelli is described as a mortgage agent;
(d) 2624221 Ontario Inc. (“262”) is described as a joint venture between Mr. Groccia and Ms. Pucciarelli. 262 also appears to have been engaged in the business of arranging mortgage financing. Mr. Groccia is said to be the president and chief executive officer of 262;
(e) Diamond Capital Investments Inc. (“Diamond”) is described as a mortgage broker. Ms. Covello claims that Diamond amalgamated with 262 at some undisclosed point in time. She further claims that Diamond and two other corporations – 2605336 Ontario Inc. (“260”) and 2404056 Ontario Inc. (“240”) – share common directors and officers and operate from the same premises in Vaughan, Ontario. I believe 260 and 240 are also alleged to have been engaged in the mortgage business;
(f) Maria Chinelli is described as a director and officer of 260. She is alleged to have aided 260 and others to breach their obligations under the Mortgage Brokers, Lenders and Administrators Act, S.O. 2006, c. 29 (the “MBLAA”);
(g) Matteo Damaso is named as a defendant, but it is not clear just what role he may have played in any of the alleged conduct referred to in the claim.
[12] It is difficult, if not impossible, to describe the substance of the claim in a few sentences. Generally speaking, Ms. Covello alleges the existence of a substantial conspiracy to commit mortgage fraud. She implicates the defendants in varying roles in the conspiracy to defraud her and others through over-leveraging, cover-ups and fraudulently registered mortgages. I will do my best to provide a brief overview of the allegations as they are set out in the claim.
[13] At the centre of the alleged conspiracy is the law firm of Anthony Miniaci, though he has not been named as a party defendant. Instead, it is alleged that his erstwhile law clerk, Prisila Pietropaolo, conspired with others, including Ms. Pucciarelli, Ms. Chinelli, Mr. Groccia, and the companies 262, 260 and 240, to arrange for and register mortgages against properties that became significantly over-leveraged. It is alleged that mortgage lenders were misled by the co-conspirators about the value of the properties being financed as well as the amount of any prior encumbrances. It is further alleged that the co-conspirators, through various means, acted to conceal their activities, including, at times, registering fraudulent mortgages. It is not made clear, but implicit in the claim is an assertion that the co-conspirators profited by their unlawful actions.
[14] Ms. Covello has not focused her claim on alleged wrongdoing connected to her own property. Instead, she has included allegations involving the properties of a significant number of third parties and she has sought relief in relation to alleged wrongdoing against those third parties. She has also asserted breaches by Ms. Pucciarelli, Ms. Chinelli, Mr. Groccia, 262, 260, 240 and Diamond Capital of the MBLLA and she has sought relief in relation to those alleged breaches.
[15] Ms. Covello further alleges that Mr. Groccia conspired with Ms. Pietropaolo to shoot Ms. Covello. This remarkable allegation does not otherwise appear to be tied to any of the relief sought in the claim.
[16] Though the bulk of the claim addresses matters not specifically related to Ms. Covello’s property on Wigwoss Drive, she does focus on her property in a small section of the claim found at paras. 36-41. In that section she alleges that Ms. Pucciarelli and Mr. Groccia registered fraudulent mortgages against 191 Wigwoss over a number of years. She refers to at least four specific mortgages that she says she did not authorize nor receive any benefit from. She also implicates Mr. Maniaci in the registration of fraudulent mortgages against her property over a number of years, though I confess I had a difficult time following the allegations.
[17] Towards the end of the claim Ms. Covello alleges that Mr. Groccia has commenced an action against Ms. Pucciarelli and Mr. Maniaci seeking damages for deceit and negligence. Ms. Covello attempts to adopt the contents of that claim by reference. She further seeks to adopt by reference, certain contents of another claim commenced by 262 against Mr. Maniaci seeking damages for negligence.
THE MOTIONS
[18] Each of the defendants brought motions in early 2021 seeking the following relief;
(a) striking the claim under r. 21.01(1)(b) of the Rules of Civil Procedure on the basis that it discloses no reasonable cause of action;
(b) striking the claim under r. 21.01(3)(b) on the basis that Ms. Covello lacks legal capacity or standing to advance the claims made;
(c) striking the claim under r. 21.01(3)(d) on the basis that it is frivolous, vexatious or otherwise an abuse of the court’s process;
(d) striking the claim under r. 25.11 because it is scandalous, frivolous, vexatious, will prejudice and/or delay the fair trial of the action and is an abuse of process; or,
(e) striking the claim under r. 25.06 because it fails to comply with the rules of pleadings.
[19] As is obvious, the defendants want the claim struck and they submit that there are a number of alternate routes to achieve that end.
[20] The defendants’ motions were originally returnable before me on September 3, 2021. A short time prior to that date Ms. Covello retained a lawyer, Mr. Granville Cadogan, to assist her with her response to the motions. The retainer of Mr. Cadogan triggered a motion by Ms. Pucciarelli to remove him as Ms. Covello’s counsel on the basis of an asserted conflict of interest. I will comment on that alleged conflict a little later on. The motion to remove Mr. Cadogan was scheduled to proceed on February 23, 2022. In the result, I adjourned the motions to strike to a date to be fixed after the motion to remove Mr. Cadogan was heard, being of the view that the motion to remove counsel should be heard in priority to the motions to strike.
[21] Before the motion to remove Mr. Cadogan was reached, however, he was suspended from practice by the Law Society of Ontario for reasons that I am not privy to. The motion to remove him became moot and on November 18, 2021, I vacated the February 23, 2022 hearing date.
[22] Following November 18, 2022, I conducted a number of case conferences with the parties in order to monitor Ms. Covello’s efforts to retain new counsel. Eventually, the motions to strike were scheduled to proceed on July 22, 2022 on a with or without counsel basis. As it happened, Mr. Cadogan’s suspension ended prior to July 22, 2022 and he assisted Ms. Covello with the preparation of responding material. He appeared for her and made submissions on her behalf at the hearing of the motions. Opposing counsel raised the conflict issue but determined that they did not want to delay the hearing of the motions to strike. Those motions proceeded without prejudice to any future argument that Mr. Cadogan should be removed from the record on account of a conflict of interest.
[23] In response to the motions to strike, Ms. Covello brought her own motion. She sought leave to file evidence at the hearing of the motions. She sought direction on whether this action was subject to what she described as a consolidation order issued by RSJ Edwards on November 2, 2021 whereby a number of claims involving Mr. Maniaci were joined, at least for case management purposes. Amongst other things, RSJ Edwards ordered a mediation to proceed in the actions subject to his order. Ms. Covello sought an order adding this action to the list of proceedings subject to RSJ Edwards’ order and otherwise staying the motions to strike pending the outcome of the mediation.
THE ISSUES:
[24] The relief sought in the motions to strike and the positions advanced by the parties raised the following issues for determination:
Should Ms. Covello be granted leave to file evidence on the motions?
Should this claim be added to the schedule of claims subject to RSJ Edwards’ order of November 2, 2021?
Should the statement of claim in this proceeding be struck, in whole or in part?
If the claim is struck, should Ms. Covello be granted leave to re-plead?
[25] I will consider the issues in turn.
Issue One: The Request for Leave to File Evidence
[26] Ms. Covello sought leave to file evidence on the motions to strike. No leave was required. The motions were grounded in a number of alternate rules. Only one – r. 21.01(1)(b) – prohibits the filing of affidavit evidence in support of the motions. The balance of the rules cited by the defendants do not prohibit the filing of evidence.
[27] Having said that, the evidence filed on the motion can only be considered for limited purposes. I have not been asked to find facts or to determine the merits of Ms. Covello’s substantive allegations. I have struck the claim under r. 25.11 for reasons I will set out more fully below.
[28] On the issue of whether leave to re-plead should be granted, the defendants have advanced a number of arguments. In some instances, they say that it is plain and obvious that certain aspects of the plaintiff’s claims cannot succeed. In others, they say the plantiff’s claims are frivolous and vexatious. And, finally, some of the plaintiff’s claims are said to amount to an abuse of process.
[29] To the extent that the defendants oppose leave to re-plead on the basis that it is plain and obvious that the plaintiff’s claims cannot succeed, no evidence may be considered. I must assume the facts, as asserted, are true unless they are patently ridiculous or incapable of proof. See Hunt v. Carey Canada, 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959 at para. 33 and Frank v. Legate, 2015 ONCA 631 at para. 36.
[30] To the extent that the defendants oppose leave to re-plead on the basis that the plaintiff’s claims are frivolous, vexatious or an abuse of process, I may consider the evidence filed on the motion only to the extent that it is relevant to that determination. See Baradaran v. Alexanian, 2016 ONCA 533 at paras. 15-16.
Issue Two: The Request to Join This Claim With Other Related Claims
[31] I was provided with a copy of an order made by RSJ Edwards on November 2, 2021. It is not a consolidation order, but it has the effect of rounding up a significant number of related claims for the purpose of case management. Amongst other things, as I noted, it provided for a common mediation.
[32] RSJ Edward’s order refers to 15 existing claims, all of which appear to involve allegations similar to those alluded to by Ms. Covello in the case at bar.
[33] As I indicated to counsel at the hearing of the motions, it is appropriate, in my view, to address whether Ms. Covello has a legally viable claim before considering whether it ought to be joined with the other claims subject to RSJ Edward’s order. If the defendants’ positions are justified, the claim should be struck, not passed off to be case managed by another judge.
Issue Three: Striking the Claim
[34] As I also indicated, I advised counsel at the hearing of the motions that I intended to strike Ms. Covello’s claim on the basis that it is unduly prolix. By that I meant to convey that it is too long, too rambling, too vague and too confusing to permit it to stand.
[35] I appreciate that Ms. Covello is, or at least was at the time of pleading, a self-represented litigant. Pleadings must at all times be read liberally and generously, particularly where they have been drafted by a person without formal legal training.
[36] That said, civil actions must be decided within the boundaries of the pleadings. Those boundaries define the stakes, the issues engaged and the scope of discovery in the proceedings. The way Ms. Covello’s claim is drafted, those boundaries are not readily discernable.
[37] The claim covers a very wide swath of ground, indeed far too wide. Problematic issues with the claim, as drafted, include the following:
(a) The damages sought are excessive and not connected to the allegations set out in the body of the claim;
(b) Certificates of pending litigation are sought over lands that are unrelated to Ms. Covello. She has failed to identify how she might have a reasonable claim to an interest in those lands;
(c) A broad conspiracy is alleged which, for the most part, has not been specifically connected to Ms. Covello, her property or her alleged damages;
(d) A reference is made to a plot to shoot Ms. Covello. The relevance of that allegation is not made clear and it appears unrelated to any of the damages sought, save, arguably, for the claim of punitive damages;
(e) The claim is lengthy, meandering and almost incomprehensible in significant portions; and,
(f) The allegations that impact on Ms. Covello specifically – the alleged fraudulent mortgages on her property – are not clearly articulated and are difficult to follow.
[38] Rule 25.06 sets out the basic requirements of a pleading. It says that every pleading is to contain a concise statement of the material facts on which the party relies for the claim or defence. The plaintiff’s claim offends this rule.
[39] Permitting the claim to stand in its present form would result in litigation that is almost entirely unmanageable. The issues for trial are ill-defined and discovery – both documentary and oral – would be a nightmare.
[40] It is well-settled that a statement of claim should serve the following functions:
(a) It should define with clarity and precision the question in controversy;
(b) It should give fair notice to the defendant of the precise case to be met and the precise remedies sought; and,
(c) It should assist the truth-finding function of the process.
See McCarthy Corp. PLC v. KPMG LLP, [2005] O.J. No. 3017, at para. 20, citing National Trust Co. v. Furbacher, [1994] O.J. No. 2385 at para. 9.
[41] Ms. Covello’s claim, as drafted, serves none of these identified functions.
[42] Rule 25.11(a) grants the court discretion to strike out a claim or expunge parts thereof, with or without leave to amend, on the ground that the pleading may prejudice or delay the fair trial of the action.
[43] It is not reasonably possible for me to expunge only portions of the claim. To the extent that there may be a legally viable claim within Ms. Covello’s pleading, it is so inextricably intertwined with problematic content that I am unable to save it. The claim must be, and is, struck out in its entirety. It is unduly prolix, confusing, and more than likely to delay the fair trial of this action.
Issue Four: Leave to Re-Plead
[44] Given my indication to the parties that I intended to strike the claim, their arguments at the hearing of the motions focused on whether Ms. Covello ought to be permitted to re-draft her pleading.
[45] Pursuant to r. 26.01, the court is mandated to grant leave to amend a pleading, on such terms as are just, unless non-compensable prejudice would result from the amendment, the pleadings are scandalous, frivolous, vexatious or an abuse of the court’s processes, or where the pleading discloses no reasonable cause of action. See 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42 at para. 25.
The Parties’ Positions
[46] I received submissions on the re-pleading issue from three counsel. Mr. Beitchman made submissions for a group of defendants that include Ms. Pucciarelli, Diamond (apparently legally known as Adamas Financial Corporation), 260, 240 and Dominion Lending Centre (I will refer to this group as the “Pucciarelli defendants”). Ms. Quinn made submissions on behalf of another group of defendants that include 262, Peter Groccia and Matteo Damaso (I will refer to this group as the “Groccia defendants”). Mr. Cadogan made responding submissions on behalf of Ms. Covello.
[47] The Pucciarelli defendants submit that Ms. Covello lost her home on Wigwoss Drive because she defaulted on a valid mortgage and failed to defend the action of the mortgagee, Flexpark Inc., for possession of the property and for payment on the covenant. She subsequently sought to set aside a default judgment granted in favour of the mortgagee, but her motion was rejected. An appeal of the motion judge’s decision was also rejected. The Pucciarelli defendants argue that this action is a misguided attempt to get around the default judgment.
[48] The Pucciarelli defendants further submit that regardless of whether a broad conspiracy of the nature alleged existed, Ms. Covello has not been directly impacted by it. She is attempting to characterize herself as a victim of the conspiracy – of what she described as a “mortgage Ponzi scheme” in one of her affidavits filed in response to the motions. She is not a victim of any conspiracy at all. Instead, she lost her home because she did not make payments on a valid mortgage. She failed to defend the mortgagee’s action for possession and a default judgment was entered against her.
[49] In their comprehensive factum, the Pucciarelli defends outline in detail the reasons why each aspect of the claim in unsustainable and should be struck. These reasons include:
(a) It is an abuse of process, for the reasons just outlined;
(b) It fails to disclose a reasonable cause of action. It is plain and obvious that Ms. Covello cannot succeed on any of her asserted claims; and,
(c) It includes scandalous, frivolous and vexatious claims. For instance, it refers to a conspiracy in relation to properties unrelated to Ms. Covello and it seeks remedies for statutory breaches where no civil cause of action is provided for in the statutes cited.
[50] In summary, the Pucciarelli defendants contend that Ms. Covello has no reasonable claim against any of them. If she is permitted to re-plead, the result can only be another equally frivolous and vexatious claim, certain to fail.
[51] The Groccia defendants submit that they are not alleged to have been involved in any way in the historical, allegedly fraudulent, mortgages on Ms. Covello’s property. Their involvement is limited to a mortgage in favour of Flexpark Inc. That is the mortgage Ms. Covello defaulted on and in respect of which Flexpark obtained default judgment. The Flexpark mortgage has been fully litigated. It was found to be valid and enforceable. Ms. Covello’s assertions of fraud in relation to that mortgage were rejected by both this court and the Court of Appeal. Ms. Covello is, the Groccia defendants submit, attempting to relitigate the Flexpark action.
[52] In a thorough factum, counsel to the Groccia defendants carefully explained why each aspect of the plaintiff’s claim is not otherwise legally viable and must be struck out. In particular:
(a) Attempting to relitigate the Flexpark action amounts to an abuse of process;
(b) Ms. Covello has no standing to advance many of the claims included in her pleading and to that end, those claims are frivolous and vexatious;
(c) There is no cause of action for statutory breaches and, again, to the extent that Ms. Covello seeks relief for breaches of the Criminal Code or the MBLAA, her claims are frivolous and vexatious; and,
(d) The claim, as drafted, generally offends the rules applicable to pleadings.
[53] The Groccia defendants oppose leave being granted to re-plead. They assert that if leave is granted, the parties will inevitably be back before the court on further motions to strike. In the interests of fairness and proportionality, leave to re-plead should not be granted.
[54] Ms. Covello’s position, as articulated by Mr. Cadogan, is that the allegations against all of the defendants arise from fraudulent activities in the law office of Mr. Maniaci. Those fraudulent activities extend, however, beyond Mr. Maniaci’s office and involve all of the named defendants. Ms. Covello has been defrauded. This case should be decided on its merits. That can only happen if she is given leave to reconstitute her claim.
[55] Mr. Cadogan concedes that the claim could have been better articulated and clearer about the liability of each of the parties. But to be fair, he says, when the claim was initially drafted, Ms. Covello did not have access to banking records that might have enabled her to trace the funds associated with various mortgages placed on her residence. She only received those bank records in March 2022. With the benefit of those records, she is now able to draft a more articulate and particularized claim.
Discussion
[56] The question of whether Ms. Covello should be granted leave to file a fresh as amended pleading is a difficult one for two principal reasons. First, it is extremely difficult to understand what exactly she has pleaded in the claim now before the court. That is a central reason why the claim has been struck. Second, because I have no idea what a fresh as amended pleading might look like in this case.
[57] There is no doubt that Ms. Covello’s claim is so deficient that it must be struck. I am, however, persuaded that Ms. Covello may have a number of valid complaints. In the interests of justice, she should be permitted the opportunity to advance any legally viable claims she may have.
[58] In the result, I will do my best to generously consider the substance of the claims presently advanced and to determine if there is any way that any of those claims might be re-pleaded in such a way as to constitute a legally viable claim.
[59] I will, of course, consider the substance of the claim in the context of the arguments advanced by the defendants as to why it is not now and never can be legally viable.
[60] A common theme advanced by both defence counsel is that this action is an abuse of process because it really amounts to a collateral attack on the judgment in the Flexpark mortgage action. It may be helpful, in the circumstances, to provide a brief overview of that action.
[61] In November 2017, Ms. Covello mortgaged her property at 181 Wigwoss Drive to a lender known as Flexpark Inc. Mr. Groccia is the president of Flexpark. The mortgage secured the principal sum of $670,000 plus interest at the rate of 12% per year.
[62] Ms. Covello defaulted on the mortgage on December 1, 2018. Flexpark sued on the mortgage – for possession and payment on the covenant – by statement of claim dated September 11, 2019. Ms. Covello failed to defend the action and default judgment was granted in favour of Flexpark on December 13, 2019. She was evicted from her residence on March 2, 2020.
[63] Ms. Covello moved to set aside the default judgment on April 3, 2020. The motion came before Leibovitch J. in Oshawa. He dismissed the motion for reasons set out in a written ruling dated April 22, 2020. Amongst other things, Leibovitch J. found that:
(a) Ms. Covello had independent legal advice before she entered the mortgage with Flexpark (from Mr. Cadogan and hence the assertion of conflict);
(b) The Flexpark mortgage was advanced to pay off an existing second mortgage on Ms. Covello’s residence and to pay off other debts;
(c) Ms. Covello failed to explain her delay in bringing the motion to set aside the default judgment;
(d) Ms. Covello sought to file a defence pleading that the Flexpark mortgage was fraudulent. Her allegations were largely based on the fact that a clerk in Mr. Maniaci’s office was alleged to have engaged in fraudulent activity that resulted in the over-leveraging of certain properties, perhaps including 181 Wigwoss. But Ms. Covello offered no evidence that the Flexpark mortgage was fraudulent, or that any alleged over-leveraging of her property acted to her detriment, as opposed to the detriment of the lender(s); and,
(e) There was no dispute that the Flexpark mortgage was advanced to Ms. Covello and that she had the benefit of the mortgage loan.
[64] Ms. Covello appealed the ruling of Leibovitch J. She moved before the Court of Appeal for an order staying the default judgment pending appeal. Her motion was dismissed by Harvison Young J.A. on August 12, 2020.
[65] Ms. Covello’s appeal was subsequently dismissed by the Court of Appeal on May 3, 2022. The Court of Appeal observed that there was no dispute that Ms. Covello entered into a mortgage agreement, that she had independent legal advice before doing so, that the mortgage funds were advanced, and that she defaulted on the mortgage.
[66] The Court of Appeal agreed with the conclusion of Leibovitch J. that any fraudulent activities of Mr. Maniaci’s law clerk, Ms. Pietropaolo, did not affect the validity or enforceability of the Flexpark mortgage.
[67] In the result, the enforceability of the Flexpark mortgage has been fully litigated. It has been conclusively determined that the Flexpark mortgage was not fraudulent. Ms. Covello lost her home because she defaulted on that mortgage. To the extent that the claim now before the court seeks to relitigate the enforceability of the Flexpark mortgage, it is undoubtedly an abuse of process. I do not, however, share defence counsel’s views that this action is focused solely on the Flexpark mortgage. Indeed, that mortgage appears to me to barely enter into it.
[68] I will accordingly turn to a consideration of the substance of the claim with a view to, again, determining the extent to which granting leave to amend may cause non-compensable prejudice to the defendants, perpetuate scandalous, frivolous, vexatious or abusive claims, or otherwise result in a fresh pleading that discloses no reasonable cause of action.
[69] Although it is difficult, I will break the claim down into what I perceive to be its principal constituent elements:
(i) The claim to a certificate of pending litigation
[70] At para. 1(g), Ms. Covello seeks leave to issue a certificate of pending litigation over the Listed Properties, none of which has ever been owned by her. It is not entirely clear to me who owns each of the Listed Properties, though it appears from an affidavit sworn by her on February 7, 2022 in another proceeding, that Ms. Pucciarelli has an interest in a number of them.
[71] A certificate of pending litigation is only available where a reasonable claim to an interest in the subject lands has been advanced. Nowhere in Ms. Covello’s claim, as pleaded, is there any indication as to how Ms. Covello might have a reasonable claim to an interest in the Listed Properties. It is at least conceivable, however, that such a claim might arise if Ms. Covello could establish that the proceeds of any mortgages fraudulently registered against her property were used to acquire, maintain or improve any of the Listed Properties.
[72] Because there may be a legally viable route supporting the granting of a CPL in Ms. Covello’s favour, she will have leave to re-plead this aspect of her prayer for relief.
(ii) The claim that 262 pay into court the sum of $2.3 million
[73] At para. 1(j), Ms. Covello seeks an order requiring 262 to pay into court the value of mortgages placed on properties in Kleinburg, Barrie and Whitby, none of which were hers. She does not appear to have standing to bring such a claim, since she has never had any interest in those properties. Her claim to this relief appears to be frivolous and vexatious.
[74] Having said that, it may be that Ms. Covello’s concern is that one or more of the defendants have intentionally encumbered their properties in such a way as to reduce the equity available to their creditors. In my view, it is open to Ms. Covello to plead that mortgages placed on any of the defendants’ properties with an intention to defeat, delay, hinder or defraud creditors are fraudulent conveyances and should be set aside under the Fraudulent Conveyances Act, R.S.O. 1990 c. F.29.
(iii) The claim that Ms. Pucciarelli and Ms. Chinelli pay $2.3 million into court
[75] At para. 1(n), Ms. Covello seeks an order that Ms. Pucciarelli and Ms. Chinelli pay into court funds that they purportedly received – presumably as commissions or fees – in relation to mortgages transacted by 260, Diamond and/or Ms. Pucciarelli, in breach of the MBLAA.
[76] Ms. Covello does not have standing to advance a claim for the return of commissions or fees relating to the arrangement of mortgages on properties owned by third parties. To the extent that she purports to do so, her claim is frivolous and vexatious.
[77] It remains open to Ms. Covello to seek an order that any of the defendants disgorge any fees or commissions unlawfully received in relation to mortgages registered against 181 Wigwoss. That said, for reasons set out more fully below, she does not have standing to prosecute alleged breaches of the MBLAA.
(iv) The claims asserting a breach of the MBLAA
[78] In addition to the relief sought at para. 1(n), as above, Ms. Covello has repeatedly alleged, throughout the claim, that Ms. Pucciarelli and other defendants have arranged mortgages when they are not properly licensed to do so under the MBLAA. See paras. 1 (l), 5, 7, 8, 9, 11, 14, 15, 16, 17, 18, 19, 21, 22, 25, 44, 46, 47, 48, 49, 52, 53, 55 and 59. The claim is often vague as to what end these allegations are directed at. But to the extent that any relief is sought in relation to alleged breaches of the MBLAA, the claim is not sustainable.
[79] There is no recognized tort of statutory breach. See Canadian Alliance of Pipeline Landowner’s Associations v. Enbridge Pipelines Inc., 2008 ONCA 227 at para. 31. Ms. Covello does not have a cause of action for breach of the MBLAA. Nothing in that statute creates a civil cause of action. To the extent that there is a public interest in enforcing the requirements of the MBLAA, that task falls to the Financial Services Regulatory Authority of Ontario.
[80] In the result, any claims for relief based on asserted breaches of the MBLAA are frivolous and vexations and leave to re-plead those assertions is denied.
(v) The allegations of Criminal Code offences
[81] In other paragraphs of the claim, Ms. Covello asserts that a number of offences have been committed under the Criminal Code of Canada. See, for instances, paras. 25 (counselling and conspiracy in restraint of trade), 30 (breach of a statute and fraudulent registration of title), 34 and 35 (counselling), 57 (fraud), 58 (fraud), and 59.
[82] For reasons expressed in the preceding section, Ms. Covello does not have standing to prosecute Criminal Code offences in this forum. That said, there are times when the essential elements of a criminal offence also constitute a civil wrong. For instance, criminal fraud and civil conversion are not dissimilar. Criminal assault and civil battery are also close cousins. Ms. Covello has not, however, asserted these civil wrongs. She has sought relief for breaches of the Criminal Code. Such claims are not sustainable and are, in the result, frivolous and vexatious.
(vi) The broad allegations of conspiracy
[83] A huge portion of the claim is dedicated to outlining what Ms. Covello views as a substantial conspiracy to commit mortgage fraud. See paras. 1(a), 16, 20 – 33, 39, 43, 55 and 58. It is not clear, however, how her own property was implicated in the conspiracy.
[84] At para. 29 of the claim, Ms. Covello lists some 37 properties that were impacted, she says, by the conspiracy to over-leverage properties, then later conceal what had been done. Thirty-six of those properties are owned by third parties.
[85] I confess that I am not entirely clear on the particulars of the alleged conspiracy, but it appears to consist of the following elements, at least as alleged by Ms. Covello:
• It is grounded in Mr. Maniaci’s office, though I am not sure to what extent Mr. Maniaci is alleged to have participated in it. He is alleged to have registered fraudulent mortgages on Ms. Covello’s property, yet he is not named as a party defendant. Instead, it is alleged that a clerk in Mr. Maniaci’s office – Ms. Pietropaolo – went rogue.
• With the assistance or acquiescence of Ms. Pucciarelli, Mr. Groccia and 262, Ms. Pietropaolo placed mortgages on a number of properties based on false representations to lenders about the value of the properties as well as the value of any prior encumbrances registered against those properties. In other words, lenders were induced to advance funds on mortgage security that was substantially less secure than they were led to believe.
• More particularly, Ms. Pucciarelli, Mr. Groccia and Diamond/262 are alleged to have referred mortgage applicants to Mr. Maniaci’s office. Ms. Pietropaolo is alleged to have misled their lender clients as to the value of properties proposed for financing and the priority of their mortgages. Ms. Pucciarelli and others are alleged to have received commissions and other fees in relation to the placed mortgages.
• As mortgages came due and the over-leveraging was at risk of discovery, a plan was formulated to conceal what had been done. Somehow Mr. Groccia allegedly paid out the impacted mortgages, whether directly or through 262.
• Ms. Pucciarelli, Ms. Chinelli and Ms. Pietropaolo took out mortgage-backed loans on their own personal properties to cover any losses suffered by Mr. Groccia or 262.
• In some instances, postponement agreements were forged and fraudulently registered on certain properties to provide lenders with priority that they were otherwise not entitled to.
• In other instances, fraudulent title insurance claims were submitted through Mr. Maniaci’s office, based on false documentation provided by that office.
[86] Whether Ms. Covello’s conspiracy theory makes any sense or has any merit is not a matter I need to grapple with. The salient question here is whether any of the alleged conspiracy impacts Ms. Covello’s property in a manner that might lead to compensable damages.
[87] For the overwhelming part, the conspiracy allegations relate to third party properties and third party lenders. It is difficult to determine whether the allegations of conspiracy, insofar as they relate to third parties, are meant to support relief that only those third parties have standing to pursue, or whether they are meant to provide context to the allegations of fraud relating to the mortgages registered against 181 Wigwoss.
[88] To the extent that Ms. Covello is seeking relief in relation to the interests of third parties, she lacks the standing to do so and any such claims are frivolous and vexatious.
[89] Ms. Covello does, however, suggest that she was herself a victim of the mortgage fraud conspiracy. She undoubtedly remains of the view that the Flexpark mortgage was fraudulent. But it has already been determined in the Flexpark proceedings that that particular mortgage was not fraudulent and that she received the benefit of it. To the extent that her claim continues to challenge the validity or enforceability of the Flexpark mortgage, it is an abuse of process. She will not have leave to re-plead any allegations that go to the validity or enforceability of that mortgage.
[90] Having said that, there are a number of mortgages registered against 181 Wigwoss that Ms. Covello asserts were unauthorized and fraudulent and in respect of which she did not receive any benefit. There is evidence that Ms. Pucciarelli and Diamond/262 received very substantial fees from one or more mortgages registered against Wigwoss, including the Flexpark mortgage and another described as the Geraci mortgage.
[91] Nothing in the Flexpark ruling prevents Ms. Covello from pursuing any of the named defendants for fees, commissions or other sums improperly received as a result of any mortgage financing placed against Wigwoss. Nothing prevents Ms. Covello from asserting that any mortgage – apart from the Flexpark mortgage – registered against Wigwoss was fraudulent.
[92] References to a larger conspiracy may be narrative necessary for a coherent explanation of the plaintiff’s claims insofar as they relate to mortgage fraud against her or to improper and unlawful fees charged to her by any of the defendants. In the result, Ms. Covello has leave to include a concise overview of the purported conspiracy in any fresh as amended pleading. She will, of course, need to adhere to the common law requirements specific to pleadings of conspiracy. And she will need to link the purported conspiracy to her own loss.
(vii) The alleged fraudulent mortgages on Wigwoss
[93] Much of the content of the claim is a distraction. But at its core it asserts that Ms. Covello has been the victim of fraud. Specifically, that mortgages were registered against her property at 181 Wigwoss Drive that she did not know about, authorize, or receive the benefit of. Only one of those allegedly fraudulent mortgages – the Flexpark mortgage – has been litigated.
[94] Ms. Covello alleges the following, at paras. 36 – 41 of the claim, with respect to other mortgages registered against her property:
(i) A mortgage registered April 23, 2012 in the amount of $236,692.85 in favour of M.Y.G. Enterprise is fraudulent. She says it was brokered by Ms. Pucciarelli. She did not give her consent to Ms. Pucciarelli or Mr. Maniaci to register the mortgage. She received none of the mortgage proceeds;
(ii) A mortgage registered October 16, 2012 in the amount of $350,000.00 in favour of Stanley Kichuk is similarly fraudulent. She appears to allege that Ms. Pucciarelli was involved in the registration of the mortgage, but that is not entirely clear. She claims she did not consent to the mortgage nor receive any of its proceeds;
(iii) Between 2014 and 2019, Mr. Maniaci registered mortgages on Wigwoss in favour of Diamond, which were fraudulent. She says she never consented to the mortgages, which totalled $240,545.44;
(iv) At para. 38, she refers to the “Geraci” mortgage which she says is fraudulent, but I am afraid I am unable to understand the allegations surrounding this transaction; and,
(v) In or about 2016 Mr. Maniaci registered a mortgage on Wigwoss and paid the proceeds, some $299,000 to Ms. Pucciarelli. She alleges that these proceeds were stolen from her.
[95] I am unable to say whether there is any merit at all to Ms. Covello’s allegations that numerous mortgages were fraudulently registered against her property. But it is not my function on this motion to determine the merits of Ms. Covello’s allegations of fraud, as they relate to the mortgages referred to in paras. 36-41.
[96] Ms. Covello is entitled to amend her pleadings provided doing so will not cause non-compensable prejudice, perpetuate a claim that is frivolous, vexatious, scandalous or an abuse of process, or where there is otherwise no reasonable cause of action. I cannot say that re-pleading the allegations of fraudulent mortgage financing on 181 Wigwoss will do any of those things, provided that any re-pleading does not challenge the validity or enforceability of the Flexpark mortgage.
[97] Should Ms. Covello cast her net too broadly and name as defendants parties who played no role in the allegedly fraudulent mortgages, then she will, of course, face further motions to strike. But I am unable to forecast who will be named as defendants in a fresh as amended pleading.
[98] Some defendants – the Groccia defendants in particular – would no doubt prefer that I bar any future claims against them by Ms. Covello. They do not presently appear to be implicated in the allegedly fraudulent mortgages registered against 181 Wigwoss, save for the Flexpark mortgage, which has been fully litigated.
[99] While I am sympathetic to their position, I do not know enough about the alleged fraudulent mortgages to have a sufficient level of confidence about who might be implicated in those allegations.
[100] Both the Puciarelli defendants and the Groccia defendants raised concerns about the likelihood that any new claims advanced in a re-pleaded claim will be statute-barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. Counsel to the Groccia defendants referred the court to the decision of Copeland, J., as she then was, in Shtaif v. Stevensons LLP, 2019 ONSC 4320. There, Copeland J. held, at para. 60, that a presumption of prejudice will arise where a plaintiff seeks to amend its pleading to add a new cause of action after a limitation period has expired.
[101] I am not in a position, on the record now before me, to determine what a re-pleaded claim will look like. Determining whether any of Ms. Covello’s claims are statute-barred as being out of time will potentially involve a number of considerations, including the date when a claim was reasonably discoverable and whether any re-pleaded claims are actually “new” or whether they were sufficiently advanced in a timely way in the original claim. Ms. Covello will, of course, have to give serious consideration to the provisions of the Limitations Act, 2002 when she re-drafts her claim.
(viii) Incorporating other claims by reference
[102] As I noted above, Ms. Covello has attempted to incorporate by reference, claims advanced against one or more of the defendants by other plaintiffs in extrinsic actions. It is not proper for her to do so. Whatever allegations she intends to make against the defendants must be contained and fully pleaded within the claim here.
Conclusion
[103] In summary, the following components of the plaintiff’s claim are struck without leave to re-plead:
(a) She may not re-plead any allegations that challenge the validity or enforceability of the Flexpark mortgage;
(b) She may not assert any claim for damages arising from any alleged breach of the Criminal Code or the MBLAA;
(c) Save as may be specifically provided for in the paragraph that follows, she may not advance a claim for damages, for the payment of monies into court, or for any other relief relating in any way to mortgages registered against third party properties. In other words, any mortgage other than those registered against 181 Wigwoss Drive;
(d) She may not pursue damages for conspiracy other than in relation to 181 Wigwoss Drive; and,
(e) She may not incorporate any other claim by reference.
[104] On the other hand, there are a number of components to the claim that, in my view, may constitute legally viable claims if properly pleaded. Ms. Covello shall have leave to re-plead the following aspects of her claim:
(a) She may advance a claim for general damages for mortgages fraudulently registered against 181 Wigwoss provided the amount is rationally connected to her own personal losses;
(b) She may advance a claim for punitive damages provided she pleads the material facts that support such a claim;
(c) She may seek to trace any funds improperly obtained through fraudulent mortgages registered against 181 Wigwoss Drive or other unlawful means;
(d) She may seek a declaration that any damages awarded arise out of fraud or misappropriation;
(e) She may seek any other relief directed at the recovery of any damage award, including but not limited to:
(i) A certificate of pending litigation, provided she pleads material facts that support her assertion of a reasonable claim to an interest in the lands subject to the certificate;
(ii) A claim to set aside any conveyance or encumbrance involving lands owned by any defendant where the conveyance or encumbrance was intended to delay, defeat, hinder or defraud creditors or others; or,
(iii) A claim to a non-dissipation or freezing order in relation to the defendants’ assets;
(f) She may advance a claim for the disgorgement by any of the defendants of any fees, commissions or other sums unlawfully received by any of the defendants in relation to mortgages registered against 181 Wigwoss; and,
(g) She may plead a concise overview of the alleged mortgage fraud conspiracy provided it is linked to the plaintiff’s own property and otherwise complies with the common law rules governing conspiracy pleadings.
[105] Ms. Covello may have other viable legal claims not yet advanced. This ruling is not intended to curtail her right to advance any legally viable claims she may have. It addresses only the content of the existing statement of claim. Some of that content is, as I have noted, struck without leave to re-plead. Other content is struck with leave to re-plead. This ruling does not go beyond that.
[106] Finally, provided Ms. Covello is able to re-draft her claim in such a way as to constitute a legally viable action, she may return for a hearing her motion to be added to the group of claims presently being case managed by RSJ Edwards.
COSTS
[107] The parties made submissions on the issue of costs in the course of the argument of the motion.
[108] The Pucciarelli defendants seek partial indemnity costs in the amount of $15,000 for their motion to strike, plus an additional $5,000 for the costs of their motion to remove Mr. Cadogan as counsel of record. By an endorsement on a case conference on November 18, 2021 I reserved the costs of that motion to the judge hearing the motions to strike.
[109] The Groccia defendants similarly seek $15,000 in costs on a partial indemnity scale for their motion to strike. They did not file materials on the motion to remove Mr. Cadogan and are not seeking costs relating to that motion.
[110] Both defence counsel argued that the motions to strike were complicated. There was an enormous volume of material. Sorting out the nature of the claims advanced by Ms. Covello – and the reasons why those claims are not sustainable – was not an easy task. Each category of claim needed to be responded to, with legal authority to support why the various claims ought to be struck. Each counsel filed a comprehensive factum.
[111] Mr. Cadogan urged the court not to award any costs of the motion. He said Ms. Covello is a self-represented litigant who did the best she could in preparing her claim. A costs award against her will be prohibitive. She is, he said, the victim of a Ponzi scheme and she should not be deprived of her day in court.
[112] Mr. Cadogan further submitted that no costs should be awarded on the motion to remove him as counsel of record, given that the motion has yet to be heard.
The Governing Principles
[113] An award of costs, and the amount of the award, are in the court’s discretion. That discretion is grounded in section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43. Its application is guided by the factors enumerated in r. 57.01 of the Rules of Civil Procedure.
[114] The law is now well-settled that the overarching principles to be applied to the assessment of costs are fairness, proportionality and reasonableness: see Beaver v. Hill, 2018 ONCA 840; Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 2004 CanLII 39005 (ON CA), 246 D.L.R. (4th) 440 (C.A.). In the context of determining what is fair, reasonable and proportionate, due consideration must be given to the reasonable expectations of the parties. See Neubuerger v. York, 2016 ONCA 303 at para. 17.
[115] By convention, costs are generally awarded to a successful party and are ordinarily measured on a partial indemnity basis. See Bell Canada v. Olympia & York Developments Limited et. al. (1994), 1994 CanLII 239 (ON CA), 17 O.R. (3d) 135 (C.A.).
Discussion
[116] The defendants were undoubtedly successful on the motion. Ms. Covello’s pleading has been struck.
[117] The defendants seek only their partial indemnity costs. Elevated costs are not being pursued.
[118] In terms of the motion to remove Mr. Cadogan as counsel of record, I agree with the submission that it is premature to assess those costs. The motion was rendered moot when it was determined that Mr. Cadogan was suspended by the Law Society. Whether it is ever returned for argument remains to be seen. I have made no finding about whether there is any merit to the motion to remove him as counsel of record. In my view, the costs of that motion are best left to be argued should there be a determination of the conflict issue in the future.
[119] In terms of the motion to strike, I find that it was a difficult motion. The reason it was difficult is that Ms. Covello’s claim is so challenging to get a handle on. It is broad and sweeping in its scope. It is difficult to comprehend in parts. It makes very serious allegations against a significant number of parties. Those allegations are of a wide variety and caused the defendants to have to argue the motion on numerous fronts. The motion was complex.
[120] Moreover, Ms. Covello filed an enormous amount of material with the court that had to be reviewed and, in some instances, responded to by the defendants.
[121] A great deal of work went into preparing for the motions, including the preparation of comprehensive factums.
[122] In my view, the amount of costs sought, at $15,000 for each of the Pucciarelli and Groccia defendants, is not entirely unreasonable. Having said that, a critical issue on the motion was whether Ms. Covello should be permitted to re-plead. I have given her leave to re-plead in significant areas, so while I have characterized the defendants as the successful parties on the motion, I recognize that Ms. Covello has had some success on an issue of great importance to her.
[123] In my view, in all the circumstances, a fair, reasonable and proportionate costs award is $8,000, all-in, for each of the two groups of defendants. Ms. Covello would, or should, have expected the defendants’ costs to be in that range. In note that costs of $10,000 were recently awarded against her by the Court of Appeal in the Flexpark action.
[124] In the result, I award costs to the Pucciarelli defendants in the amount of $8,000 and similarly award the amount of $8,000 to the Groccia defendants, payable by the plaintiff within 30 days.
Boswell J.
Released: October 7, 2022