Court File and Parties
COURT FILE NO.: CV-23-00696115-00CL DATE: 2023-06-01 SUPERIOR COURT OF JUSTICE – COMMERCIAL LIST - ONTARIO
RE: Richter Inc. (formerly, Richter Advisory Group Inc.) in its capacity as Licensed Insolvency Trustee of the Bankruptcy Estate of Dennis Roy Wing, Plaintiff AND: Dennis Roy Wing and Maria Wing, a.k.a. Maria Cella Kosky or Maria Cella Wing, Defendants
BEFORE: P.J. Osborne J.
COUNSEL: C. Haddon Murray, for the Plaintiff Adam Zeldin, for Richter Inc., Licensed Insolvency Trustee of the Estate of Dennis Wing
HEARD: May 31, 2023
Endorsement
1.
Introduction
Richter Inc., in its capacity as Trustee in Bankruptcy, seeks leave to serve originating process on a defendant located in the United States pursuant to r. 17.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. It also seeks as ancillary relief an extension of the time for service.
2.
The Legal Framework for Service Ex Juris
Rule 17 provides for service outside Ontario. Rule 17.02 enumerates a list of those proceedings in respect of which an originating process may be served as of right, without leave.
3. Rule 17.03(1) provides that the court may grant leave to serve an originating process in any case to which Rule 17.02 does not apply. Pursuant to r. 17.03(2), such leave may be sought on motion brought without notice, supported by an affidavit or other evidence showing in which place or country the person is or probably may be found, and the grounds on which the motion is made.
4. It appears that the test for granting leave pursuant to r. 17.03 is not particularly well-settled.1
5. There is, not surprisingly, a relationship between the law relating to assumption and exercise of jurisdiction for any given case, and the law relating to the procedural rules that govern the circumstances in which a party in a foreign jurisdiction may be served with Ontario originating process (i.e., Rule 17).
6. In Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572, the Supreme Court of Canada clarified the test for the assumption and exercise of jurisdiction. The first question the court must decide is whether it is open to the court to assume jurisdiction based on a real and substantial connection. If there is such jurisdiction, the second question is whether the court should decline to exercise its jurisdiction under the doctrine of forum non conveniens.
7. The Supreme Court set out a list of connecting factors, the presence of which creates a presumption of jurisdiction in tort cases. However, the list is not exhaustive, and the presumption is rebuttable. Where, in any particular case, none of the connecting factors nor any new or non-listed presumptive connecting factor applies, the court should not assume jurisdiction (subject to the issue of forum of necessity, which the Court left for another day).
8. If the Court has jurisdiction (i.e., the presumption is not rebutted), it is to be exercised unless a party invokes the doctrine of forum non conveniens.
9. Put simply, the Van Breda test involves an analysis of those three issues, in order:
a. does the Court have jurisdiction based on the presumptive factors?
b. has this presumption been rebutted?
c. if the presumption has not been rebutted is there another forum that is clearly more appropriate for the litigation of the claim?
10. In Van Breda, the Supreme Court specifically referenced the r. 17.02 factors in the context of a discussion about certain connections that the courts could use as presumptive connecting factors. The Court stated, at para. 83, that those factors:
relate to situations in which service ex juris is allowed, and they were not adopted as conflicts rules. Nevertheless, they represent an expression of wisdom and experience drawn from the life of the law. Several of them are based on objective facts that may also indicate when courts can properly assume jurisdiction.
11. In 2019, the Supreme Court further observed in Barer v. Knight Brothers LLC, 2019 SCC 13, [2019] 1 S.C.R. 573, at para. 132, that:
these service ex juris rules are purely procedural and do not by themselves determine the issue of the jurisdiction of the Ontario courts; the substantial source of jurisdiction is instead the presence of a “real and substantial connection”.
12. As submitted by the Trustee, the r. 17.02 factors relevant to service outside Ontario, and the test for the assumption of jurisdiction, have been informed by one another as reflected in the jurisprudence, but service and jurisdiction remain different concepts.
13. Moreover, the fact that the list of r. 17.02 factors is not exhaustive, is clear from r. 17.03 itself which expressly applies to any case to which r. 17.02 does not apply.
14. The Trustee submits that, where a plaintiff can establish jurisdiction simpliciter, the court should permit service of an originating process. It follows that the test for leave under r. 17.03 must be at least as broad as the test for the assumption of jurisdiction. I agree with this submission.
15. On the other hand, it also follows that if a party cannot establish jurisdiction simpliciter, that party should not be permitted leave to serve originating process: Bui Duy Thinh et al. v. Tran Quoc Chinh et al., 2015 ONSC 3406, 11 E.T.R. (4th) 177.
16. While, as noted above, there are few cases interpreting r. 17.03, there are, however, a few decisions interpreting r. 17.06(3), which provides that the court may make an order validating service where the court concludes that service outside Ontario was not authorized by these Rules, but the case is one in which it would have been appropriate to grant leave to serve outside Ontario under r. 17.03. Those decisions seem consistent with the approach outlined above.
17. First, in Tyoga Investments Ltd. v. Service Alimentaire Desco Inc., 2015 ONSC 3810, DiTomaso J., in granting Tyoga’s motion, stated as follows, at paras. 72-74:
Tyoga brings a motion for an order validating service of the Statement of Claim on Desco pursuant to rules 17.02 and 17.06(3) of the Rules of Civil Procedure. This court has found that the contract was formed in Ontario. Further, Desco carries on business in Ontario.
On the basis of the Statement of Claim and the totality of the evidence on this motion, I find that service of the Statement of Claim was valid and should not be set aside.
Moreover, there is a real and substantial connection between the litigation and Ontario such that service should be permitted. Ontario is the convenient forum for trying the action. Accordingly, service of the Statement of Claim is validated pursuant to rule 17.02 of the Rules of Civil Procedure.
18. Second, in Rosenblatt v. Peled, 2019 ONSC 5197, Christie J. found, at para. 60, that “Ontario does not have jurisdiction based on the real and substantial connection test”, and stated, at paras. 57-58:
Pursuant to Rule 17.06(3), if the court is satisfied that service outside Ontario is not authorized by the rules, but the case is one in which it would have been appropriate to grant leave to serve outside Ontario under Rule 17.03, the court may make an order validating service […]
I am satisfied that service outside of Ontario on the Defendants, without leave, was not authorized under the Rules and Ontario is not an appropriate forum for the subject matter of this action for the reasons stated above regarding the real and substantial connection test, forum non conveniens, and forum of necessity.
19. Finally, in Tucows.Com Co. v. Lojas Renner S.A., 2011 ONCA 548, 106 O.R. (3d) 561, the Court of Appeal for Ontario stated, at paras. 73-74:
Pursuant to Van Breda, if a case falls within rule 17.02(a), a real and substantial connection for the purposes of assuming jurisdiction against the defendant will be presumed to exist […]
Having regard to these reasons, it is unnecessary for me to address Tucows’s submissions respecting validation of service after the fact pursuant to rule 17.06(3).
20. In my view, if service outside Ontario (without leave) is permitted under r. 17.02 on the basis that there is a presumed real and substantial connection, then the real and substantial connection test logically ought to function as the test for leave under r. 17.03.
21. The issue here, then, is whether this Court can assume jurisdiction over the action.
22.
Background and Facts
The Fourth Report of the Trustee dated March 30, 2023, filed on this motion sets out in detail the basis for this motion.
23. The Trustee commenced the action to recover funds transferred by the Bankrupt, Mr. Wing, to his wife, Maria Wing, as transfers undervalue or preferences pursuant to ss. 95 and 96 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the “BIA”). The transferred funds represent the proceeds from the sale of an Ontario property.
24. In 2015, the Ontario Securities Commission (“OSC”) found that Mr. Wing had engaged in an insider trading scheme and had been untruthful to Commission staff in a compelled examination. The OSC issued an order imposing a permanent ban on Mr. Wing trading or acquiring securities (subject to certain exceptions) and requiring Mr. Wing to pay penalties, disgorgement and costs in the amount of $2,570,916.
25. Mr. Wing appealed the OSC order and his appeal was dismissed in October, 2016.
26. In May 2016, while that appeal was pending, Mr. Wing sold a Toronto condominium. On May 17, 2016, approximately USD $2.2 million was deposited into a J.P. Morgan Chase bank account held by Mr. Wing. He states in his Statement of Defence attached to the Fourth Report that these funds were the proceeds of sale from that condominium.
27. The same day or the next day, on May 17 or 18, 2016, Mr. Wing transferred approximately USD $1.6 million from the proceeds of sale to another J.P. Morgan Chase bank account controlled by his wife. It is this transfer that the Trustee attacks in this action as a transfer undervalue or as a preference.
28. In December 2016, and shortly after his appeal from the OSC order was dismissed, Mr. Wing filed a notice of intention to make a proposal under the BIA.
29. In his Statement of Affairs sworn January 19, 2017, Mr. Wing failed to disclose a number of bank accounts with balances in excess of $500,000. In May 2017, the OSC discovered these undisclosed accounts and informed the Trustee. The OSC also discovered that Mr. Wing had breached the terms of the permanent trading ban.
30. Mr. Wing’s proposal creditors rejected his proposal, with the result that he was deemed to have made an assignment in bankruptcy and the current Trustee replaced the proposal trustee.
31. The Trustee only became aware that the bank account to which Mr. Wing had transferred the funds was owned by his wife, on January 14, 2020. The Trustee requested that Mr. Wing provide his wife’s address and he declined to do so on the basis that she did not give him permission to provide that information to the Trustee. The Trustee then commenced this action.
32. In the absence of any cooperation from Mr. Wing or Mrs. Wing as to her whereabouts, the Trustee engaged investigative services and located her at an address in Scottsdale, Arizona, United States.
33. Accordingly, to serve Mrs. Wing with originating process, the Trustee must obtain leave pursuant to r. 17.03 (in addition to complying with the Hague Convention on Service).
34.
Jurisdiction Analysis
The presumptive connecting factors set out by the Supreme Court in Van Breda, at para. 90, that, prima facie, entitle a court to assume jurisdiction over a dispute are:
a. the defendant is domiciled or resident in the province;
b. the defendant carries on business in the province;
c. the tort was committed in the province; and
d. a contract connected with the dispute was made in the province.
35. The Bankrupt, the transferor, resides in Ontario. This Court has jurisdiction over his bankruptcy, and that proceeding is properly pending in this Court.
36. Mrs. Wing, however, is apparently located in the United States. Moreover, the transferred funds appear to have been transferred between bank accounts located in the US. There is no evidence at this time as to the location of Mr. Wing at the time he caused the money to be transferred to his wife.
37. The law with respect to establishing that the Court can assume jurisdiction was aptly summarized in Thind v. Polycon Industries, 2022 ONSC 2322, at paras. 27-29:
The party arguing that the court should assume jurisdiction has the burden of identifying a connecting factor between the litigation and the forum.
… A plaintiff’s mere presence in Ontario is not, on its own, a connecting factor that allows a court to have jurisdiction. Similarly, the fact that damages were sustained in the jurisdiction is not a presumptive connecting factor. Moreover, the courts have not given presumptive effect to the concept of a necessary and proper party. Jurisdiction may not be assumed based on the combined effect of a number of non-presumptive connecting factors.
Jurisdiction simpliciter may be grounded on a relatively low threshold. To successfully establish jurisdiction simpliciter, the plaintiff need only show a “good arguable case” that a connecting factor applies for the court to assume jurisdiction. This is not a high threshold and only requires the plaintiff to show “a serious question to be tried,” or a “genuine issue,” or that the case has “some chance of success”. To show a “good arguable case” that a connecting factor applies, the plaintiff may rely upon the facts pleaded in the statement of claim without additional evidence unless the allegation is challenged or seems devoid of merit or lacks an air of reality.
38. The Court of Appeal for Ontario has also observed that the threshold is low and, while there is an evidentiary burden on the plaintiff to substantiate the presumptive connecting factors, especially where there is insufficient particularity in the statement of claim with respect to the jurisdictional facts, this does not mean that the motion judge is to assess the merits of the case, but he or she must at least be satisfied that there is a good arguable case supporting a presumptive factor, taking account of both the allegations in the statement of claim and the evidence: Vahle v. Global Work & Travel Co. Inc., 2020 ONCA 224, at paras. 12 and 13.
39. Thind is part of a line of cases that stands for the proposition that, so long as any defendant is resident or domiciled in Canada, a claim may be brought against all of the defendants in a single claim with inseparable damages. (See also Cesario v. Gondek, 2012 ONSC 4563, 113 O.R. (3d) 466; and Mitsubishi HC Capital America Inc. v. eCapital Trust Corp, 2022 ONSC 4161).
40. In Thind, the plaintiff sued four companies, two of which were in Ontario and two of which were not. Justice Doi reviewed the law that the test for assuming jurisdiction related to the dispute as a whole, not just the individual defendants, at paras. 35-36:
The importance of considering the claim or dispute in the jurisdiction simpliciter analysis is emphasized by LeBel J.’s reasons in Van Breda at para 99 which noted the following:
I should add that it is possible for a case to sound both in contract and in tort or to invoke more than one tort. Would a court be limited to hearing the specific part of the case that can be directly connected with the jurisdiction? Such a rule would breach the principles of fairness and efficiency on which the assumption of jurisdiction is based. The purpose of the conflicts rules is to establish whether a real and substantial connection exists between the forum, the subject matter of the litigation and the defendant. If such a connection exists in respect of a factual and legal situation, the court must assume jurisdiction over all aspects of the case. The plaintiff should not be obliged to litigate a tort claim in Manitoba and a related claim for restitution in Nova Scotia. That would be incompatible with any notion of fairness and efficiency. [Emphasis Justice Doi’s]
Similarly, R.A. Blair J.A. writing for the Court of Appeal in M.J. Jones Inc. v. Kingsway General Insurance Co., 2004 CanLII 10547 (ONCA) at para 22 noted that in a case with multiple defendants and claims, some having an extra-territorial dimension, the jurisdiction simpliciter analysis must consider the claim as a whole without treating the claim against the foreign defendant as a separate action. In addition, Blair J.A. acknowledged the need to assess the connection with Ontario having regard to the subject matter of the litigation to include both the claim against the foreign defendant and the claims against the domestic defendants, with the guiding factors under the real and substantial connection test being order and fairness. Where the requirements of order and fairness are served by trying the foreign claim together with the claims that are clearly rooted in Ontario, the foreign claim will meet the real and substantial connection test, even if that claim would fail the test if it were constituted as a separate action. This allows the court the flexibility to balance the globalization of litigation against the problems of a defendant who is sued in a foreign jurisdiction.
41. Justice Doi went on to determine that, if one or more defendants is domiciled in Ontario the test for assuming jurisdiction is met:
[37] The Plaintiff and Polycon rely on Cesario v. Gondek, 2012 ONSC 4563 to support their position that jurisdiction simpliciter is met where one or more defendants is domiciled or resident in Ontario, even if another defendant is not. That case involved a driver husband and his passenger wife who brought an Ontario action for two (2) motor vehicle accidents, the first occurring in New York State and the second occurring in Ontario. Both plaintiffs claimed against the New York driver in the New York accident, the Ontario driver in the Ontario accident, and their Ontario insurer. The wife also claimed against her husband as the driver in both accidents. The New York defendants moved to stay the action against them in Ontario for lack of jurisdiction.
[38] Applying principles of fairness and efficiency as articulated by LeBel J. in Van Breda at para 99, Edwards J. held in Cesario at paras 23-24 that a sufficient real and substantial connection exists between a claim and Ontario for the court to assume jurisdiction over all aspects of a case involving multiple defendants where at least one is domiciled or resident in Ontario:
[23] As to the first presumptive factor whether "the defendant is domiciled or resident in the province", this motion raises for determination whether the Supreme Court of Canada in Van Breda was referring to "the defendant" being domiciled or resident in the province as being the moving defendant or whether any defendant in the action domiciled or resident in the province was sufficient for a connecting factor. The answer to this question can be found in para. 99 of Van Breda, which provides:
I should add that it is possible for a case to sound both in contract and in tort or to invoke more than one tort. Would a court be limited to hearing the specific part of the case that can be directly connected with the jurisdiction? Such a rule would breach the principles of fairness and efficiency on which the assumption of jurisdiction is based. The purpose of the conflicts rules is to establish whether a real and substantial connection exists between the forum, the subject matter of the litigation and the defendant. If such a connection exists in respect of a factual and legal situation, the court must assume jurisdiction over all aspects of the case. The plaintiff should not be obliged to litigate a tort claim in Manitoba and a related claim for restitution in Nova Scotia. That would be incompatible with any notion of fairness and efficiency.
[24] If the position of the New York defendants was accepted, the plaintiffs could be forced to litigate three separate actions; one of which would be heard in the State of New York and two of which would be heard in the Province of Ontario. Such a situation would, adopting the language of Van Breda [at para. 99], "breach the principles of fairness and efficiency on which the assumption of jurisdiction is based". In addition, adopting the concluding words of LeBel J. in Van Breda [at para. 124]: ". . . keeping the case in the Ontario courts will probably avert a situation in which the proceedings against the various defendants are split". It would raise the real and quite unjust prospect of inconsistent verdicts. [Emphasis added]
[39] Subsequent decisions found the Cesario decision to be grounded on the first presumptive connecting factor in Van Breda at para 90: Best v. Palacios, 2016 NBCA 59 at paras 19-20, and Mitchell v. Jeckovich, 2013 ONSC 7494 at para 35. Another held that Cesario identified a new presumptive connecting factor for the court to assume jurisdiction where one of several defendants are domiciled or resident in Ontario: Mannarino v. Brown Estate, 2015 ONSC 3167 at para 33.
[40] Where there are multiple defendants, some in Ontario and others outside of the jurisdiction, who are joint tortfeasors in an action having inseparable damages, I accept that the court in Ontario may assume jurisdiction simpliciter on the basis of the first presumptive factor. Otherwise, a plaintiff would be forced to litigate in Ontario and bring separate actions against defendants in other jurisdictions, which makes little sense and raises the real and unjust prospect of inconsistent verdicts. In contrast, hearing the action in Ontario would avoid fragmented litigation and align with the overarching principles of fairness and efficiency on which the assumption of jurisdiction simpliciter is based. To this end, I share the reasoning of Edwards J. in Cesario at paras 27-28:
[27] … To force an Ontario litigant to split his or her case between more than one jurisdiction would not be doing justice between the parties. As LeBel J. in Van Breda noted [at para. 75]:
Stability and predictability in the branch of law of conflicts should turn primarily on the identification of objective factors that might link a legal situation or the subject matter of litigation to the court that is seized of it. At the same time, the need for fairness and justice to all parties engaged in litigation must be borne in mind in selecting these presumptive connecting factors.
[28] The principle of fairness and justice referenced by LeBel J. in Van Breda causes this court to conclude that where there are multiple defendants, at least one of whom is resident in the Province of Ontario, or domiciled in the Province of Ontario (as is the case on the facts before this court, i.e., the defendant Domenic Cesario, the defendant Elizabeth Ruth Stoutz and the defendant Security National Insurance Company), then there is a sufficient real and substantial connection existing such that the court should assume jurisdiction over all aspects of the case, including that aspect of the case involving the New York defendants. [Emphasis Justice Doi’s]
42. As the Trustee acknowledged, the action in this case is to unwind the impugned transfer of funds in the disgorgement of the payment, rather than damages. In my view, however, the above authorities ought to apply to those circumstances also.
43. I observe that Thind was followed by Cavanagh J. of this Court with respect to an action based on an alleged fraudulent conveyance and knowing receipt: Mitsubishi HC Capital America Inc. v. eCapital Trust Corp, 2022 ONSC 4161.
44. Here, Mr. Wayne is an Ontario resident. The causes of action in this proceeding are inextricably intertwined with his bankruptcy, which is also in Ontario and properly before this Court. While the J.P. Morgan Chase bank accounts appear to be in the United States, and while acknowledging that there is no evidence as to where Mr. Wing was physically located when he caused the transfer of funds, the actionable wrong, and the relief sought, all relate to one transaction for the sale of the condominium property in Ontario and the transfer of the proceeds of sale from that property to Mrs. Wing.
45. Mr. Wing, the transferor, has defended the action. In his Statement of Defence, he pleads at paras. 22-24 that:
[the] property was a condominium at 10 Bellair Street, Suite 405, Toronto, Ontario (the “Condo”)…. Dennis transferred proceeds of sale of the Condo (the “Funds”) to his wife, Maria Wing, in trust, for the benefit of Dennis’ sons in accordance with the terms of the Trust.
46. For all of the above reasons, I am satisfied that the Trustee, in its capacity as plaintiff in the action, has established a good arguable case for a real and substantial connection between Ontario and the claim.
47. It follows that leave pursuant to r. 17.03 is granted.
48.
Extension of Time for Service
As noted at the outset of this Endorsement, the Trustee also seeks an order extending time to serve the statement of claim to July 11, 2023.
49. Rule 14.08 (1) requires that a claim be served within six months from the day it is issued. In this case, that was January 11, 2023. Pursuant to r. 3.02, the court may extend any time prescribed by the Rules or an order, on such terms as are just. A motion for an order extending time may be made before or after the expiration of the time prescribed.
50. The test for obtaining an extension was set out in Rowland v. Wright Medical Technology Canada Ltd., 2015 ONSC 3280:
[16] The key factor in determining whether to grant an extension for service of the statement of claim is prejudice from the delay in service; if the defendant is not prejudiced by the delay in service, the court may extend the time for service of the statement of claim…
[17] The plaintiff has the onus of showing that extending the time for service of the statement of claim will not result in prejudice to the defendant: ... In determining whether there is any prejudice, the court will consider whether: (a) material witnesses have disappeared or died; (b) relevant documents have been preserved; (c) the delay is such that it can reasonably be assumed that memories have faded; and (d) any new facts are being alleged…
[18] On a motion to extend, the focus is on the discrete prejudice caused by the delay in serving the documents and not any prejudice from the passage of time from the relevant events to the commencement of the action…
[19] In Chiarelli v. Wiens, supra, at paras. 14-16, the Court of Appeal articulated the following principles for determining whether to grant an extension of time for the delivery of the statement of claim: (1) although the onus is on the plaintiff to show that the defendant will not be prejudiced by an extension of time, the plaintiff cannot be expected to speculate and the defendant has at least an evidentiary obligation to provide some details of prejudice; (2) the defendant cannot create prejudice by his or her failure to do something that could reasonably have been done; (3) the prejudice that will defeat an extension of time for service must be caused by the delay; (4) an extension of the time for service should not be denied simply because the delay is longer than the applicable limitation period; and (5) each case should be decided on its facts, focusing on whether the defendant is prejudiced by the delay.
51. I am satisfied that there is no basis to conclude that Mrs. Wing will experience prejudice as a result of the extension of time for service from January 11, 2023 to July 11, 2023.
52. Mrs. Wing is aware of this action and of the efforts of the Trustee. She has been in communication with counsel for her husband in this action specifically with respect to the efforts of the Trustee to locate and serve her. Her husband, Mr. Wing, advised the Trustee by correspondence from his counsel dated June 30, 2022 that: “Mrs. Wing advises that she does not authorize her husband to release her personal information to the Trustee.”
53. Accordingly, she has been in a position to preserve any relevant documents.
54. For these reasons, I extend the time for service of the claim, nunc pro tunc, to July 11, 2023.
55.
Disposition
Orders to go in the form signed by me, which are effective immediately and without the necessity of issuing and entering, although they may be taken out at the Commercial List Office if such is required.
Osborne J.
Date: June 1, 2023
Footnotes
- The Trustee drew to the attention of the Court two cases where leave under r. 17.03 was sought: (a) in Bui Duy Thinh et al. v. Tran Quoc Chinh et al., 2015 ONSC 3406, 11 E.T.R. (4th) 177, the Court denied leave on the basis that the action was duplicative of a prior proceeding that the Divisional Court had held, did not meet the test for assuming jurisdiction under Van Breda; (b) in Goodings v. Lubin, 2018 ONSC 176, at paras. 14 to 17, there is a reference to a decision by Master McAfee dated January 20, 2017 granting leave under r. 17.03 on an ex parte motion. The Trustee could not locate any endorsement in connection with that order.