Court File and Parties

Court File No.: CV-23-00694910-00CL Date: 2023-08-18 Ontario - Superior Court of Justice – Commercial List

Application Under: Subsection 243(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended Section 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended

Re: Bank of Montreal, Applicant And: Can United Consulting Corporation et al., Respondents

Before: Peter J. Osborne J.

Counsel: Miranda Spence, for the Applicant Stefan Juzkiw, for the Respondents Bobby Kofman, for the Receiver, KSV

Heard: August 8, 2023

Endorsement

[1] The Receiver seeks an order approving its conduct and activities as set out in the First Report dated March 12, 2023, the Second Report dated March 28, 2023, the Third Report dated April 26, 2023 and the Fourth Report dated July 24, 2023; approval of fees and disbursements of the Receiver and its counsel; authorization for payment to the Applicant of all funds presently held in the accounts of certain non-arm’s-length entities related to the Debtors; an order discharging the Receiver; and finally, an order granting the Applicant its costs of this proceeding in the amount of $50,000, payable by Mr. Kai Wu personally.

[2] The Receiver relies upon the Reports and in particular, the Fourth Report.

[3] The background to, and context of, this motion is set out in my earlier Endorsements made in this matter and in the Reports of the Receiver. I have not repeated all of that here. Defined terms in this Endorsement have the meaning given to them in the motion materials, Reports or earlier Endorsements, unless otherwise stated.

[4] I granted the receivership order in this proceeding. The Debtors borrowed $2,100,000 from the Applicant as part of the federal government pandemic assistance program, and in particular the Highly Affected Sectors Credit Availability Program (HASCAP). Pursuant to HASCAP, the loans are extended by Canadian banks, but the principal (not interest, fees or costs) is guaranteed by the federal government through the Business Development Bank of Canada (BDC).

[5] Accordingly, BDC has repaid the Applicant in full the principal amount outstanding but no interest, fees or costs. BDC has now stepped into the shoes of the Applicant for the purposes of enforcing the loans.

[6] The funds advanced have not been repaid. The Debtors appear to have no assets whatsoever. The position of the Applicant is that the extremely limited evidence available to date shows that a significant portion of the funds advanced have been used for personal purposes and that neither the Debtors nor Mr. Wu has ever provided any evidence to the contrary.

[7] Indeed, cooperation from the Debtors and Mr. Wu since the commencement of this proceeding has been, to put it charitably, limited.

[8] Respondents’ counsel confirmed that Mr. Wu was at all material times and is the directing mind of all three Debtor corporations (Respondents) as well as the non-debtor corporations that maintain accounts at BMO as set out in the Fourth Report. In fact, he is the authorized signatory on each account and executed the documents required for the opening of each account in connection with the loans advanced and the banking activities of the Respondents.

[9] BDC (and its predecessor, BMO) have been unable to track any business activity attributable to the Debtors or identify any realizable assets belonging to the Receiver, in large part due to the complete absence of cooperation with the Receiver by the Debtors. BDC has therefore advised the Receiver that it does not intend to fund the receivership further, with the result that the Receiver seeks to be discharged.

[10] The discharge of the Receiver is not opposed and in my view is appropriate. It is granted. Similarly, approval of the activities of the Receiver as set out in the Reports is not opposed and it is likewise appropriate and is granted.

[11] As to the fees and disbursements of the Receiver and its counsel, I have reviewed the fee affidavits, filed, as against the work undertaken as described fully in the four Reports. The Respondents concede that approval of fees and disbursements is appropriate, but submit that generally, the work done was excessive and both the fees and disbursements should be reduced. They cannot, however, point to any particulars or specifics with respect to work that was undertaken and ought not to have been undertaken or to particulars of excessive fees or disbursements.

[12] Counsel did make reference to the fact that there were a number of timekeepers on the Receiver’s team, whereas only Mr. Kofman has attended in Court and has led the work. I am satisfied that the distribution and delegation of work as reflected in the fee affidavits and exhibits thereto was appropriate. Indeed, I would fully expect delegation of work to less senior members of the team and I would not expect to see all members of the team in Court on each attendance unless there were a specific requirement or need for their attendance.

[13] Moreover, it is not clear to me that the Debtors have any standing to oppose the fees and disbursements, nor, even if they did have standing, whether any significant weight should be accorded to their submissions in circumstances where, as here, their cooperation is limited at best and they have not repaid a single dollar of the funds advanced. I need not decide that, however, since I heard their counsel on the nature of the objections.

[14] In all the circumstances, and having reviewed the materials, I am satisfied that the fees and disbursements of the Receiver and its counsel are appropriate, and they are approved.

[15] The Receiver also seeks its costs of this proceeding. It has filed a bill of costs which reflects total partial fees, disbursements and taxes of $47,124.34 and total full fees, disbursements and taxes of $52,634.74. These figures are as against actual fees and disbursements of approximately double those amounts. In the circumstances, the receiver seeks $50,000, inclusive of fees, disbursements and taxes, as against the Respondents, but also as against Mr. Wu personally.

[16] The position of the Receiver is that Mr. Wu’s conduct, and the conduct of the Debtor Respondents which are under his exclusive control, amount to an abuse of process. Since an order against the Respondents will have no practical effect because they have no assets, the Receiver submits that Mr. Wu should be personally responsible for the payment of this amount as a non-party.

[17] Counsel for the Respondents takes the position that the costs sought are too high, and should be reduced to “around $20,000”, although counsel was not able to direct me to the particulars of any fees or disbursements in the bill of costs that were alleged to be excessive or otherwise inappropriate. I am satisfied that the quantum sought of $50,000 inclusive of disbursements and taxes is appropriate and in fact is more than reasonable in the circumstances of this case. Costs in that amount are ordered as against the Respondents.

[18] That leaves the one remaining issue of whether Mr. Wu personally should be responsible for those costs as well.

[19] This proceeding was brought, and the Receiver was appointed, pursuant to section 243 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (BIA) and section 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (CJA). This Court has the discretion to award costs of BIA proceedings pursuant to section 197 of the BIA and has the discretion to award costs in any civil proceeding pursuant to section 131 of the CJA (taking into account the factors set out in Rule 57.01 of the Rules of Civil Procedure).

[20] The discretion under both statutes includes the discretion to determine whether costs should be paid, and if so by whom, and to what extent. This discretion includes the jurisdiction to award costs against a non-party: Dallas/North Group Inc. (Re), [2001] 148 O.A.C. 288, O.J. No. 2743 (C.A.) at paras. 6 – 15; 1730960 Ontario Ltd. (Re), 2009 ONCA 720, O.J. No. 4182 at para. 8; and 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2017 ONSC 3566, O.J. No. 3374 at paras. 27 – 28.

[21] Generally, an award of costs against a non-party requires evidence of fraud, abuse of the court process in general and/or the bankruptcy process in particular to serve a collateral purpose or similar wrongdoing: 1730960 at para. 8.

[22] The language of section 131 of the CJA does not exclude the inherent jurisdiction of the court to order costs against a non-party who commits an abuse of process. It is “permissive” in that it confers broad discretion to make costs orders. This is consistent with Rule 57.01 which prescribes the factors that the court may take into account when exercising the section 131 discretion. The factors expressly include “any other matter relevant to the question of costs”: 1318847 Ontario Ltd. v. Laval Tool & Mould Ltd., 2017 ONCA 184, 134 O.R. (3d) 641 at paras. 69 - 72.

[23] What, then, constitutes an abuse of process? In Laval, the Court of Appeal quoted with approval the Supreme Court of Canada characterization of abuse of process as “the bringing of proceedings that are unfair to the point that they are contrary to the interest of justice”, or “oppressive’ or ‘vexatious” treatment that undermines “the public interest in a fair and just trial process and the proper administration of justice”: Laval, at para. 73, quoting with approval Behn v. Moulton Contracting Ltd., 2013 SCC 26, 2 S.C.R. 1031 at para. 39.

[24] In Laval, the Court of Appeal gave examples of conduct that constituted an abuse of process by a non-party so as to attract a costs order. Those examples included initiating proceedings through a nominal plaintiff in order to oppress the defendant (Dallas/North); putting forward a nominal plaintiff to employ the court’s processes as an instrument to defraud the defendant (Oasis Hotel Ltd. v. Zurich Insurance Co., 1981, 28 B.C.L.R. 230, 124 D.L.R (3d) 455 (C.A.)); or engaging in conduct that amounts to the tort of maintenance (paras. 74-75).

[25] The Court of Appeal observed that “situations of gross misconduct, vexatious conduct, or conduct by a non-party that undermines the fair administration of justice other than those discussed above can be envisioned” (paras. 74 - 76). The court further stated: costs against non-parties who are directors, shareholders or principals of corporations may be ordered in exceptional circumstances if the non-party commits an abuse of process. Such circumstances may include fraud or gross misconduct in the instigation or conduct of the litigation. But the injunction and authorities referred to [earlier in the reasons] must be followed - costs should not be awarded against corporate officers, directors or shareholders simply because they directed the operations of the company [emphasis added, citations omitted] (para. 77).

[26] All of the above is consistent with the statements of the Court of Appeal in Davies v. Clarington (Municipality) et al, 2009 ONCA 722, 100 O.R. (3d) 66 at para. 40 to the effect that “while fixing costs is a discretionary exercise ….. it must be on a principled basis …… [and there should be] a clear finding of reprehensible conduct on the part of the party against which the cost award is being made”.

[27] Accordingly, it seems to me that to constitute an abuse of process, conduct need not require the instigation or commencement of frivolous or vexatious litigation. Rather, conduct of a non-party during litigation can, in appropriate circumstances, amount to an abuse.

[28] In my view, it follows from the BIA and the CJA and these authorities that I have the jurisdiction and the discretion to award costs against Mr. Wu in this case, assuming he has been given notice that such relief was sought. I am satisfied that he has been given notice, and in fact the thrust of the responding affidavit in the submissions of counsel for the Respondents (which he controls) are all directed in large part to this issue.

[29] The question, therefore, is whether the evidence in the record as to his conduct amounts to an abuse of process.

[30] In this case, the Receiver argues that Mr. Wu, in his capacity as an officer and director of the Respondent Debtors (and the controlling mind of each) has failed entirely to respect the receivership process and to obey or comply with the orders made in this proceeding or to cause the Respondents, which are under his direct control, to comply with any of their obligations.

[31] Counsel for the Respondents, making submissions on this aspect of the relief sought on behalf of Mr. Wu personally as well as on behalf of the Respondents, argued that Mr. Wu was not a personal guarantor on the default debt obligations of the corporate Respondents, was not a party to the proceeding himself, and ought not to be liable for costs. The affidavit filed in response to this motion was stated by counsel to be filed on behalf of the Respondents and Mr. Wu. Indeed, the affidavit is largely directed towards the costs order sought against him personally.

[32] A review of the chronology of this matter is appropriate.

[33] This Application was originally returnable before me on February 24, 2023. The Application materials had been served on the Respondents on February 17, 2023. The Applicant relied upon the affidavit of Michaela Wolf sworn February 17, 2023, together with exhibits thereto. The evidence was to the effect that the Debtors did not appear to be carrying on active business operations. Moreover, Ms. Wolf had identified numerous additional bank accounts at BMO all opened by the Related Companies for which Mr. Wu, the sole director of the Debtors, was also the sole director on the bank account opening documents.

[34] The evidence further disclosed that monies had been transferred from a bank account of one of the Debtors to Mr. Wu personally, through a Related Bank Account. The Debtors were in default of financial reporting and financial information provision obligations.

[35] Evidence as to the loans, the loan and security documentation, the amounts owing, and the default and demands was clear (and undisputed). Ms. Wolf stated in her affidavit that Mr. Wu had confirmed to a Senior Account Manager at the bank that he had received the Demands and BIA Notices. The 10 day statutory period under section 244 of the BIA has expired. The loans had been in default since November 30, 2022.

[36] In her affidavit, Ms. Wolf set out the particulars of receipts from operations and from the loans, as well as disbursements, all to the limited extent that the incomplete books and records allowed. Bank statements reflected that approximately $344,000 was transferred to Mr. Wu personally and another $200,000 was transferred to an entity known as Yuehua Corporation, of which Yuqing Tan was the sole director. Ms. Tang resides at the same address as Mr. Wu. Yet another $10,000 had been transferred to Xuejiao Ma, who also lived at the same address as Mr. Wu.

[37] One of the debtors, Facilitate Settlement, had purchased a Porsche automobile for approximately $30,000 in 2002 and paid a deposit of $30,000 to a realtor, in trust. Those, and other payments made by the Debtor (such as disbursements for alcohol and payments to a debt Centre), did not appear on the basis of the review and analysis by the Applicant, to be related to the business of the Debtor.

[38] In addition to the indebtedness of the Debtors to the Applicant, two of the three Debtors had garnishments from the Canada Revenue Agency issued in November, 2022 for the aggregate amount of just under $600,000.

[39] Finally, the affidavit disclosed that notwithstanding the acknowledgement of the receipt of the demands and BIA Notices, the Debtors have failed to respond to the bank regarding those documents and had failed to make any payment or seek to make alternative arrangements or initiate any filings under the BIA. Given the evidence of the receipts and disbursements, the position of the Bank was that it had identified suspicious activity of the Debtors in that they had used proceeds advanced pursuant to the credit facilities for purposes in contravention of the terms of the Loan Agreements. For all of those reasons, the Applicants sought the appointment of a receiver on an urgent basis.

[40] The Respondents requested an adjournment to permit them additional time to file responding materials. The Applicant objected, noting among other things the fact that the central material facts (executed loan agreements, consent to the appointment of a receiver in the event of default, the fact of a default and demands having been made) were not in dispute.

[41] Notwithstanding the objections of the Applicant, I granted the adjournment.

[42] The matter returned before me on March 2, 2023. The Respondents had not made any contact with the Applicant in the intervening period whatsoever (such as to attempt to negotiate the terms of a possible forbearance). They filed responding materials late at night on March 1, approximately 12 hours before the return of the motion.

[43] For the reasons set out in my Endorsement, I granted the relief sought. I appointed the Receiver and also froze the funds in the accounts at the bank of the other non-Debtor entities controlled by Mr. Wu.

[44] As set out in my Endorsement, the evidence satisfied me that approximately $344,000 of the funds was advanced or transferred to Mr. Wu personally, and another $200,000 was transferred to a corporation and an individual. Both that individual and another individual who was the sole director of the corporation, resided at the same address as Mr. Wu, all as stated above.

[45] Mr. Wu filed an affidavit in respect of the return of the Application on March 6. Asserting that all of the transfers were for business related purposes, he acknowledged in his affidavit that “over the past year our bookkeeping management has fallen behind” but said that he was in the process of bringing the books and records up to date. He reiterated that all transactions identified by the bank were explainable and he required “only a sufficient opportunity to work with his accountant to prepare all required books and records”. He proposed a draft forbearance agreement. However, not only had he not socialized this with the Applicant at all, the draft agreement in the materials did not provide for any repayment terms. It simply extended the indebtedness. Accordingly, the Respondents opposed the appointment of a receiver.

[46] For the reasons set out in my Endorsement, I was satisfied that it was not only just or convenient, but indeed just and convenient, to appoint a receiver. However, given the scope of relief sought and granted, I was prepared to extend the relief only for a short part of time. The court proposed March 16 or 17, but that period of time was extended expressly at the request of counsel for the Respondents, and the parties agreed that it would be adjourned until March 31, the date on which all counsel confirmed their availability.

[47] I pause to observe that the receivership order, following the Model Order of the Commercial List, gave the Receiver the power, among other things, to examine under oath before a court reporter any person reasonably thought to have knowledge of the affairs of the Debtors respecting the Debtors’ dealings or property, and the power to order any person liable to be so examined.

[48] Separate and apart from a compelled examination under oath, however, the order required the Debtors and all of their current and former directors, officers, employees, agents, accountants, legal counsel and shareholders, and all other persons acting on its instructions or behalf, to advise the Receiver of all books and records, to provide them to the Receiver and generally, to cooperate fully.

[49] The order also gave the Receiver the power to investigate any transfer by the Debtors to third parties and to compel the production of information from any person with respect to that transferred property and the surrounding circumstances.

[50] The matter returned, however, prior to the scheduled date of March 31, on an urgent basis shortly after my Endorsement of March 6 was released. It returned on March 7, 2023 to address questions arising out of my order appointing the Receiver and in particular about the cooperation and document production expected from the Respondents which had not been forthcoming.

[51] On March 6, the Receiver requested a case conference to seek advice and directions with respect to what it stated was the failure of the Respondents and their representative, Mr. Wu, to cooperate and provide information and documents as required in the order. In fact, what had happened was that following the receivership order, the Receiver had requested to meet with Mr. Wu to get a basic understanding of the operations, books and records of the Debtors, and Mr. Wu had simply refused to meet.

[52] Counsel for the Respondents objected to the scheduling of the case conference, objected to the request that Mr. Wu meet with the Receiver and stated that the actions of the Receiver were adversely affecting Mr. Wu’s health. Counsel for the Respondents suggested that they were not available in any event.

[53] In the circumstances, I scheduled the case conference for March 7. Counsel for the Respondents attended. Counsel confirmed that Mr. Wu intended to cooperate with the Receiver but suggested that Mr. Wu was confused about what records were required of him on behalf of the Respondents. Counsel also objected to Mr. Wu meeting with the Receiver for any purpose unless counsel and a court reporter were present.

[54] All of those issues, including in particular Mr. Wu’s purported confusion as to what was required of him, and when, were addressed at that case conference and are fully described in my Endorsement of March 7. Mr. Wu requested through counsel that the Receiver provide written questions in advance of any examination of him. I declined to order that. I clarified with counsel the distinction between the general obligation to cooperate with the Receiver and provide records, and the more formal requirement to attend for an examination under oath if necessary. Counsel confirmed that understanding and reiterated the commitment of Mr. Wu to fully cooperate.

[55] Mr. Wu’s counsel then indicated that, if an examination of Mr. Wu was required, he may require an interpreter for any examination. This surprised me, given his repeated correspondence and communications with the bank (all in the record), all of which were in the English language without the involvement of an interpreter or translator. Moreover, his affidavit was sworn in the English language and similarly was not translated nor interpreted, and no such requirement was disclosed or submitted as being necessary. In any event, I indicated that if arrangements for any required examination under oath could not be sorted out on consent, I would provide further direction.

[56] In the circumstances, I directed that the parties return before me for yet another case conference on March 13, in order that the court could be kept apprised of the documentation and information being provided by and on behalf of the Debtors.

[57] When the matter returned before me again on March 13, the Receiver had filed its First Report which described the paltry cooperation and information received. In particular, no accounting information, other than certain payroll reports, had been provided to the Receiver, and Mr. Wu had still refused to meet. As acknowledged by the Receiver, subsequent to the filing of the First Report, some limited additional information had been provided through counsel.

[58] Counsel for the Respondents submitted at the continued case conference, however, that the flow of information and documents had been impaired since Mr. Wu slipped and fell in the snow on March 6 and was treated for concussion symptoms at the emergency department of Sunnybrook Hospital. The attending physician had apparently recommended that he not undertake any stressful activities, such as an examination under oath by the Receiver. His counsel confirmed, however, as reflected in my Endorsement of March 13, that he was still able to assist with less stressful tasks and provide some information.

[59] Counsel also advised that new accountants were involved to assist with the process.

[60] In all the circumstances, the Receiver indicated that it was content to continue to try to work things out on an informal basis, without prejudice to its right to seek a formal examination if necessary.

[61] As reflected in my Endorsement, I adjourned the matter yet again to March 31 in order that the court could receive a status report. I also directed that if Mr. Wu’s medical condition continued to be the basis upon which the required information and documentation was not provided, I would expect to see medical evidence regarding this, in proper form, from Mr. Wu’s current treating physician.

[62] None has ever been filed.

[63] On March 31, the matter returned before me yet again at which time counsel for the Respondents confirmed that significant financial and business records would be provided to the Receiver within the following two weeks. There was discussion about physical business and banking records of the Respondents in the possession of the landlord or former landlord at the 5000 Yonge Street location. Counsel for the Respondents, who continued to take instructions from Mr. Wu, agreed to work with the Receiver to preserve and produce those documents. It was agreed that the Receiver would also produce other electronic documents.

[64] It was revealed during the case conference that each of the two counsel for the Respondents, Messrs. Michaels and Juzkiw, had in fact themselves been employees of the Respondents (or some of them) during some or all of the relevant period. This came up in the context of those counsel advising that they would assist in the production of books and records by and on behalf of the Respondents.

[65] Given the commitment to provide the financial information and books and records, I adjourned the matter yet again and another case conference was directed for May 1.

[66] When the matter returned before me on May 1, no materials whatsoever had been provided to the Receiver until 3:45 a.m. on the very morning of the motion when counsel for the Respondent sent an email to counsel for the Receiver which included some limited materials. One of the two co-counsel for the Respondents (Mr. Michaels) had withdrawn; the other (Mr. Juzkiw) remained and does to this day. At the time of the case conference that proceeded a few hours after the middle-of-the-night email, the Receiver had understandably not had a full opportunity to review the material.

[67] Some of the material that had been provided in the middle of the previous night included materials prepared by a recently retained bookkeeper. Counsel advised that the documents had been created exclusively from bank statements. However, the Receiver submitted that at least some of the materials, such as profit and loss statements and balance sheets, could not have been generated from bank statements alone and that, if the statements were true and accurate, they were of necessity based on other books and records that had not been produced.

[68] I accepted the Receiver’s submission then, and it remains valid today. Bank statements show debits and credits, deposits and withdrawals or transfers in and out of accounts. It is not possible to calculate profit or loss figures, for example, with bank statements alone. Counsel for the Respondents agreed to provide forthwith to the Receiver all documents that were, he confirmed, provided to the bookkeepers. Counsel advised the court and the Receiver that those books and records were then being reviewed by these bookkeepers.

[69] There was also an unusual exchange with counsel for the Respondents who confirmed their employment with the Respondents (or some of them) but neither could remember when their employment with the Respondents commenced or when it terminated. Mr. Michaels, who was withdrawing (as noted above), declined to confirm the whereabouts of any documents of the Respondents or even whether he continued to be an employee of the Respondents on that date.

[70] I expressed my disappointment with the complete lack of cooperation, information and documentation coming from the Respondents and their directing mind, Mr. Wu. Counsel for the Respondents assured the court of the cooperation of the Respondents and Mr. Wu and undertook that the information and materials would be produced immediately.

[71] Yet again, however, that did not occur. It has still not occurred. For his part, Mr. Wu continues to maintain (through counsel) his position that as a result of his fall in March, he is unable to be examined under oath and the Respondents will not produce him. He has filed no further affidavit. Nor, as noted above, has he filed any affidavit or report from a current treating physician as I directed him to do months ago. Still, counsel for the Respondents maintains that he remains capable and competent such that they are taking instructions from him with respect to these proceedings.

[72] As set out in the Fourth Report dated July 26, 2023, it is the position of the Receiver that the Debtors have not cooperated nor complied with the orders and endorsements issued by the court. As that Report confirms, no communications have been received from or on behalf of the Debtors since the case conference of May 1, nor has any additional information been provided nor books and records produced.

[73] As of the date of the Report, well over four months had passed since the date of Mr. Wu’s fall, and absolutely nothing had been produced to the Receiver or to the court with respect to Mr. Wu’s current medical condition (his ability to instruct counsel for the Respondents but not to provide any books and records or information to the Receiver) as I had previously directed. Indeed, there had been no contact from Mr. Wu to the Receiver whatsoever. As stated at Section 3.1 of the Fourth Report, “the Receiver has no evidence that Mr. Wu has attempted to comply with the orders or endorsements issued in these proceedings, including instructing his legal counsel to do so.”

[74] Substantively, the Respondents have failed to explain what happened to the monies advanced. They have not adduced any evidence to support the bald assertion that the entirety of the funds advanced were used for proper purposes, particularly in circumstances where the record shows significant proportions of the funds advanced being transferred to Mr. Wu personally or to other entities controlled by him, as set out above and more fully described in the First Report.

[75] The Respondents do not appear to maintain proper books and records, or if they do, none has been produced. In particular, the Debtors have not disclosed the location of their books and records, and counsel for the Respondents stated that they were not in a position to assist with respect to any of the factual issues or the production of books and records, since they were appearing as counsel only and not fact witnesses. This submission was made notwithstanding that they were both employees of the Respondents at least at some point in time.

[76] As set out above, the material that the Respondents submitted had been provided to “new bookkeepers” has not been produced as was directed (and agreed to). The purported statements produced could not have been generated from the limited primary documentation provided. No evidence has been filed from these bookkeepers, and not even their identity has been disclosed. No evidence has been provided by or in respect of the landlord at the 5000 Yonge Street location who was said to be withholding other records.

[77] The material provided by the Debtors to the Receiver is set out at Appendix B to the Fourth Report and consists of some but not all bank statements for the Debtor companies.

[78] Accordingly, the Applicant, supported by the Receiver, seeks the costs award against Mr. Wu.

[79] Yet again, the Respondents and Mr. Wu failed to respond to the motion until the last minute. They delivered last Friday (the business day immediately preceding this hearing) an affidavit of “Mehdi Raza” sworn August 3, 2023. The affidavit is not contained within a motion record. Counsel advised during submissions that it was filed on behalf of the corporate Respondents and Mr. Wu, since it addressed in large part the request for a costs order against him personally.

[80] That affidavit contains no information whatsoever about who this affiant is or how they came to have any direct knowledge or information and belief of the facts to which they depose. It does not state whether the affiant had direct or indirect knowledge or belief, or any source of information for any such belief. Nor does the affidavit say whether they have any ability or authority to bind or speak on behalf of any of the Respondent Debtors. The affidavit is completely silent on all of this.

[81] In submissions, counsel for the Respondents advised, without any supporting evidence, that the affiant was a former employee of the Respondents who, he said, was now acting as a consultant to assist in providing the information to the bank and the Receiver. Counsel was unable to advise when the term of employment for the affiant commenced or ended. Counsel was equally unable to advise of the position or title of the affiant while employed, but counsel advised that this individual was now being paid as a consultant by Mr. Wu. Again, there is no affidavit from Mr. Wu himself.

[82] The affidavit filed discloses none of the facts submitted by counsel as to the role of the affiant. Indeed, much of the affidavit is more in the nature of submissions than facts. The exhibits contain the loan agreements already in the record, together with excerpts from what are said to be journals for the Respondents, from which the affiant draws all manner of conclusions about the source and destination of various funds and fund transfers between and among various entities controlled by Mr. Wu, and suggests that at least some of those transfers (to Mr. Wu or to entities he controls) were in respect of shareholder loans.

[83] The affidavit goes on to provide particulars about various other entities, amounts for rent paid and marketing and sales services provided, and takes issue with the specific quantum of certain transactions as set out in the Receiver’s Reports based on its analysis. There are references to multiple agreements with other entities and individuals, none of which is attached as an exhibit. There is no backup documentation or information provided in respect of any of the numerous transactions summarized in these journal exerts. There is no primary transaction documentation whatsoever. In short, there is no backup or basis provided for many of the bald statements made.

[84] Having considered the totality of the record, I am satisfied that in the particular circumstances of this case, the conduct of Mr. Wu amounts to an abuse of process. This is not a case, contrary to the submissions of his counsel, where Mr. Wu has done nothing other than hold positions as an officer and director of the corporate Respondents at an unfortunate or unlucky period in time.

[85] For the reasons set out above, I am satisfied that his conduct goes well beyond that. He has simply refused and failed to comply with the terms of the original receivership order and the subsequent directions of the court. He has done so notwithstanding that those terms were clearly explained to his counsel who confirmed their understanding of what was required of Mr. Wu and of the corporate Respondents of which he was the directing mind.

[86] This all occurred when counsel confirmed that they were taking instructions from him. He instructed counsel to seek the first adjournment on his undertaking to fully cooperate because he simply needed more time to gather the books and records. They were not produced. A further adjournment was sought, and also granted, on the basis of his injury. No medical records were produced. Subsequently, he was said to be fit to instruct counsel and cooperate, but not to go through a stressful examination under oath, yet he failed to do even the former or cause and compel the Respondents (which he controlled) to do so.

[87] The position of Mr. Wu, as submitted by counsel, boils down to the argument that he was not a personal guarantor on the corporate loans, with the result that he has no personal liability. To be clear, my conclusion that he is liable for the limited costs award granted flows from his failure to cooperate with the orders and directions of this Court which in my view amount to an abuse of process.

[88] For all of the above reasons, I award costs to the Applicant payable by Mr. Wu personally. I have set out above my reasons for concluding that the quantum sought is more than reasonable in the circumstances.

[89] Order to go in accordance with these reasons. If the parties cannot agree on the form of order, a brief attendance before me may be scheduled through the Commercial List Office.

Released: August 18, 2023 Osborne J.