Court File and Parties
COURT FILE NO.: CV-24-00714494-00CL DATE: 20241212 ONTARIO - SUPERIOR COURT OF JUSTICE – COMMERCIAL LIST
RE: TARION WARRANTY CORPORATION, Plaintiff AND: THE TORONTO-DOMINION BANK, CARLO TAURASI, DINO TAURASI, LUXVIEW FINE HOMES CORPORATION, STATEVIEW CONSTRUCTION LTD., STATEVIEW HOMES (ASHBURN HEIGHTS) INC., STATEVIEW HOMES (BALDWIN HEIGHTS) INC., STATEVIEW HOMES (BEA TOWNS) INC., STATEVIEW HOMES (BONAVENTURE) INC., STATEVIEW HOMES (EDGE TOWNS) INC., STATEVIEW HOMES (ELIA COLLECTION) INC., STATEVIEW HOMES (ELM&CO) INC., STATEVIEW HOMES (HAMPTON HEIGHTS) INC., STATEVIEW HOMES (HIGH CROWN ESTATES) INC., STATEVIEW HOMES (KINGS LANDING PHASE II) INC., STATEVIEW HOMES (KINGS LANDING) INC., STATEVIEW HOMES (MAIN & CO) INC., STATEVIEW HOMES (MINU TOWNS) INC., STATEVIEW HOMES (NAO TOWNS) INC., STATEVIEW HOMES (NAO TOWNS II) INC., STATEVIEW HOMES (ON THE MARK) INC., STATEVIEW HOMES (OOH LALA TOWNS) INC., STATEVIEW HOMES (QUEEN’S COURT) INC., STATEVIEW HOMES (RIALTO TOWNS) INC., STATEVIEW HOMES (TESORO COLLECTION) INC., STATEVIEW HOMES (IVORY OAK ESTATES) INC., TAURA DEVELOPMENTS INC., LIVE INSPIRED ORGANIZATION, HIGHVIEW BUILDING CORP INC., NORTHGATE FINE HOMES INC., TLSFD TAURASI HOLDINGS CORP., and JOHN DOES 1-10 and/or JANE DOES 1- 10, Defendants
BEFORE: Peter J. Osborne J.
COUNSEL: Erin Pleet, Eric Block and Viktor Nikolov, for the Plaintiff Saneea Tanvir, Erin Chesney, Emily Young and Solomiya Zakharchuk, for the Defendants
HEARD: December 9, 2024
Endorsement
[1]
Overview
The Defendant, The Toronto-Dominion Bank (“TD”), seeks an order pursuant to Rule 5.05 severing from one another certain allegations advanced in this action by the Plaintiff, and directing that the two sets of allegations be pursued and tried in two separate actions.
2The requested relief is opposed by the Plaintiff, Tarion Warranty Corporation (“Tarion”) and by Carlo and Dino Taurasi.
3For the reasons that follow, the motion is dismissed.
[4]
Background
Tarion brings this action against TD, and against the Taurasis and a number of corporate Defendants that, for the purposes of this motion, can be described collectively and together with the Taurasis as the StateView Defendants.
5Carlo and Dino Taurasi were the principals and controlling shareholders in a series of related businesses operating together and under the name StateView Homes (“StateView Homes”). StateView Homes was a major developer based in York Region.
6Several of the StateView companies held deposit accounts with TD. As a result of a cheque kiting scheme, TD incurred losses exceeding $37 million. The Taurasis do not contest that the fraud occurred, but maintain that it was perpetrated by StateView’s former Chief Financial Officer, Daniel Ciccone, and that they had no involvement in it.
7Many of the StateView Defendants are now in receivership. The Receiver consented to a lifting of the stay of proceedings solely for the purpose of issuing the statement of claim in this action. While served with all motion materials, the Receiver takes no position on this motion.
8Tarion seeks damages from TD as a result of the fraud and losses referred to above. Carlo and Dino Taurasi, also Defendants in this action, have filed almost identical statements of defence and counterclaims within which they also allege negligence by TD.
9The fraud was apparently carried out between April 2022 and March 14, 2023, the latter date being the date on which TD discovered the cheque kiting scheme.
10Shortly after TD discovered the fraud, it commenced its own action against StateView Homes and the Taurasis. It entered into negotiations with StateView Homes and the Taurasis resulting in a settlement agreement (the “Settlement Agreement”) dated March 31, 2023 pursuant to which TD would not proceed with litigation against the StateView Defendants, and they, in turn, would pay out TD to recover its losses over time. The debt was to be secured by mortgages, guarantees and other security until repaid. The Settlement Agreement was the subject of a consent Court order.
11The Settlement Agreement was never performed because shortly after it was entered into, StateView Homes was placed into receivership and no further payments were made.
12Tarion administers Ontario’s new home warranty program and alleges in this action that it will have to pay out significant claims to homebuyers as a result of the collapse of StateView Homes. In this action, Tarion alleges claims against TD as follows:
a. that TD was negligent in that TD owed Tarion a duty of care to detect the cheque kiting scheme in the 11-month period within which it occurred, and that TD breached that duty, causing Tarion damages equal to the amount it will have to pay out to Ontario homebuyers; and b. that TD sought to improperly benefit itself by entering into the Settlement Agreement such that the Settlement Agreement should be set aside pursuant to the Assignments and Preferences Act and the Fraudulent Conveyances Act.
13TD’s position on this motion is that these two categories of allegations are discrete, separate and should be severed from one another. It submits that the claim in negligence is a personal claim advanced by Tarion in respect of losses it has incurred or will incur as a result of making payments to homebuyers under its program. TD further submits that this claim is therefore conceptually different than its claim to set aside the Settlement Agreement as a fraudulent conveyance or preference, since that latter claim is one advanced on behalf of all creditors of StateView Homes.
14Accordingly, TD submits on this motion that the two principal components of Tarion’s claim are temporally separate since the first relates to the time period from April 2022 until March 14, 2023, while the second relates to the time period from March 24, 2023 to April 6, 2023. It follows, submits TD, that there is no overlap between those two components of Tarion’s claim, that there is no risk of overlapping evidence, and that these two components of the claim ought to be severed and tried separately.
[15]
Legal Framework
Both parties agree and I accept that relief from joinder is the corollary to joinder. The question in either case is whether justice and judicial efficiency are best achieved by having multiple claims determined together in a single action or separately in separate actions.
16Rule 5.01 of the Rules of Civil Procedure provides as follows:
Joinder of Claims
5.01 (1) A plaintiff or applicant may in the same proceeding join any claims the plaintiff or applicant has against an opposite party.
(2) A plaintiff or applicant may sue in different capacities and a defendant or respondent may be sued in different capacities in the same proceeding.
(3) Where there is more than one defendant or respondent, it is not necessary for each to have an interest in all the relief claimed or in each claim included in the proceeding.
17Rule 5.05 of the Rules of Civil Procedure provides as follows:
Relief against Joinder
5.05 Where it appears that the joinder of multiple claims or parties in the same proceeding may unduly complicate or delay the hearing or cause undue prejudice to a party, the court may,
(a) order separate hearings; (b) require one or more of the claims to be asserted, if at all, in another proceeding; (c) order that a party be compensated by costs for having to attend, or be relieved from attending, any part of a hearing in which the party has no interest; (d) stay the proceeding against a defendant or respondent, pending the hearing of the proceeding against another defendant or respondent, on condition that the party against whom the proceeding is stayed is bound by the findings made at the hearing against the other defendant or respondent; or (e) make such other order as is just.
18Rule 5.02 of the Rules of Civil Procedure provides as follows:
Joinder of Parties Multiple Plaintiffs or Applicants
5.02 (1) Two or more persons who are represented by the same lawyer of record may join as plaintiffs or applicants in the same proceeding where,
(a) they assert, whether jointly, severally or in the alternative, any claims to relief arising out of the same transaction or occurrence, or series of transactions or occurrences; (b) a common question of law or fact may arise in the proceeding; or (c) it appears that their joining in the same proceeding may promote the convenient administration of justice.
19As observed by this Court in Dumais v. Hobbs, 2015 ONSC 5643 at para. 23, at the heart of the inquiry are questions of overlap, efficiency, delay, prejudice and judicial economy.
20In addition, s.138 of the Courts of Justice Act provides that as far as possible, multiplicity of legal proceedings shall be avoided.
21This is consistent with the observations of the Court of Appeal for Ontario, that it is a basic right of a litigant to have all issues in dispute resolved in one trial, with the result that the ability of the court to sever, bifurcate or separate an action is a narrowly circumscribed power: Elcano Acceptance Ltd. et al. v. Richmond, Richmond, Stambler & Mills, 55 OR (2d) 56 (ONCA) at para. 11.
[22]
Analysis
In my view, there is no basis upon which the Court should sever the two categories of claims advanced in this action.
23As is clear from Rules 5.01 and 5.02, the joinder of claims and parties is permitted even if each defendant does not have an interest in each head of relief claimed, provided that (and the factors are disjunctive):
a. there are common questions of law or fact; b. the claims arise out of the same transaction or series of transactions; c. the loss has been caused by more than one defendant; or d. joinder in the same proceeding promotes the convenient administration of justice.
24Rule 5.05, which is the Rule under which TD moves here, in a sense expresses the factors in the reverse: relief from joinder is available only where joinder may unduly complicate or delay the hearing or cause undue prejudice to a party. The onus is on the moving party.
25In my view, there is no undue complexity, delay or prejudice to TD if all of these claims continue to be determined within a single action. There is no evidence of prejudice to TD in the record so as to justify the severing of the claims.
26I am satisfied that there are common questions of law or fact. The claims clearly arise out of the same series of transactions: the underlying cheque kiting scheme that is at the heart of the entire matter. Many findings of fact that will be central to the requisite determinations in respect of each category of claims overlap. These would include the facts relating to the underlying fraudulent scheme itself, the knowledge of TD of that scheme and the knowledge (as well as alleged participation) of its employees.
27In the first category of claims, TD is alleged to have been negligent in failing to detect the scheme. In the second, TD is alleged to have entered into the Settlement Agreement with knowledge of the scheme and an intent to obtain a preference for itself. Notwithstanding that the facts underlying the alleged fraudulent scheme occurred (obviously) before the negotiation and execution of the Settlement Agreement, it is practically impossible in my view to consider the facts as comprising two different, temporally separate sets of facts. Rather, what needs to be considered by the Court is one continuing set of facts along a continuum, beginning with the commencement of the cheque kiting scheme and concluding with the Settlement Agreement that is under attack. It will be more efficient, and also fair to all parties, to have all of the claims determined in a single proceeding.
28As noted above, the StateView Homes companies are currently in receivership. The Court-appointed Receiver has custody of the books and records of those entities, and those are going to be relevant to both categories of claims. The Receiver is necessarily going to have to be involved. More broadly, there is very significant overlap in the facts relevant to both categories of claims.
29In my view, trying to separate these two categories of claims while avoiding the creation of inefficiencies and the risk of inconsistent findings would be extremely challenging.
30The fact that the statutory claims advanced in respect of the alleged fraudulent conveyance or preference are advanced on behalf of all creditors does not justify severing that claim as against all of these other factors. This Court routinely determines actions within which a fraudulent conveyance or preference is alleged in respect of some but not all transactions at issue, and/or alleged as against some but not all defendants.
31For all of these reasons, the motion is dismissed.
[32]
Costs and Disposition
At the conclusion of argument, counsel advised that the parties had reached an agreement with respect to costs depending on the result. Accordingly, I make no order as to costs and leave that issue to the parties as agreed.
33Order to go to give effect to these reasons.
Osborne J.