Ontario Superior Court of Justice
Court File No.: CV-17-502-A1
Date: 2025/03/17
Parties
Between:
B2B Bank, Plaintiff
– and –
Michael Gillis and Julie Joanisse Gillis also known as Julie Joanisse-Gillis, Defendants
GP Wealth Management Corporation, Guy Corriveau, and Cindy Fleury, Third Parties
Not Participating:
John W. Wowk, for the Defendants
Marie Sydney, for the Third Party Guy Corriveau
Veronica Sjolin, for the Third Party GP Wealth Management
Heard: September 23, 2024
Justice K. Tranquilli
Introduction
1The third parties move for summary judgment dismissing the third party claim or alternatively, an order dismissing or staying the third party claim pursuant to rule 21. They submit the defendants are without legal capacity to bring the claim and are out of time.
2At issue is when the cause of action arose and whether it is statute barred.
Background
3In 2008, the defendants consulted with the third party Guy Corriveau, a financial advisor with the third party GP Wealth Management Corporation, about a retirement and savings strategy for their family.
4In April 2008, with the assistance of the third parties, the defendants embarked upon a leveraged investment strategy where they borrowed a total of $150,000 from an investment lender, AGF Trust. These loans were invested in the Clarington Canadian Dividend Fund. The defendants also borrowed money from Manulife Bank for a separate investment strategy. The leveraged investment plan was that the Clarington Dividend Fund would make distributions that would pay interest on the AGF Trust and Manulife Bank loans and also fund contributions to the defendants’ RRSPs. It was expected that the fund would appreciate and provide for both repayment of the loans and retirement and education savings for the defendants.
5However, these investments began to suffer losses shortly after they were made, beginning with the global financial market crash in September 2008. The investment only made nominal profit and the defendants came to learn the investment yielded significantly less profit than what they claim Mr. Corriveau represented.
6The defendants made assignments in bankruptcy in July 2009. The Manulife Bank loans were included in the bankruptcy; however, the defendants did not include the AGF Trust investment or the loans in their bankruptcy. They claim this was on the advice of Mr. Corriveau and with the knowledge of the trustee in bankruptcy. The defendants were discharged from bankruptcy in 2011. The defendants allege that in 2012 Mr. Corriveau then suggested they should include the AGF investment and loan in the bankruptcy. The defendants say they made the inquiry but were told by the trustee that it was too late. Mr. Corriveau denies providing such advice to the defendants.
7AGF Trust was acquired by B2B Bank in or about 2013, at which time B2B Bank acquired the defendants’ investment loans. The defendants had only been paying interest on the loans since 2008, but beginning in or about 2014, the plaintiff required the defendants to make payments on the principal and interest, which put the defendants under further financial strain.
8The third party Corriveau resigned from GP Wealth in late 2014 and the third party Cindy Fleury, also a financial advisor with GP Wealth, assumed carriage of the defendants’ investment portfolio. In February 2015, Ms. Fleury met with the defendants and questioned the advisability of the investment strategy. At that time, the defendants acknowledged the investments had not performed the way they had been led to believe.
9The defendants subsequently defaulted on the loan payments. The plaintiff took the investment as collateral for the loan in 2016 and commenced this action by statement of claim issued March 2, 2017.
10The defendants denied contractual liability to the plaintiff. By third party claim issued May 10, 2017, the defendants claimed against their financial advisors Mr. Corriveau, Ms. Fleury and their firm, GP Wealth Management Corporation in “contribution and indemnity” for any sums the defendants were found owing to the plaintiff because of the financial advisor’s negligence and negligent misrepresentations regarding both the investment strategy and then excluding the investment and debt from their bankruptcy.
11The defendants plead the third party Corriveau made negligent or fraudulent misrepresentations in stating the investment would make the defendants “a lot of money”, that the investment would “pay for itself and there would be no out-of-pocket expenses;” and that the investment would “grow really fast.” But for these misrepresentations, the defendants plead they would not have made the investment. The defendants further plead that they relied on Mr. Corriveau’s negligent advice to keep the investment and the loan out of the bankruptcy.
12The defendants have resolved the main action on terms of a consent judgment on which they make periodic payments to the plaintiff. The defendants discontinued the third party claim against Ms. Fleury. The parties have undertaken examinations for discovery. The defendants have set the matter down for trial; however, a trial date is yet to be scheduled.
Positions of the Parties
13The moving parties submit the defendants lack capacity to bring this claim because the cause of action vested in the trustee in bankruptcy and has not been transferred to the defendants as required by statute. In any event, the third parties submit the claim is also out of time pursuant to the Limitations Act, 2002 as at the latest, they knew, or ought to have known of, their claims against the third parties in February 2015, such that the claim was out of time when it was issued in May 2017.
14The defendants submit they have capacity to institute the third party claim and that it is not statute barred. The cause of action did not arise until after they were discharged from bankruptcy. The third parties continued to assist the defendants in managing the financial shortfall until the plaintiff bank switched from requiring payment on interest only to principal and interest and then collapsed the leveraged investment scheme in November 2016. The defendants did not know that the third parties were responsible for causing and contributing to their losses until they received an expert opinion in September 2022.
15These reasons will explain why I agree with the third parties’ position. The causes of action arose before and during the period that the defendants were in bankruptcy and therefore vested with the trustee in bankruptcy. This property was not returned to the defendants by the trustee, as is required by the Bankruptcy and Insolvency Act, and the defendants did not seek such relief on cross motion. In any event, even if this court were to exercise its discretion under the BIA to regularize the third party claim, this would not assist the defendants as their claims are out of time. Summary judgment is therefore granted dismissing the third party claim.
Issues
16The motion requires the court to address the following questions:
- Is summary judgment appropriate?
- When did the causes of action arise?
- Did the causes of action vest in the trustee in bankruptcy?
- Are the causes of action statute-barred?
Analysis
1. Is summary judgment appropriate?
17The court’s exercise of its discretion and powers on a summary judgment motion are well established and need not be detailed in these reasons: Hyrniak v. Mauldin, 2014 SCC 7, paras. 65-68. In general, the motion judge is entitled to assume the record contains all the evidence the parties would present at trial. The parties must put their best foot forward and “lead, trump or risk losing”: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200 at para. 27.
18This action was commenced under rule 76, such that summary judgment in simplified procedure matters can still be appropriate but are considered to be “exceptional” because of the limitations on examinations for discovery and the prohibition against cross-examinations on affidavits: Manthadi v. ASCO Manufacturing, 2020 ONCA 285.
19I find that the record does not raise issues of credibility and reliability or gaps in the evidence that would caution against the court’s use of its summary judgment powers in this simplified procedure matter. The parties were examined for discovery. While the defendant has filed an affidavit in response to the defendants’ motion, her affidavit does not contradict the discovery evidence, raise a material conflict, or identify a gap in the evidence that would require trial. While there are factual disputes about what the third parties and defendants discussed in the course of this doomed investment scheme, those disputes do not prevent a determination of when the cause of action arose or when, giving the defendants the benefit of the doubt, they knew or ought to have known of their claims against the third parties.
20Moreover, the issues as to the effect of the assignments in bankruptcy also engage rule 21.01(3)(b), entitling the defendants to move to have the action stayed or dismissed on grounds that the defendants are without legal capacity to have commenced or continue the third party claim.
2. When did the causes of action arise?
21The question of when the causes of action arose informs whether that property vested in the trustee in bankruptcy. I find the defendants’ causes of action against the third parties arose in 2008 with the commencement of the investment strategy and in 2009, with respect to the financial advisor’s alleged advice to keep the AGF investment loan and debts out of the bankruptcies.
22The loan and leveraged investment strategy was implemented in April 2008, where the defendants acted upon the alleged negligent advice of the third party Corriveau. The defendants agree their claim regarding the leveraged investment strategy is based on negligent misrepresentation. The elements of that cause of action accrued when the defendants acted upon the financial planner’s advice, took out the loan, and initiated the investment strategy in 2008. In cases where a plaintiff is induced to enter into a transaction in reliance on a misrepresentation and fails to get what he was entitled to, the plaintiff suffers the damage sufficient to complete the cause of action when he enters into the transaction, not when the loss is monetized into a specific amount: Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156 at para. 32. Here, the defendants were allegedly induced to engage in a high-risk investment strategy they erroneously believed to be safe. They became subject to this liability at the time they entered into the transactions in 2008. Similarly, they became exposed to the further negative consequences of the loan and investment strategy when they excluded the investment and the debt from their bankruptcies in 2009, again, allegedly on the financial planner’s advice. This advice would have been given around the time of the assignments in bankruptcy and before the defendants’ discharges from bankruptcy in 2011.
23While section 4(2) of the Limitations Act, 2002 presumes the defendants to have discovered their causes of action with the initiation of the investment strategy in 2008, and then the negligent bankruptcy advice in 2009, it is open to the defendants to establish these claims could not have been discovered until a later date, which shall be addressed later in these reasons.
3. Did the causes of action vest in the trustee in bankruptcy?
24The defendants made voluntary assignments in bankruptcy in July 2009. The defendant Michael Gillis was discharged from bankruptcy in May 2011 and the defendant Julie Joannise-Gillis was discharged from bankruptcy in November 2011. The negligent misrepresentation claim arose in April 2008 and the negligent bankruptcy advice occurred on or after July 2009 at the time of assignment and before the defendants’ discharges from bankruptcy in 2011.
25Although the action and third party claim did not commence until 2017, the question is whether these causes of action nevertheless vested in the trustee.
26Section 71 of the Bankruptcy and Insolvency Act provides that upon an assignment in bankruptcy being filed, the bankrupt ceases to have any capacity to deal with his or her property, which, subject to the BIA and the rights of security creditors, immediately passes to and vests in the trustee: Thistle v. Schumilas, 2020 ONSC 88 at para. 11.
27The Court of Appeal has previously explained that the BIA broadly defines the bankrupt’s “property” to include a cause of action, regardless of whether it has been discovered or not. Grafting discoverability to a s. 71 BIA vesting order would create uncertainty and incentivize bankrupts to avoid learning of and disclosing all assets to their trustee. The BIA does not prevent the claim from being asserted or prevent discoverability. The provision only directs that the cause of action vests in the trustee: Thistle, at paras. 16-20. The defendants’ causes of action as described in the third party claim therefore vested in the trustee in bankruptcy.
28The BIA makes no provision for the automatic re-vesting of the property of a bankrupt either on her discharge or the discharge of the trustee. Pursuant to s. 40 of the BIA, before a bankrupt’s discharge, a trustee is obligated to return property either listed in the statement of affairs or otherwise disclosed to the trustee and that is found incapable of realization. Thistle, at para. 12. As the causes of action were not disclosed to the trustee or at all before discharge, the trustee has made no determination that the causes of action are incapable of realization. Therefore, it cannot be said the trustee is unable to dispose of the property as provided in s. 40: Clement v. A.G. of Canada, 2012 ONSC 5823 at para. 44.
29The trustee could have been reappointed pursuant to s. 41(11) of the BIA or the defendants could have arranged for the trustee to transfer the actions back to them: Thistle, at para. 20.
30A discharged bankrupt has no right or entitlement to deal with his or her prior assets. As the causes of action vested in the trustee, the defendants had no power or authority to commence the third party claim and the claim is a nullity: Solomon v. Education Fund Services Inc. at paras. 17, 23. The third party claims can therefore be struck as an abuse of process of the court: Clement, at para. 41.
31However, in appropriate circumstances, the court can use its discretion to make an order under s. 40(2) to convey the actions back to the defendants: Clement, at para. 52. The defendants did not seek this relief on the motion; however, I will consider this issue as part of considering whether the third party claim is a nullity or whether this question raises a genuine issue requiring trial.
32In general, the court has considered the exercise of its discretion to re-assign a claim to a discharged bankrupt, effective nunc pro tunc, where the incapacity arises from a procedural or technical irregularity: Murphy v. Stefaniak, 2007 ONCA 819, D’Alimonte v. Porretta, 2011 ONCA 307. According to the defendants, they excluded the investment and the debts from their bankruptcies on the advice of the financial planner because at that time the investment was just starting to earn. The financial planner denies giving such advice. The defendant Joannisse-Gillis also testified on her examination for discovery that she did inform the trustee of the loans and investments and that he was content for these items to be excluded from the statements of affairs. I find that this aspect of the record provides an insufficient basis on which to consider whether the non-disclosure was of an administrative or technical nature so as to support entitlement to the discretionary order. This would potentially raise a genuine issue requiring trial.
33However, this relief also involves consideration of the limitation periods and whether the actions are now statute-barred. Where the relief is sought after the expiry of the limitation period, a nunc pro tunc order cannot be made because the order is of no practical effect. The relief would only backdate the order to the date of the motion, which is already beyond the limitation period: Thistle, at para. 27.
34As I will now explain, I find the causes of action are statute-barred, such that even if I were persuaded that there is a basis on which to find the non-disclosure was procedural or technical irregularity, the defendants are out of time to pursue these claims. The court has no authority to make a nunc pro tunc order if the party did not seek the order before the expiration of the limitation period: Thistle, at para. 27.
4. Are the causes of action statute-barred?
35The third party claim, issued May 10, 2017, seeks relief in “contribution and indemnity for any and all damages which this Defendant may have to pay to the plaintiffs pursuant to any Judgment or Order.” Section 18 of the Limitations Act, 2002, would therefore arguably mean that the third party claim was issued in time as the claim did not arise until the day on which the defendants were served with the statement of claim regarding the loan default.
36The third parties submit that this claim is not correctly characterized as being for contribution and indemnity, such that s. 18 of the Limitations Act, 2002 does not apply. I agree with this submission.
37It is a precondition of the right to resort to contribution that there be liability to the plaintiff. A claim for contribution cannot be made by one person against another in respect of a loss resulting to a third person unless each of the former two came under a liability to the third person to answer for his loss: Giffels v. Eastern Constructions, [1978] 2 SCR 1346 at 1354. A third party may only be liable for contribution under the Negligence Act if the third party is directly liable to the plaintiff. The defendants can only have a claim for contribution if the facts as pleaded and accepted as true establish that the third party owed a private law duty of care to the plaintiffs: Becker v. McMurter, 2015 ONSC 4207 at para. 33.
38The pith and substance of the third party claim is for independent causes of action in negligent misrepresentation and negligence as between the defendants and third parties. Those circumstances have no legal relationship to the contractual debt asserted by the plaintiff in the statement of claim and more pointedly, the pleadings do not suggest there is direct liability by the third parties to the plaintiff bank.
39The defendants acknowledged the challenge with characterizing their claim as being in contribution and indemnity. They alternatively submitted that time did not start to run until the plaintiff collapsed the investment strategy prior to suing the defendants on the loan shortfall, in or about November 2016, or that they required their expert opinion, received in September 2022, which gave the particulars as to how the third parties fell below the standard of care for investment advisors.
40I disagree.
41A cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the claimant by the exercise of reasonable diligence. The onus is on the claimant to show that its claim is not statute barred and that it behaved as a reasonable person in the same or similar circumstances using reasonable diligence in discovering the facts relating to the limitation issue. The question to be posed is whether the prospective claimant knows enough facts on which to base an allegation of negligence against the other party. If the claimant does, then the claim has been discovered and the limitation period begins to run. Certainty of a defendant’s responsibility or the full extent of the damages suffered is not a requirement. It is enough to have prima facie grounds to infer that the acts or omissions were caused by the party: Johnson v. Studley, 2014 ONSC 1732 at paras. 56-62.
42To that end, the expert opinion, provided almost four years after the defendants instituted the third party claim, cannot be said to have been necessary to identify that the defendants had experienced a loss, and that Mr. Corriveau was responsible. The plaintiff only has to know enough material facts on which to base a legal allegation. Once the plaintiff knows that some damage has occurred and has identified the alleged wrongdoer, the cause of action has accrued. The details of the wrongdoer’s conduct and how the loss happened will be revealed through the legal proceeding: Beaton v. Scotia iTrade and Scotia Capital, 2012 ONSC 7063, at para. 13.
43In the third party claim, the defendants plead that the advisor told them of a “great investment” that would “make a lot of money”, “grow really fast” with no out-of-pocket expenses. It would have been readily apparent to a reasonably diligent investor that this strategy was not performing as represented shortly after it commenced. The ledger of transactions between 2008 and 2014 shows that the defendants’ investments lost significant value of over 30% throughout the course of the scheme. However, the defendants did not review the statements regularly issued during the course of the investment strategy. The defendant Joanisse-Gillis acknowledged receiving statements but not reviewing them. The defendant Gillis also recalled receiving the statements. He reviewed some of them but did not understand them and did not ask the third parties for assistance. Furthermore, in 2011, the defendants signed a Leverage Meeting Form wherein they acknowledged a decline in the market value of the investments of 40%, again contrary to the representations made that induced them into the venture.
44It should also have been apparent to the defendants that there was doubt to the advice to exclude the leveraged investment from the bankruptcy when the advisor instructed the defendants to try and include the troubled scheme in the bankruptcy. By the defendants’ evidence, this advice took place in 2012, about one year after they were discharged from bankruptcy.
45Therefore, by 2012 and likely earlier, it is arguable the defendants were in a position where they knew or ought to have known through the exercise of reasonable diligence that the investments had not performed as represented and that they should have been included in the bankruptcy. The defendants contend the third parties minimized the issues with the performance of the investments and represented that they would recover. This evidence on this issue is scant on the record and was not thoroughly argued at the hearing.
46However, I find that any question about when the defendants knew or ought to have known of their financial issues caused by the leveraged investment, for which they knew Mr. Corriveau was responsible, is laid to rest with the arrival of his replacement, Cindy Fleury, who met with the defendants in February 2015.
47Ms. Fleury’s notes from her meeting on February 22, 2015 indicated that she reviewed the investment loans with the plaintiff and questioned why they had not been put into the bankruptcy. The defendants stated that Mr. Corriveau had advised them not to. Ms. Fleury noted that the defendants were relying on credit cards and line of credit debt to subsidize their lifestyle. The plaintiff bank had recently required the defendants to start making payments on both interest and principal. She observed the defendants did not appear to understand that the investment loans were “loans” and that if they had continued to pay interest only, the loans would never be paid off. Her note to file continued: “Their response was the investments were not performing the way they had been led to believe. They wanted something that would pay out a higher cash distribution monthly to help pay the monthly investment loan payments.”
48The defendants do not contradict Ms. Fleury’s evidence. On her examination for discovery the defendant Joanisse-Gillis recalled Ms. Fleury coming to meet the defendants in the defendants’ home at least once and that the meeting date of February 22, 2015 made sense. The defendant was asked when she became aware there was a problem with the investment and that she could suffer a loss:
I mean, when Manulife fell into the bankruptcy, then it was also well, what are we doing this for? And then Guy just said, “oh, we’ll do this. We’ll do a few different things.” I didn’t know what that meant exactly. He again reassured us and then said – whatever – it was always reassurance that, “Don’t worry. We’ll – we’ll invest in other things, and we’ll do things.” And I said, “Okay.” And then when Guy stepped out and Cindy stepped in and she came to meet me at my house and said, “I don’t know what this guy is doing, but this is a mess,” that’s when it really, truly hit us like, “oh my God. What have – what are we in here?” [emphasis added]
49While I find it likely that the limitation periods began earlier, by at 2011 for the negligent misrepresentation and 2012 for the bankruptcy advice, I conclude for the purposes of this motion that there is no genuine issue requiring a trial as to the conclusion that the limitation period on these causes of action began to run no later than February 22, 2015, when Ms. Fleury’s questions and explanations caused the defendants to realize they were in a poor financial position because of the investment strategy. By this date they knew they had suffered an investment loss and were in a financial predicament, that the scheme had not performed as represented and that it was Mr. Corriveau who caused them to make the ill-fated investment.
50As the third party claim was not issued until May 10, 2017, it is therefore out of time.
Conclusion
51There would be no practical effect to regularizing the third party claim and reassigning the causes of action to the defendants. A nunc pro tunc order cannot be made because the order is of no practical effect. The relief would only backdate the order to the date of the motion, which is already beyond the limitation period.
52I therefore grant summary judgment dismissing the third party claim as being statute barred. Pursuant to rule 21.01(3), the third party claim is also struck without leave to amend. The action is a nullity as a result of the causes of action being subject to the bankruptcies and cannot be regularized as the limitation period has expired.
53If the parties cannot resolve costs, the third parties shall deliver their written submissions by April 3, 2025, and the defendants shall deliver their written submissions by April 10, 2025. Written submissions are limited to two pages excluding a bill of costs and any offers to settle. There is no reply without leave.
Justice K. Tranquilli
Released: March 17, 2025