Superior Court of Justice – Ontario

Court File No.: CV-22-00690536
Date: January 13, 2025

Between:
Aleksandr Shinkarev, Irina Shinkareva, Maksim Shinkarev, Daria Shinkareva
Plaintiffs

and

Maria Surovova
Defendant

Before: Mark L. Koehnen
Counsel: Gregory Weedon for the plaintiffs
Heard: In writing

Endorsement

Background

[1] By reasons dated October 11, 2024, I struck out the defendant’s statement of defence for serial refusal to attend an examination for discovery. The defendant was noted in default on October 22, 2025. The plaintiff now moves for default judgment.

[2] In addition to the deemed admissions to the factual allegations in the statement of claim, the plaintiffs’ motion is supported by the affidavit of Irina Shinkareva, sworn October 29, 2024.

[3] The combination of those factors makes it clear that default judgment should be granted.

Findings of Fact

[4] The defendant falsely held herself out as being a mortgage broker. She is not and never has been a mortgage broker. The defendant embarked upon a fraudulent scheme whereby she told the plaintiffs that she could assist them in obtaining mortgage financing. However, to obtain financing and better terms on that financing, the defendant told the plaintiffs that they had to reduce their indebtedness. The defendant asked the plaintiffs to transfer monies to her which the defendant promised to use to reduce the indebtedness. The plaintiffs transferred a total of $85,221.00 to the defendant for this purpose. The defendant used none of the funds to pay down the plaintiffs’ debt. Instead, she retained the funds for herself.

[5] The plaintiffs transferred the funds to the defendant for a specific purpose, namely to pay down specifically identified debts with each of the payments the plaintiffs made. Those funds were therefore impressed with a trust in favor of the plaintiffs. The defendant did not use the funds for the purpose intended and has never accounted for what she did with the plaintiffs’ funds.

Fraud

[6] That conduct amounts to fraud. Fraud requires the plaintiffs to establish:
a) a false representation made by the defendant;
b) that the defendant knew or was reckless as to the falsehood of the representation;
c) that the false representation caused the plaintiff to act; and
d) that the plaintiffs suffered damages as a result of their reliance on the defendant’s misrepresentation (Bruno Appliance and Furniture, Inc. v. Hyrniak, 2014 SCC 8, para 21).

[7] The plaintiffs have met each of these four branches of the test for fraud. The defendant falsely represented that she was a mortgage broker and falsely represented that she would use the monies that the plaintiffs transferred to her to reduce the plaintiffs’ debt. The defendant clearly knew about the falsehood because she received the monies and did not pay down the plaintiffs’ debt. The false representations of the defendant caused the plaintiffs to transfer money to the defendant. The plaintiffs have suffered a loss as a result of the transfer of funds because their debt was not paid down and the funds have never been returned to them.

Punitive Damages

[8] The plaintiffs also seek punitive damages in the amount of $50,000. I am satisfied that such an award should be made.

[9] In Whiten v. Pilot Insurance Co., 2002 SCC 18, paras 36, 111, the Supreme Court of Canada stated that the purpose of punitive damages is to further retribution, denunciation, and deterrence. Punitive damages are awarded in exceptional cases of “malicious, oppressive and high-handed” misconduct.

[10] In Nanny and Eldercare Services Inc. v. Walsh Business and Tax Management Ltd., 2024 ONSC 5563, para 26, Chalmers J. held that punitive damages were warranted against accountants who took money from a client to remit to CRA but fraudulently failed to do so. In so holding, Chalmers J. said at para. 26 that “the fraud meets the standard of high-handed, malicious and reprehensible conduct.” Justice Chalmers went on to quote Sossin J. (as he then was) in Gennett Limber Co. v. John Doe a.k.a. Milton Harvey et al., 2019 ONSC 1345 to the effect that: “it is hard to see how simply returning the funds fraudulently acquired would be sufficient, particularly with the goal of deterrence in mind.” Simply awarding judgment in the amount of the funds transferred would provide no deterrent value at all. Indeed, it would encourage fraud because the worst case scenario that the fraudster would face is a requirement to return the funds they fraudulently took. Deterrence requires an additional penalty beyond returning the fraudulently obtained funds: Elekta Ltd. v. Rodkin, 2012 ONSC 2062, para 31.

Bankruptcy and Survival of Judgment

[11] Finally, the plaintiffs seek an order that this judgment survives any bankruptcy of the defendant. Section 178(1) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3, provides as follows:

An order of discharge does not release the bankrupt from, [....]
d. any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity [....]

[12] The principal judgment that I am awarding the plaintiffs clearly amounts to a liability that arises out of the defendant's fraud, misappropriation and defalcation while acting in a fiduciary capacity. As a result, section 178 of the Bankruptcy and Insolvency Act would apply to ensure that the defendant is not released from the judgment by virtue of any bankruptcy.

[13] There is sometimes an issue about whether it is more appropriate to make a finding in relation to section 178 before a bankruptcy has occurred or whether it is more appropriate to make that finding in the course of the bankruptcy proceeding. In my view, it is more appropriate on the facts of this case to make that finding now.

[14] As noted earlier, the defendant’s statement of defence was struck out for her serial failure to attend examinations for discovery. The defendant failed to attend discoveries because she asserted that she was in the process of making an assignment in bankruptcy. No such assignment was ever made. The defendant has, however, clearly made the threat that she would undermine the utility of any judgment by making an assignment in bankruptcy. The plaintiffs have already been defrauded of over $85,000. They have incurred unnecessary legal costs to try to recover that money. In my view it would be profoundly unjust to force the plaintiffs into yet another proceeding in any future bankruptcy to demonstrate that this judgment related to fraud and should survive the defendant's bankruptcy. On the facts of this case, it is more efficient and more just to make that finding now. Other courts have made such orders in similar circumstances: see for example University Plumbing v. Solstice Two Limited, 2019 ONSC 2242, para 23; Nanny and Eldercare at para. 19.

Costs

[15] The plaintiffs seek their costs on a full indemnity basis, in an amount of $25,551.94, including disbursements and H.S.T.

[16] Full indemnity costs are reserved for the rare and exceptional cases where the conduct of the party against whom costs is ordered has engaged in egregious conduct such as fraud: Marcos Limited Building Design Consultants v. Lad, 2018 ONSC 7812, para 7; Nanny and Eldercare at para. 30.

[17] Costs are usually awarded on a lower scale because courts do not want to discourage people from bringing meritorious suits or defending suits on a meritorious basis even though they may prosecute or defend unsuccessfully. Here there was no merit to the defendant's conduct. She brazenly defrauded the plaintiffs of money without colour of right. She then refused to participate in the court process that would allow the plaintiffs to assert their rights. This is not a question of a defendant pursuing a defence in good faith and in respect of which she happens to be unsuccessful.

[18] I would therefore award the plaintiffs their costs on a full indemnity scale but would reduce those costs by $3,209.48 on account of cost spent communicating with the police, Crown and FSRA. I accept that this time was validly incurred, it is not time spent in connection with this action. I would therefore fix costs at $22,342.46.

[19] I also award the plaintiffs prejudgment interest of $5,674.55 in accordance with the rate of 2.8%.

Date: January 13, 2025
Mark L. Koehnen