Royal Bank of Canada v Amor, 2023 ABKB 12

Court of King’s Bench of Alberta Citation: Royal Bank of Canada v Amor, 2023 ABKB 12 Date: 20230109 Docket: 1101 01866; 1101 01868 Registry: Calgary Between: Royal Bank of Canada Plaintiff/Respondent - and - Isaac Amor, Nathan Amor and Thomas Lynch Defendants/Appellants _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice O.P. Malik _______________________________________________________ I.

Introduction [ 1 ] Isaac Amor, Nathan Amor and Thomas Lynch (the “Defendants”) appeal the decision of Applications Judge Mason not to dismiss the Plaintiff’s action for inordinate and inexcusable delay pursuant to r 4.31 of the Alberta Rules of Court , Alta Reg 124/2010 . Applications Judge Mason found that there was such delay but declined to dismiss the action because she found the Plaintiff had rebutted the presumption of significant prejudice to the Defendants.

The Defendants contend that the Applications Judge erred in the latter conclusion. [ 2 ] The Plaintiff, Royal Bank of Canada (“RBC”), did not appeal the Applications Judge’s finding of inordinate and inexcusable delay. Therefore, the parties agree that the sole issue to be decided in this appeal is whether the Applications Judge erred in concluding that RBC had rebutted the presumption of significant prejudice. [ 3 ] For the following reasons, I allow the appeal and dismiss the action against the Defendants. II. Facts i.

Chronology [ 4 ] In 2011, RBC commenced a fraud action against the Amors, alleging they had obtained certain mortgages by making false and fraudulent misrepresentations and providing false and fraudulent documentation in support of their mortgage applications. [ 5 ] The Amors defended the claim, asserting they had unwittingly been used in a scheme (the “Mortgage Fraud Scheme”) to induce RBC to grant the mortgage under false pretences. The Amors filed a Third-Party claim against several individuals, including Mr. Lynch, whom they allege involved them in the Mortgage Fraud Scheme.

[ 6 ] RBC filed amended claims adding Mr. Lynch as a defendant and alleging that the Amors and Mr. Lynch acted in concert in perpetrating the Mortgage Fraud Scheme. RBC made the following allegations:

i) the Amors and Mr. Lynch planned and organized and/or participated in the transaction including identifying and approaching potential purchasers, preparing the purchase contracts, applications to qualify for the mortgages, knowing the material part of those documents were false; ii) the Amors and Mr. Lynch divided up the proceeds of the Mortgage Fraud Scheme; iii) the Amors and Mr. Lynch falsely represented to RBC that there were no collateral agreements in respect of the properties involved; and iv) the Amors and Mr.

Lynch concealed the above facts from RBC to induce it to approve the mortgage applications. [ 7 ] Mr. Lynch filed a Statement of Defence. [ 8 ] The Defendants were questioned in 2012. [ 9 ] On October 13, 2020, the Amors applied to dismiss the actions against them pursuant to rules 4.31 and 4.33. On March 2, 2021, Mr. Lynch applied to dismiss the action pursuant to r 4.31. The Applications Judge heard both applications together. Her conclusion that there had not been a long delay pursuant to r 4.33 was not appealed. ii.

The Applications Judge’s Decision [ 10 ] The Applications Judge found there had been an inordinate and inexcusable delay in the action which triggered the presumption of substantial prejudice to the Defendants pursuant to r 4.31(2). She then found that RBC had rebutted the presumption and declined to dismiss the action. [ 11 ] It appears that all pre-trial litigation steps were substantially complete by the time the Defendants brought their applications before the Applications Judge.

At para 68 of her decision, she found that “[t]he only barrier to booking trial dates is the necessity of a JDR or other resolution processes”. At para 69, she directed the parties either to apply to dispense with the JDR requirement or to

schedule the earliest JDR or other resolution process and, at the same time, to set trial dates. [ 12 ] Currently, the lead time for booking a short civil trial (less than 5 days) in the Court of King’s Bench is somewhere in the range of 14-16 months. [ 13 ] At para 55, the Applications Judge noted that she was “entitled to consider all the evidence before [her]” in considering whether RBC had rebutted the presumption, but that there was “insufficient prejudice to warrant striking out” its actions. [ 14 ] At para 56, she found “it was common ground” that the actions were primarily “documents cases” as opposed to “memories cases” and that evidence of the Defendants’ misrepresentations is set out in the documentary record.

She then quoted another mortgage fraud case, Royal Bank of Canada v Levy , 2020 ABQB 500 , aff’d 2020 ABCA 338 , at para 62 : The Applicants argue that that the memories of witnesses will tend to fade over time. As the Alberta Court of Appeal noted, “[t]his is a common concern, and one of the reasons that the delay rules exist”; Transamerica [ Transamerica Life Canada v Oakwood Associates Advisory Group Ltd , 2019 ABCA 276 ] at para 46.

Like Transamerica , the case at bar is heavily “document-based,” in the sense that the impugned transactions are evidenced and preserved through the various mortgage applications, mortgages, appraisals, and bank records. There has been extensive questioning which has preserved, or provided the opportunity to preserve, oral evidence. [ 15 ] The Applications Judge further noted at para 57 that: ...to the extent that memories will be engaged at trial, the facts of the “investment opportunity” in these cases are not complex or subtle. Further, as was the case in [ Levy ], the Amors and Mr.

Lynch were questioned early in the action. Their evidence has been memorialized and transcripts are available to refresh memories should that be necessary.

The defendants have not identified any other witnesses necessary to their defence whose memories may have faded over time. [ 16 ] At para 61, she noted that “[a]s for actual prejudice, the Amors acknowledge that they have provided no evidence in this regard”. [ 17 ] At paras 63 and 64, the Applications Judge found that “[t]here is no evidence that any other necessary witness will not be available for trial” and that “there is no suggestion that any documents have been destroyed or gone missing”. [ 18 ] The Applications Judge considered an Affidavit filed in 2021 by Mr.

Lynch in which he describes as follows the impacts that the outstanding actions have had on him: This lawsuit has proceeded at a slow pace. There have been lengthy delays over the past 10 years. I work as an advisor to private corporations to assist with mergers, acquisitions, restructurings, and management placements. The nature of my work sometimes requires my clients to perform background checks on me, which reveal that I am a defendant in this Action. On at least 3 separate occasions, as a result of such background checks, I was deemed unfit and too risky to work with prior to signing contracts.

The nature of the allegations against me in this Action have caused particular concern for some of my clients and potential clients. I have lost work and thus sustained financial losses over the years.

I sometimes assist with corporate restructuring as part of the work I do. At times, this entails the replacement of board members for publicly traded companies. I have been offered positions, but to become a board member, I would need to complete a “PIF” (Personal Information Form) ...which would require me to make full disclosure of this lawsuit against me. Both in my personal life and professional life, I have been denied financing and lenders have been unwilling to extend credit to me as a result of this Action. [ 19 ] The Applications Judge expressed her dissatisfaction with Mr.

Lynch’s evidence and remarked at para 65 that his evidence consisted of “general and conclusory statements as to non-litigation prejudice...which are not supported with sufficient detail or documents”. [ 20 ] At para 66, the Applications Judge acknowledged that while “the defendants have had fraud allegations hanging over their heads while these actions remain undetermined...document disclosure and questioning are complete...[t]he matters are virtually ready for trial and steps can be taken immediately towards getting a trial scheduled”. III. Applicable Principles i.

Standard of Review [ 21 ] An appeal from the decision of an Applications Judge is de novo and the standard of review is correctness ( Bahcheli v Yorkton Securities Inc , 2012 ABCA 166 at para 30 ). [ 22 ] Where the appeal involves the same record and arguments, I may frame my reasons with reference to the Applications Judge’s decision where I agree with them ( HOOPP Realty Inc v Emery Jamieson LLP , 2020 ABCA 159 at para. 41 ). ii.

Rebutting the Presumption of Significant Prejudice [ 23 ] Since the Defendants have proven RBC’s delay is inordinate and inexcusable, significant prejudice is presumed and the onus shifts to RBC to rebut that presumption (r 4.31(2); Transamerica at para 43). The operation of this rebuttable presumption means that RBC bears either the evidentiary or legal burden to satisfy this Court on a balance of probabilities that its delay has not caused the Defendants significant prejudice ( 330626 Alberta Ltd v Ho & Laviolette Engineering Ltd , 2018 ABQB 398 at para 93 ) .

This is entirely reasonable and recognizes “the seriousness of the consequences litigation delay presents in our community” ( Humphreys v Trebilcock , 2017 ABCA 116 at para 149 ). [ 24 ] At no time does this burden shift to the Defendants. They are not required to prove actual prejudice.

To require this of them would displace the onus of proof. [ 25 ] Rebutting the presumption may require a plaintiff to tender evidence or cross-examine a defendant and courts have commented on plaintiffs’ failure to do so ( 4075447 Canada Inc v Pacrim Developments Inc , 2018 ABQB 358 at para 71 , aff’d 2020 ABCA 150 at para 21 ; Renkinn Developments Inc (Renkinn Developments Ltd) v Stevens , 2016 ABQB 549 at para 61 ; Nahal v Gottlieb , 2019 ABQB 650 at para 28 ; Condominium Corporation 052 0580 (o/a The Tradition at Southbrook) v Carrington Holdings , 2022 ABKB 623 at para 151 ; Jacobson v Wawanesa Mutual Insurance Company , 2021 ABQB 938 at paras 26 and 29 ).

IV. Analysis [ 26 ] For the following reasons, I find that RBC has failed to rebut the presumption of significant prejudice. [ 27 ] First, I disagree with the Applications Judge’s finding that this is primarily a documents case and that the Amors and Mr. Lynch can refresh their memories from the transcripts of their questioning. Whatever evidence was obtained through questioning in 2012 is sufficiently dated that the Defendants may have little actual memory of it.

In my view, it is inherently problematic for parties to have to rely solely on their evidence given during questioning, particularly where the evidence was given some time ago and the witnesses may have no memory of it at trial ( Cochrane (Town) v Austech Holdings Inc , 2021 ABQB 666 at paras 184-211 ; The Owners: Condominium Plan No 982 6403 v CPI Crown Properties International Corporation , 2017 ABQB 562 at para 65 ; Warren v Cowling , 2019 ABQB 403 at para 49 ; 330626 at para 95; and Trademark Calgary Holdings Inc v Hub Oil Company Ltd , 2019 ABQB 42 at para 84 ). [ 28 ] Further, financial fraud cases are not truly “documents cases”.

As the Court in Cochrane noted at para 205 (reiterating the Court of Appeal’s point in Humphreys at para 184 ), even in a financial fraud case it is inevitable that there will be questions for which the answer is not in the documents.

The Court’s observations in Cochrane are particularly apt in this case where RBC’s allegations regarding the Defendants’ involvement in the Mortgage Fraud Scheme necessarily engage issues in dispute that extend beyond whatever mortgage documents form part of the documentary record and involve an assessment of the witness’ credibility, which requires the parties’ recollections to be intact.

I am unaware whether the documents that have been produced in these proceedings contain evidence that depicts the Defendants having planned, organized and participated in the Mortgage Fraud Scheme as RBC has alleged. [ 29 ] In The Owners: Condominium Plan No 982 6403 , the Court recognized at para 65 that: It is not a satisfactory response to the prejudice that arises through failing memories to suggest that witnesses can rely on answers given previously, if they have no memory at trial.

One of the reasons for a trial is to hear the evidence of witnesses expected to recount the relevant events, not to read portions of transcripts and statements given years before. This is undoubtedly one of the reasons why parties

are expected to pursue their lawsuits diligently – that is, the recognition that memories fade and witnesses disappear or die with the passage of time, compromising the effectiveness of the trial process. [ 30 ] Similarly, in Middleton Energy Management Ltd v TransCanada Pipelines Limited , 2017 ABQB 669 , the Court held at para 38 that: It is not an option for one sophisticated party unilaterally to simply keep a claim alive by taking occasional steps forward until it finds it convenient to move it to trial.

It brings the administration of justice into disrepute by the lengthy delay alone, but also the eventual decision will be hampered by faint memories of witnesses who no longer remember or, when they have long retired or resigned, no longer have the same interest in assisting in the assembly of evidence. And when a witness is cross-examined on a detail that he or she has not thought about for 13 or more years, the reply will at least be uncertain or otherwise subject to some doubt, through no fault of the witness or the party presenting the witness. [ 31 ] The Defendants were questioned 10 years ago.

A trial date is at least 14-16 months away. In my view, a gap of 10 years is sufficient to call into question a witness’ ability to recall earlier testimony and to respond meaningfully to cross-examination at trial.

In this respect, I am reminded of the earlier case of Costigan v Ruzicka , 1984 ABCA 234 , wherein the Court stated at para 30 that “[e]very trial judge is aware that stale claims with stale testimony produce bad trial trials and poor decisions” (cited with approval in McKay v Eriksson , 2019 ABQB 408 at para 19 ). [ 32 ] RBC has not established that the Defendants’ memories are intact such that they can reasonably defend themselves at trial. Nor has it established that its allegations against the Defendants are provable from the available documentary record.

Consequently, I do not find that RBC has rebutted the presumption of significant prejudice that flows from its own delay in respect of the Defendants’ recollection of past events. [ 33 ] Second, I accept Mr. Lynch’s testimony regarding the actual non-litigation prejudice he has suffered because of RBC’s delay. As RBC has not cross-examined Mr. Lynch, that evidence is uncontroverted. I disagree with the Applications Judge’s view that the evidence is so general or conclusory as to amount to a bare assertion. In my view, Mr. Lynch has satisfactorily established actual non- litigation prejudice.

In this respect, I take the same view of Mr. Lynch’s evidence as expressed by the Court in Trademark Calgary Holdings at paras 87-88: ...I accept the unchallenged and uncontroverted evidence of Mr. Kalmacoff that the Defendant has been impaired in conducting business with respect to urban renewal, and that the Plaintiff’s litigation is the cause of that impairment. Mr. Kalmacoff explained, and the Court accepts, that if it had not been for the background distraction of the litigation, the Defendant would have been more aggressive in seeking proactive development. The litigation, as Mr.

Kalmacoff explained, has tended to inhibit more aggressive action. While the Plaintiff argues that the assertions of Mr. Kalmacoff are rather vague, his evidence remains unchallenged and there is no evidence suggesting that the Defendant has not suffered adverse consequences from the outstanding litigation... [ 34 ] As noted above, the onus to rebut the presumption of significant prejudice rests with the plaintiff and the defendant is not required to prove actual prejudice once inordinate and inexcusable delay has been established.

Where, as here, a defendant leads some credible evidence of actual prejudice, the plaintiff should challenge that evidence and a failure to do so may be fatal. [ 35 ] Finally, the Applications Judge recognized that the “defendants have had fraud allegations hanging over their heads while these actions remain undetermined” but concluded that these allegations could be addressed at trial.

However, the Court in Humphreys at para 123 (and acknowledged by the Court in Cochrane at para 212) recognized that allegations such as fraud require unique treatment because of their harmful nature: Fraud may be such an allegation. A litigant who alleges fraud may be under an obligation to advance the action with reasonable expedition, that is at a faster pace than that expected of a reasonable litigant pursuing a claim that does not allege fraud or a comparable wrong. This means that any delay may not escape being characterized as inordinate delay if the nonmoving party advances a fraud claim.

In other words, a nonmoving party who claims that the moving party has committed fraud or a comparably egregious form of misconduct runs a greater risk that delay attributable to the nonmoving party may be characterized as being inordinate than does a plaintiff in other actions not alleging fraud. [ 36 ] The Court in International Capital Corp v Robinson Twigg & Ketilson , 2010 SKCA 48 (cited at n 79 of Humphreys ) made a similar point at para 45(d): The court should be sensitive to the impact of claims which put in question the professional, business or personal reputation of the defendant, which put the livelihood of the defendant at risk or which involve significant or ongoing negative publicity for the defendant.

In circumstances of those sorts, the court should be alert to the damage that can be caused by a plaintiff’s failure to proceed with reasonable dispatch and, at least in general terms, should be less inclined to tolerate inexcusable delay. [ 37 ] RBC alleges that the Defendants perpetrated the Mortgage Fraud Scheme. These are serious and stigmatising allegations that impugn the Defendants’ reputation, trustworthiness, and character. Until a trial can be concluded, these allegations hang like a pall over the Defendants.

RBC has failed to satisfy me that the Defendants will not suffer additional prejudice before this matter can be resolved at trial. V. Conclusion [ 38 ] RBC has not rebutted the presumption that the Defendants have been caused significant prejudice. The fading of memories is a serious concern that cannot be cured given the delay to this point and the additional time it will take for the matter to come to trial. Mr. Lynch has established that he has suffered prejudice because of RBC’s delay. The cloud of suspicion continues to hang over all the

Defendants. [ 39 ] I appreciate that this matter is essentially trial-ready. I am also mindful that r. 4.31 is discretionary. Nevertheless, in the face of RBC’s failure to rebut the presumption of significant prejudice that its delay has caused (and will continue to cause) the Defendants, I cannot identify any compelling reason to deny the Defendants’ application for dismissal of the action.

Litigation delay is contrary to the key objectives of the foundational rule of the Alberta Rules of Court , undermines the public’s confidence in the administration of justice and imperils everyone’s access to timely justice. [ 40 ] Consequently, RBC’s actions against the Defendants are dismissed. [ 41 ] The Defendants are entitled to their costs. If the parties cannot agree on the amount, they may provide written submissions, not exceeding 3 pages each, within the next 30 days. I ask that the parties address McAllister v Calgary (City) , 2021 ABCA 25 in their submissions. Heard on the 17 th day of November 2022.

Dated at the City of Calgary, Alberta this 9 th day of January, 2023. O.P. Malik J.C.K.B.A. Appearances: Ravi Jadusingh for Nathan Amor and Isaac Amor Matthew X. James for Thomas Lynch Tyler F.A. Derksen for Royal Bank of Canada