2023 ONSC 6239, 2023 ONSC 6239

CITATION : Allen v. Kumar, 2023 ONSC 6239 DIVISIONAL COURT FILE NO.: 435/23 DATE: 20231102 SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT RE: Brian Anish Kumar et al., Appellants/Defendants AND: TERRY ALLEN et al., Respondents/Plaintiffs BEFORE: Nishikawa J.

COUNSEL: Brian Anish Kumar , in person Ashley Ferguson , for the Respondents HEARD at Toronto: October 31, 2023 ENDORSEMENT Overview [ 1 ] The Appellant, Brian Anish Kumar (the “Appellant”), appeals the order of Associate Justice Robinson dated July 22, 2022 (the “Decision”) striking his statement of defence under subrules 57.03(2) and 60.12 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 . The basis for the order was the Appellant’s failure to pay an outstanding costs order and his history of non-compliance with other court orders. [ 2 ] For the reasons that follow, I dismiss the appeal.

Procedural Background [ 3 ] The Respondent plaintiffs, Terry Allen, Irene Allen, Christopher Robinson, Crystal Robinson, Sean Deline, Kristy Elik, Max Careau and Robin Kumar, brought an action for fraud against the Appellant. On March 19, 2019, Archibald J. found that the Respondents had a strong prima facie case and issued a Mareva injunction restraining the Appellant from dissipating assets acquired or financed with funds or property, directly or indirectly, from the Respondents (the “ Mareva Order”).

The Mareva Order permitted the Appellant to spend up to $5,000 per month on “ordinary living expenses” and up to $10,000 on legal services and representation, but required that the Appellant advise the Respondents’ solicitors in writing of the source of the funds and to provide them with a monthly expenditure log. [ 4 ] On March 22, 2019, Faieta J. extended the Mareva Order and issued an Anton Pillar order for production of documents.

On April 15, 2019 and May 15, 2019, Kimmel J. extended both orders and made ancillary disclosure and examination orders. [ 5 ] On June 30, 2020, O’Brien J. dismissed the Appellant’s motion to set aside the Mareva Order and Anton Pillar orders. On August 4, 2020, O’Brien J. ordered the Appellant to pay $100,000 in costs of his unsuccessful motion (the “Costs Order”). [ 6 ] The Respondents brought a motion to strike the Appellant’s statement of defence based on his failure to pay the Costs Order. On July 27, 2021, the parties appeared on the motion before the Associate Judge.

The motion was adjourned on consent and a timetable was set. The Decision [ 7 ] The motion was heard by the Associate Judge on February 16, 2022. In the Decision, the Associate Judge granted the Respondents’ motion to strike the Appellants’ statement of defence, pursuant to subrules 57.03(2) and 60.12 of the Rules . [ 8 ] On the motion, the Appellant had argued that he had no access to funds to pay the Costs Order because of the Mareva Order and Anton Pillar order.

The Associate Judge rejected the Appellant’s argument that the failure to pay the Costs Order was justified by his impecuniosity, finding that the Appellant had failed to provide financial transparency in response to the motion or the Mareva Order. In particular, the Appellant did not explain how he qualified for CERB in 2019 and refused, without a proper basis, to answer questions concerning his bank accounts.

Evidence on the motion revealed that the Appellant had an income surplus, was living in a multi-million- dollar home and leasing a Mercedes vehicle, and potentially had access to $25,000 to settle a criminal complaint. [ 9 ] In addition, the Associate Judge held that the Appellant’s refusal to pay the Costs Order was consistent with the Appellant’s pattern of breaching court orders and evading his disclosure obligations. He failed to appear for cross-examination as required by a previous order and refused to answer questions on prior examinations.

He failed to comply with two prior production orders and with the requirement that he produce his expenditure logs. The Associate Judge found that the Appellant’s conduct “demonstrates a level of

defiance and obstruction that cannot be condoned.” [ 10 ] Moreover, the Associate Judge held that the Appellant should not be given an opportunity to cure the default because he provided no indication that he would pay the Costs Order. Although striking the defence should not be a remedy of first resort, the Appellant had repeatedly been found in non-compliance with court orders. Further, the Associate Judge noted that despite the strong prima facie case against him for fraud, the Appellant provided no evidence of the merits of his defence. Issues [ 11 ] On appeal, the Appellant raises the following issues: (

a) Whether the Associate Judge made an error in law in exercising his discretion to strike the defence by reversing the onus; (

b) Whether the Associate Judge failed to consider the merits of the Appellant’s defence; (

c) Whether the Associate Judge incorrectly found that the Appellant was in contempt of court orders; and (

d) Whether the Associate Judge failed to consider the Appellant’s family law litigation. Analysis Standard of Review [ 12 ] The parties agree the standard of review in an appeal from the order of an associate judge is the same as that for an appeal from an order of a judge: correctness for errors of law, palpable and overriding error for errors of fact, and correctness or palpable and overriding error for a question of mixed fact and law, depending on whether there is an extricable legal principle.

Did the Associate Judge Err by Reversing the Onus? [ 13 ] The Appellant submits that the Associate Judge erred in law by reversing the onus, thus requiring him to show a meritorious defence as opposed to requiring the Respondents to show why the defence should be struck. [ 14 ] The Appellant relies on the Court of Appeal’s decision in Bell ExpressVu Limited Partnership v. Corkery , 2009 ONCA 85 , at para. 34 , where the Court stated as follows: The motion judge concluded that “no reason [was] shown why his defence should not be struck”.

Respectfully, this approach transfers the onus on the motion to strike to the appellant. It was not for the appellant to demonstrate that he had a strong defence on the merits or to show why his defence should not be struck. It was for the respondents to do so.

This flaw is significant given the grounds upon which the motion judge proceeded. [ 15 ] In Bell ExpressVu , at para. 35, the Court of Appeal went on to hold that striking a defence is a severe remedy and “ought generally not to be a remedy of first resort in circumstances such as this, without at least providing the defaulting defendant with an opportunity to cure the default.” [ 16 ] In the Decision, at para. 57, the Associate Judge stated as follows: [57] Mr.

Kumar’s position is, essentially, that he should be given another chance despite ongoing non-payment of the costs award and prior non-compliance with court orders because the case should be tried on its merits. However, despite making submissions on the merits of his pleaded defences, Mr. Kumar has put forward no evidence on this motion supporting that his defences are meritorious.

His responding affidavit deals only with compliance with undertakings, expense logs for July 2020 to August 2021, his notices of assessment for 2019 and 2020, and his position on impecuniosity and why the costs award has not been paid. [ 17 ] In my view, the Associate Judge did not reverse the onus on the Respondents’ motion, nor did he require that the Appellant demonstrate a strong defence on the merits.

The Associate Judge properly instructed himself on the applicable legal principles and the balance to be struck between having claims adjudicated on their merits and ensuring that the administration of justice is not undermined by litigants failing to comply with court orders. [ 18 ] The Associate Judge made the above observation after a thorough review of the record of non-compliance that was before him in an effort to determine how the merits of the Appellant’s defence should be balanced against the pattern of non-compliance that he found.

The Associate Judge did not strike the defence solely on the basis that it lacked merit.

However, taking seriously the Court of Appeal’s view that striking a defence ought not to be a remedy of first resort, the Associate Judge looked to the merits of the defence to determine whether there was some basis for giving the Appellant a further chance to comply, despite the pattern of non-compliance that he had found. [ 19 ] This differs significantly from Bell ExpressVu , where the Court of Appeal found that the motion judge could not have made a finding as to the merits of the defence when the statement of defence, and the statement of claim, had not been filed in the record before him.

Here, there was a substantial record regarding the strength of the Respondents’ claim and the Appellant’s past non-compliance with court orders. It was open to the Appellant to put forward evidence to challenge the Respondents’ evidence and demonstrate the strength of his defences. The Associate Judge’s observation that the Appellant did not do so did not constitute a reversal of the onus but was an accurate assessment of the record before him. [ 20 ] In addition, given the Appellant’s pattern of non-compliance and the absence of any indication that the Appellant intended to

pay the Costs Order, the Associate Judge found that there would be no point to providing a further opportunity to comply.

As noted in by the Court of Appeal in Falcon Lumber Ltd. v. 2480375 Ontario Inc. , 2020 ONCA 310 , at para. 52 : … although a court may also consider the merits of a party’s claim or defence, as it does under r. 60.12 dealing with the failure to comply with an interlocutory order, this factor may play only a limited role where breaches of production obligations are alleged as one would reasonably expect a party with a strong claim or defence to comply promptly with its disclosure and production obligations. [ 21 ] The Associate Judge did not reverse the onus and thus made no error of law.

Did the Associate Judge Fail to Consider the Merits of the Appellant’s Defence? [ 22 ] The Appellant submits that the Associate Judge then “changed his mind” about the merits and found that a trial was necessary in his costs endorsement dated December 1, 2022. This is an incorrect reading of the costs endorsement, which states, “[t]he plaintiffs’ submissions include arguments that, in my view, cannot be accepted as being accurate and bearing on costs until there have been factual findings made at a subsequent motion or trial, such as whether Mr.

Kumar has, in fact, orchestrated the alleged fraud.” The Associate Judge did not find that a trial was necessary but simply declined to accept the Respondents’ submissions about the Appellant having orchestrated the alleged fraud for the purposes of deciding whether to award substantial indemnity costs. [ 23 ] The Appellant further submits that the Associate Judge made a palpable and overriding error in failing to take into consideration that criminal charges against him for assault and uttering a threat were withdrawn after the credibility of his former spouse was significantly challenged in that proceeding.

The Appellant submits that the Associate Judge ought to have considered this when weighing the merits because the former spouse was the main affiant in support of the Mareva Order. [ 24 ] The Appellant failed to raise this argument at the hearing before the Associate Judge. The Associate Judge made no palpable and overriding error in not considering an issue that was not raised in front of him. In any event, the outcome of the unrelated criminal case against the Appellant involving allegations regarding his former spouse has no bearing on the civil fraud case.

Moreover, the Appellant’s statements about his former spouse’s credibility are not supported by the transcript of the criminal proceeding, which shows only that the Appellant entered into a peace bond. [ 25 ] The Associate judge made no palpable and overriding error in failing to consider the merits of the Appellant’s defence. Did the Associate Judge Find the Appellant in Contempt? [ 26 ] The Appellant submits that the Associate Judge erred in making a finding of contempt against him despite no motion for contempt having been brought and without applying the proper test. [ 27 ] I reject this ground of appeal.

In deciding to strike the defence, the Associate Judge relied on the Appellant’s “ongoing pattern of non-compliance with court orders and procedural obligations[.]” The Associate Judge did not find that the Appellant was in contempt of a court order. Non-compliance, or even a pattern of non-compliance, is not a finding of contempt. [ 28 ] Moreover, contrary to the Appellant’s submissions, the Associate Judge did not make a palpable and overriding error err in finding that the Appellant was not in compliance with previous court orders.

The Appellant submits that the Associate Judge erred in finding that he did not comply with the order that he provide expenditure logs until the hearing of the motion because he provided such logs in July 2021 and the motion was not heard until February 2022. However, the motion was first before the Associate Judge in July 2021. He therefore made no error in finding that the Appellant only produced expenditure logs in response to the motion. Moreover, the Appellant disregards that he was in non-compliance with the Mareva Order for over two years.

Did the Associate Judge Err in Failing to Consider the Family Law Litigation? [ 29 ] The Appellant submits that in finding that he had failed to pay the Costs Order, the Associate Judge erred in failing to take into consideration the family law support orders made against the Appellant. Before this court, the Appellant submits that the orders against him for family and child support, as well as arrears, preclude him from paying the Costs Order because by law, the family law orders take precedence. [ 30 ] This ground of appeal must also fail.

Before the Associate Judge, the Appellant relied on his impecuniosity, and not the family law support orders against him, as the basis for his failure to pay the Costs Order. Not only did the Appellant not raise the support orders before the Associate Judge, he has not otherwise raised them in the course of the civil proceeding.

To the contrary, before the Ontario Court of Justice, the Appellant raised the Mareva Order as the basis for his inability to pay support. [ 31 ] The Appellant argues that the Associate Judge ought to have been aware of the Creditors’ Relief Act, 2010 , S.O. 2010, c. 16, Sch. 4 , which provides that support orders take precedence over all other judgment debts. However, the Appellant did not raise this issue before the Associate Judge, who would not otherwise have known of the existence of the support orders.

In any event, the Appellant could have raised the support orders, which were made before the Mareva Order, at any time. The Mareva Order includes a clause that allows the Appellant to move to vary the order on proper notice.

Yet, the Appellant has not attempted to vary the order to enable him to pay support. [ 32 ] In addition, the Appellant took no steps to vary the Costs Order or to appeal it, or to enter into a payment arrangement, whether because of the support orders or otherwise. [ 33 ] Finally, the existence of the support orders does not demonstrate that the Appellant is impecunious, only that he has also failed to pay support orders. Having failed to pay the support orders, the Appellant cannot point to them as a basis for his inability to pay the Costs Order.

Conclusion [ 34 ] Accordingly, the appeal is dismissed. The Respondents seek their costs of the appeal on a partial indemnity basis in the amount of $4,457.85, all-inclusive, which I find to be fair and reasonable in the circumstances. The Appellant is required to pay the Respondents’ costs of $4,457.85, within 30 days of the release of this endorsement. “Nishikawa J.” Date: November 2, 2023