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Supreme Court of Canada Urges Access to Justice For Fraud Victims

Canadian Fraud Lawyer

In the past we have written on the Toronto Commercial Court’s promotion of ‘Hybrid Trials” as a legal mechanism which victims of fraud can access to seek a just, efficient and expeditious resolution to their claim – see “An Argument for Hybrid Trials for Victims of Fraud – September 11, 2013.” (117349). We can now report that our concern about access to justice for fraud victims has recently been addressed by the Supreme Court of Canada in an investment fraud case released on January 23, 2014, and cited as Hryniak v. Mauldin2014 SCC 7.

The context of the Hryniak decision was the concern of the Ontario Court of Appeal that, in applying the new summary judgment rules, it was not fair to a fraudster defendant that the case against them be decided by way of summary judgment. The Ontario Court of Appeal inferred that summary judgment motions were not available to victims of fraud because, they reasoned, it was not possible for a judge to gain a full appreciation of the facts in a summary judgment motion that may result in a finding as serious as fraud against a defendant. In other words, the Ontario Court of Appeal declared fraud cases generally where a type of case where fraud victims must be put through the expense and delay of a full trial – all in the name of fraudsters ‘rights.’

Access to Justice Generally

Thankfully, the Supreme Court of Canada held that it was not in the interest of justice and fairness to all fraud victims to single out fraud as a cause of action for which summary judgment was not available. The Supreme Court guidance to all Courts in Canada on access to justice ideals is so important to fraud victims that we are quoting the text for your review:

 

[23] This appeal concerns the values and choices underlying our civil justice system, and the ability of ordinary Canadians to access that justice. Our civil justice system is premised upon the value that the process of adjudication must be fair and just. This cannot be compromised.

 

[24] However, undue process and protracted trials, with unnecessary expense and delay, can prevent the fair and just resolution of disputes. The full trial has become largely illusory because, except where government funding is available,[1] ordinary Canadians cannot afford to access the adjudication of civil disputes.[2] The cost and delay associated with the traditional process means that, as counsel for the intervener the Advocates’ Society (in Bruno Appliance) stated at the hearing of this appeal, the trial process denies ordinary people the opportunity to have adjudication. And while going to trial has long been seen as a last resort, other dispute resolution mechanisms such as mediation and settlement are more likely to produce fair and just results when adjudication remains a realistic alternative.

 

[25] Prompt judicial resolution of legal disputes allows individuals to get on with their lives. But, when court costs and delays become too great, people look for alternatives or simply give up on justice. Sometimes, they choose to represent themselves, often creating further problems due to their lack of familiarity with the law.

 

[26] In some circles, private arbitration is increasingly seen as an alternative to a slow judicial process. But private arbitration is not the solution since, without an accessible public forum for the adjudication of disputes, the rule of law is threatened and the development of the common law undermined.

 

[27] There is growing support for alternative adjudication of disputes and a developing consensus that the traditional balance struck by extensive pre-trial processes and the conventional trial no longer reflects the modern reality and needs to be re-adjusted. A proper balance requires simplified and proportionate procedures for adjudication, and impacts the role of counsel and judges. This balance must recognize that a process can be fair and just, without the expense and delay of a trial, and that alternative models of adjudication are no less legitimate than the conventional trial.

 

[28] This requires a shift in culture. The principal goal remains the same: a fair process that results in a just adjudication of disputes. A fair and just process must permit a judge to find the facts necessary to resolve the dispute and to apply the relevant legal principles to the facts as found. However, that process is illusory unless it is also accessible — proportionate, timely and affordable. The proportionality principle means that the best forum for resolving a dispute is not always that with the most painstaking procedure.

 

[29] There is, of course, always some tension between accessibility and the truth-seeking function but, much as one would not expect a jury trial over a contested parking ticket, the procedures used to adjudicate civil disputes must fit the nature of the claim. If the process is disproportionate to the nature of the dispute and the interests involved, then it will not achieve a fair and just result.

 

[30] The proportionality principle is now reflected in many of the provinces’ rules and can act as a touchstone for access to civil justice.[3]

 

[31] Even where proportionality is not specifically codified, applying rules of court that involve discretion “includes . . . an underlying principle of proportionality which means taking account of the appropriateness of the procedure, its cost and impact on the litigation, and its timeliness, given the nature and complexity of the litigation” (Szeto v. Dwyer, 2010 NLCA 36 (CanLII), 2010 NLCA 36, 297 Nfld. & P.E.I.R. 311,at para. 53).

 

[32] This culture shift requires judges to actively manage the legal process in line with the principle of proportionality. While summary judgment motions can save time and resources, like most pre-trial procedures, they can also slow down the proceedings if used inappropriately. While judges can and should play a role in controlling such risks, counsel must, in accordance with the traditions of their profession, act in a way that facilitates rather than frustrates access to justice. Lawyers should consider their client’s limited means and the nature of their case and fashion proportionate means to achieve a fair and just result.

 

[33] A complex claim may involve an extensive record and a significant commitment of time and expense. However, proportionality is inevitably comparative; even slow and expensive procedures can be proportionate when they are the fastest and most efficient alternative. The question is whether the added expense and delay of fact finding at trial is necessary to a fair process and just adjudication.

 

Application of the New Rules to the Fraudster Hryniak’s Case

The Supreme Court, in applying the new summary judgment rules to the Hyrniak fraud, summarized the test for common law fraud as follows:

The tort of civil fraud has four elements, which must be proven on a balance of probabilities:

 (1) a false representation by the defendant;

(2) some level of knowledge of the falsehood of the representation on the part of the defendant (whether knowledge or recklessness);

(3) the false representation caused the plaintiff to act; and

(4) the plaintiff’s actions resulted in a loss.

The Supreme Court then made the following summary ruling declaring the fraudster Hryniak liable for the investment fraud as against the Mauldin Group:

(1) “[u]nquestionably, the Mauldin group was induced to invest with Hryniak because of what Hryniak said to Fred Mauldin”

(2) “Hryniak’s lack of effort to ensure that the funds would be properly invested and failure to verify that the eventual end-point of the funds, New Savings Bank, was secure” inferred Hryniak’s knowledge or reckless behaviour;

(3) “Hryniak secured a US$76,000 loan for Fred Mauldin and conducted a “test trade”, actions which, in the motion judge’s view, were “undertaken . . . for the purpose of dissuading the Mauldin group from demanding the return of its investment”; and

(4) the “loss, is clearly present. The Mauldin Group invested US$1.2 million and, but for a small return of US$9,600 in February 2002, lost its investment.”

 

The particular rules and application of those rules is too detailed (and uninteresting for fraud victims) to be reviewed in detail in this blog. If you have an interest in the technical application of the new rule, we commend you to a review of the Hryniak decision as linked to this blog.

 

It is important to note that the Court is not inferring that all fraud cases should be decided by way of summary judgment. In some cases the facts are too much in dispute and require that determinations of credibility be made by way of a trial. But even where a trial is required, fraud victims can request a less expensive and more expeditious determination of their case by way of a “Hybrid Trial”.

 

Application of Access to Justice Principles to the Ontario Courts

It is appropriate here to point out to fraud victims that often we do not see access to justice ideals applied in the Ontario’s lower courts, most notably in the Masters motions courts, on a consistent basis. The culture in the motions courts is slow to change. The Masters motions courts are where significant delay and expense is incurred dealing with what are often routine discovery procedural issues.

In the past, when seeking access to justice for our fraud victim clients by way of a Hybrid Trial, we have cited Justice Brown’s case of York University v. Michael Markicevic, 2013 CarswellOnt 8851, 2013 ONSC 4311. York University was an employee procurement fraud case. Justice Brown ordered a Hybrid Trial to bring an end to the delay and expense being incurred in that case. An extract from this case is worth repeating:

More substantively, the motion raises important questions about the practical availability of access to the civil justice system.

Access to the civil justice system requires ensuring that courts are made accessible to all, … Such access must be achieved in ways which are fair to the legitimate interests of both parties to a lawsuit.  How to achieve such fair access to our system of civil justice is not a debate about abstract concepts. Maintenance of the cohesion of our civil society depends, in significant part, upon ensuring that those in society who have legal disputes enjoy access to the public civil justice system in order to secure an adjudication of those disputes. Lack of access to justice is not the negative of some desired abstract concept; lack of access to justice puts us on the road to unwinding the weave which holds our civil society together. 

The present case presents a concrete example of the problem. [The Plaintiff] is making serious allegations of fraud…[The defendant] vigorously denies the allegations…The lawsuit has been on-going for over a year…[S]uffice it to say for this overview, some year and a half after this action commenced, it is not much, if any, closer to a trial date…[H}ere the parties stand, five months after my decision on their first round of … motions, no closer to trial, and with one defendant asking for…

Achieving access to the civil justice system requires taking concrete steps. The most concrete and most readily available step to improving access to justice involves judges consistently making greater use of their inherent powers to control the civil justice process to ensure that those who seek justice actually end up in a court room where justice is dispensed, without encountering financial exhaustion before reaching the threshold of the court room. 

Why do judges not exercise greater control over the civil justice process to achieve that end? Are they fearful that if they try something creative to move a case along, they will be slapped down by an appellate court? Perhaps that thought lingers in the recesses of their minds, but decisions of appellate courts of this province in recent years have supported such efforts by trial and motion court judges, as long as the creative solutions are fair.

Are judges becoming indifferent to the task of attempting to control the civil justice system?  Here we are moving closer to the present day reality on the ground. One cannot overstate the oppressive effect on judicial morale of the endless waves of cases which seem to be going nowhere in a civil justice system that is sinking.  Why try to be creative when the system, with a life of its own, grinds relentlessly on and downward?

Have judges lost touch with how to move a case along to a final adjudication? For the better part of 20 years the relentless mantra has been – trials are bad, mediation will solve all problems. Of course, it hasn’t…Let me venture the view that judges, as a collective, are losing the will and ability to move cases along to trial because we are led (wrongly) to believe that trials represent a failure of the system.

 Where does all of this leave the person who really matters – the litigant in the civil justice process, who more often than not simply wants to get before a judge, tell his or her story, and get a decision?  If one were to describe the progression of a civil lawsuit, from its start to finish, as akin to a walk from one side of a field to the other, with the determination of  the parties’ legal rights awaiting on the far side of the field, then litigants increasingly are coming to see that walk as one involving small, tentative, money-draining steps, with each side probing the ground ahead, through interlocutory motions, to ensure no tactical obstacle or hidden mine lurks beneath the surface of the field.  As the parties’ snail-paced walk proceeds across the field, and as the money flows out of their pockets, all too often, at the point when the parties’ financial resources are exhausted, they raise their heads, look across the field, and discover that the other side – whence rests the final decision on their dispute – remains elusively distant and beyond their practical reach.

That should not be. Such a state of affairs reflects an unacceptable failure on the part of our civil justice system. The primary purpose of our civil justice system must be to enable those who have legal disputes against each other to secure an impartial third-party adjudication of their disputes.

I have come to the conclusion that the best way to adjudicate the merits of the case is not through endless interlocutory motions, where slivers of the merits of the case are subjected to intense scrutiny, but to no final result.  Nor is it through making every case pass through the hoop of rigid mandatory mediation, when the nature of some disputes dictates getting before a judge as soon as possible.  Nor does the solution lie solely in case management which, unless relentlessly focused on pushing a case on to trial readiness can turn into as unproductive a quagmire as interlocutory motions. The best way is by forcefully managing the parties to trial

The plaintiff has made serious allegations against the…defendants, which the defendants deny.  I do not know who is right or who is wrong.  What I do know is that the [parties] are entitled to their day in this Court.  If they win before the trial judge; they win. If they lose; they lose. But, the [parties] are entitled to have a judge of this Court be the one who decides whether the most serious allegations leveled against them have or have not been made out.

These comments express, perhaps in somewhat blunt language, the fundamental principle underpinning our province’s civil justice system – its purpose is to secure the just, most expeditious and least expensive determination of civil proceedings on their merits, by employing a process proportionate to the importance and complexity of the issues and to the amount of involved and, I would emphasize, by using a process which actually results in a final decision on the merits.  Fair; fast; cost-effective; finality – these, then, are the principles which will guide the exercise of my discretion engaged by this particular motion.

Inquiries

At Investigation Counsel PC, we are experienced at dealing with the obstructionist tactics of fraudsters and their lawyers. We advocate Hybrid Trials and summary judgment motions for fraud victims seeking access to justice. For further information, or to have your case assessed, contact us at www.investigationcounsel.com.

Norman Groot, LLB, CFE, CFI – February 13, 2014

Disclaimer

Norman Groot

About Norman Groot

Based on my police experience and my experience thereafter as a litigator, I have joined forces with other lawyers with police experience and created the law firm Investigation Counsel Professional Corporation.

2 Responses to "Supreme Court of Canada Urges Access to Justice For Fraud Victims"

  • Angela De Cruz
    March 3, 2015 - 6:52 am

    I wanted the comments to be for you.

  • Norman Groot
    Norman Groot
    March 6, 2015 - 4:30 pm

    Please refer to our contact us form

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