HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp. et al.,

• Jurisdiction: Ontario
• Judge: Cronk, Gillese and Epstein, JJ.A.
• Neutral Citation: 2008 ONCA 894
• Citation: (2008), 245 O.A.C. 47 (CA),2008 ONCA 894,[2008] CarswellOnt 7956,[2008] OJ No 5345 (QL),174 ACWS (3d) 666,245 OAC 47,(2008), 245 OAC 47 (CA),245 O.A.C. 47,[2008] O.J. No 5345 (QL)
• Date: 04 December 2008
• Court: Court of Appeal (Ontario)

HSBC Securities v. Firestar Capital Mgt. (2008), 245 O.A.C. 47 (CA)

MLB headnote and full text

Temp. Cite: [2009] O.A.C. TBEd. JA.035

HSBC Securities (Canada) Inc. (plaintiff/respondent) v. Firestar Capital Management Corporation, Firestar Investment Management Group, Michael Ciavarella , Kamposse Financial Corporation, Kalson Jang, Gwen Jang, Kalano Jang, Michael Lee Mitton, Karen Lam, Yu Hui Brian Luo, Jeffrey Hwee, Jasmine Yun, Frederick Ly, Matthew La, Jeffrey Lau, Man Ho Lam, Tsz Leung (Jacky) Soo, XYZ Company, ABC Company, John Doe and Jane Doe (defendants/ appellants )

(C48286; 2008 ONCA 894)

Indexed As: HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp. et al.

Ontario Court of Appeal

Cronk, Gillese and Epstein, JJ.A.

December 31, 2008.

Summary:

HSBC Securities (Canada) Inc. sued Firestar Capital Management Corporation, Firestar Investment Management Group, Ciavarella and others for payment of a debt and damages. The claim related to purchases in brokerage accounts held by Ciavarella and Firestar Capital at HSBC and allegations of an unlawful stock manipulation scheme involving trading in shares of a public company. HSBC obtained default judgments against Firestar Capital, Firestar Investment and Ciavarella (the defendants). The defendants moved to set aside the default judgments.

The Ontario Superior Court dismissed the motion. The defendants appealed and applied to introduce fresh evidence.

The Ontario Court of Appeal refused to admit the fresh evidence and dismissed the appeal.

Practice - Topic 6198

Judgments and orders - Setting aside default judgments (incl. noting in default) - Affidavit of merits - On January 30 2007, HSBC obtained default judgment against Ciavarella and his two companies (the defendants) - The action related to purchases in brokerage accounts and allegations of an unlawful stock manipulation scheme - On August 9, 2007, the defendants notified HSBC of their motion to set aside the judgments - A motion judge dismissed the motion where the delay was not adequately explained and the evidence did not support the allegation that there was a triable defence on the basis that the impugned trades were unauthorized - The Ontario Court of Appeal dismissed an appeal - There was no reason to interfere with the motion judge's rejection of an assertion that Ciavarella was distracted by other matters and financially unable to retain a lawyer to represent him and his companies - Ciavarella was sophisticated and more than capable of managing his complicated affairs - It was against that background that Ciavarella was served with, and had the opportunity to read, the statement of claim which contained clear notice of the consequences of a failure to respond - Moreover, throughout the period of inaction after learning of the default judgments, Ciavarella was represented by experienced lawyers who could have notified HSBC that a motion would be brought to set aside the judgments - The motion judge took a good hard look at the merits and assessed whether the moving parties had established an arguable defence - There was no reason to interfere with his conclusion that a self-serving affidavit by Ciavarella did not create a triable issue given the absence of detailed facts and supporting evidence - See paragraphs 21 to 28.

Practice - Topic 6199

Judgments and orders - Setting aside default judgments (incl. noting in default) - Delay in applying - [See Practice - Topic 6198 ].

Practice - Topic 6200

Judgments and orders - Setting aside default judgments (incl. noting in default) - Circumstances when party precluded from attacking judgment - [See Practice - Topic 6198 ].

Practice - Topic 6200

Judgments and orders - Setting aside default judgments (incl. noting in default) - Circumstances when party precluded from attacking judgment - The plaintiff obtained default judgments against three defendants - The defendants moved to set aside the judgments - The motion was dismissed - The defendants appealed, advancing, inter alia, an interests of justice argument - They asserted that the motion judge failed to consider that they would be significantly prejudiced if the judgments were not set aside, whereas there would be no prejudice to the plaintiff if the claim were to proceed to trial - The Ontario Court of Appeal rejected the argument - Read as a whole, the motion judge's reasons demonstrated that he was alive to whether the interests of justice favoured granting the order to set aside the judgments - He adverted to matters relevant to the interests of justice, such as his belief that the defendant Ciavarella was "gaming the process", that Ciavarella's delay in responding to both the claim and the default judgments reflected only "inattention and inaction", and that his affidavit contained "self-serving" evidence in an effort to establish a defence - Given the judge's unassailable conclusions that the defendants were unable to adequately explain the circumstances giving rise to the default or the delay, that they were unable to raise a triable defence on the merits, and further, that Ciavarella was effectively taking his chances with the process, it was not in the interests of justice to set aside the default judgments - See paragraphs 29 to 33.

Practice - Topic 9031

Appeals - Evidence on appeal - Admission of "new evidence" - The plaintiff obtained default judgments against Ciavarella and his two companies - The action related to purchases in brokerage accounts and allegations of an unlawful stock manipulation scheme - The defendants moved to set aside the judgments - The motion was dismissed - The defendants appealed and sought to introduce fresh evidence respecting a fax number the plaintiff used to send trade confirmations and the extent to which Ciavarella was able to use his internet access to review the status of the trading accounts - The Ontario Court of Appeal refused to admit the evidence - There was nothing to indicate that the evidence could not have been provided to the motion judge before he became functus officio other than Ciavarella's uncorroborated evidence that his lawyer failed to follow instructions - Further it did not address the other evidence relating to confirmation - The evidence could not be expected to have affected the result on the motion - See paragraph 40.

Practice - Topic 9031

Appeals - Evidence on appeal - Admission of "new evidence" - The plaintiff obtained default judgments against Ciavarella and his two companies - The action related to purchases in brokerage accounts and allegations of an unlawful stock manipulation scheme - The defendants moved to set aside the judgments - The motion was dismissed - The defendants appealed and sought to introduce fresh evidence respecting the testimony of an investment advisor (Ng) at Ciavarella's preliminary inquiry that he had accepted trading instructions from another (Mitton) without properly signed trading authorization - The Ontario Court of Appeal held that this did not constitute fresh evidence - Although Ng's evidence was not in the form of testimony at Ciavarella's preliminary inquiry until after the motion was heard, there was no suggestion that Ng was not accessible to the defendants earlier in the proceedings to give evidence about his interactions with them - More significantly, the proposed evidence related to whether Ciavarella gave Ng written authorization to take instructions from Mitton - It did not contradict Ng's evidence that Ciavarella orally authorized him to take instructions from Mitton, which was the evidence upon which the motion judge relied - Accordingly, this evidence would not have affected the motion judge's findings - See paragraphs 41 to 44.

Cases Noticed:

R. v. Palmer, [1980] 1 S.C.R. 759; 30 N.R. 181, refd to. [para. 2].

Morgan v. Municipality of Toronto Police Services Board et al. (2003), 169 O.A.C. 390; 34 C.P.C.(5th) 46 (C.A.), refd to. [para. 21].

Hill v. Forbes (2007), 225 O.A.C. 74 (C.A.), refd to. [para. 22].

Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. et al., [2007] O.A.C. Uned. 191; 87 O.R.(3d) 479 (C.A.), refd to. [para. 30].

Counsel:

Brian N. Radnoff, for the appellants;

John A. Fabello, for the respondent.

This appeal was heard on December 4, 2008, by Cronk, Gillese and Epstein, JJ.A., of the Ontario Court of Appeal. Epstein, J.A., released the following judgment for the court on December 31, 2008.