Executive Summary: Key Legal and Evidentiary Issues

• Central dispute concerns characterization of the “DBI Loan” as either a loan to the defendants or a loan routed through them as mere conduits for a third party, Positano.
• Plaintiffs alleged a pattern of discovery misconduct (disruptive conduct, refusals, breaches of orders, late productions, and alleged spoliation) as grounds to strike the amended defence.
• Defendants’ conduct at examinations for discovery, including use of notes, room interruptions, and counsel’s demeanor, was scrutinized but found insufficient to justify the extraordinary remedy of striking pleadings.
• Multiple cancellations, adjournments, and certificates of non-attendance were examined in light of the discovery timetable and correspondence between counsel, ultimately treated as explained or not serious enough to warrant striking the defence.
• Allegations of inadequate production, loss of QuickBooks data, and potential spoliation were not supported by a sufficient evidentiary foundation or applicable legal test.
• The court favoured proportionality and the policy of deciding cases on their merits, dismissing the motion to strike and instead granting the defendants modest costs of $7,500 payable by the plaintiffs in the cause.

Background and parties

This case arises from a long-standing personal and financial relationship between the plaintiff, Paul Banner, and the defendant, James Austin. Banner is the directing mind and sole shareholder of Double Bogey Investments (DBI), his holding company. Austin, a registered mutual fund dealer, is the directing mind, shareholder and director of Alibra Financial Services (Alibra). He provided services as a financial advisor through Equity Associates, while Alibra offers financial and investment services. Banner and Austin have known each other for approximately 40 years. Over roughly two decades, Banner relied on Austin to perform his personal and corporate bookkeeping and related financial services. In recent years, Banner had largely wound down his own investments and focused on lending money.

Facts giving rise to the dispute

The litigation centres on what the amended statement of claim refers to as the “DBI Loan.” According to the plaintiffs, Banner advanced funds to the defendants—Austin and Alibra—at least in part because Austin needed money for an investment opportunity. In their telling, the defendants received and used these funds, and now owe Banner and DBI significant amounts. The defendants firmly deny that there was any investment of this nature. Instead, they say that a non-party, Positano, who knew Banner and was involved in an automotive business, needed money related to that business. On the defendants’ version, Banner chose to lend money to Positano, not to the defendants themselves. Because the defendants were already acting as Banner’s bookkeepers, Banner allegedly asked that the loans to Positano be routed “through” the defendants’ services, with Austin and Alibra acting only as conduits. Separate proceedings were indeed brought by Alibra against Positano and others in another action, which forms part of the broader factual context but is distinct from this case.

Claims and legal theories advanced

In the amended statement of claim, the plaintiffs frame their case using a wide suite of civil and commercial causes of action. Against Austin personally, they claim interim, interlocutory and permanent injunctive relief restraining him from disposing of personal and corporate assets pending trial. Against both defendants, they seek an interim and interlocutory order requiring full particulars of assets said to have been acquired using funds provided by the plaintiffs. The monetary relief sought is extensive and pled in the alternative under multiple theories. The plaintiffs claim: payment of $407,000 as the alleged outstanding debt; $250,000 in damages for breach of confidence and breach of fiduciary duty; $62,000 in damages for conversion or detinue for alleged theft or misappropriation of funds; $469,000 for unjust enrichment and/or restitution; in the alternative, $250,000 for conspiracy to injure; an accounting and disgorgement of all profits said to have been made by the defendants; and, in the alternative, $500,000 for fraud or breach of trust. They also seek oppression remedy relief and compensation pursuant to s. 248 of the Ontario Business Corporations Act, punitive and exemplary damages of $100,000, interest and costs. At this stage, however, these remain allegations and claimed amounts; there has been no trial or final determination of liability or damages.

Procedural history of the action

The action was commenced by statement of claim on February 19, 2020. The original statement of defence was served in June 2020, and the plaintiffs filed a reply in July 2020. The plaintiffs later amended their statement of claim in December 2021, prompting the defendants to amend their statement of defence in April 2022. Over the ensuing years, the case became mired in scheduling issues, discovery disputes, attempts to amend pleadings again, and repeated case conference attendances. Examinations for discovery were first scheduled for June 2 and 3, 2021. Days before those examinations, the defendants served approximately 700 pages of documents from the separate Positano action, leading plaintiffs’ counsel to cancel the defendants’ examination on timing grounds. The defendants, in turn, sought to cancel their examination of the plaintiffs, but plaintiffs’ counsel insisted that the defendants’ examination of the plaintiffs go ahead or they would treat it as abandoned. The June 3, 2021 examination did proceed but was adjourned shortly thereafter when both counsel recognized that the statement of claim needed amendment and further production was required to support those amendments.

Discovery timetable and certificates of non-attendance

Between February and May 2022, plaintiffs’ counsel repeatedly attempted to canvas dates for renewed examinations. When those efforts did not immediately yield agreed dates, plaintiffs’ counsel unilaterally scheduled an examination of the defendants for October 5, 2022. Defendants’ counsel was unavailable that day, and while the parties’ offices worked back and forth on new dates, plaintiffs’ counsel nonetheless obtained a first certificate of non-attendance on October 5, 2022. Ultimately, the parties agreed to February 15 and 17, 2023 for examinations, but a furnace failure at plaintiffs’ counsel’s home and strategic concerns about incurring preparation costs led both sides to adjourn those dates. Further dates in March 2023 were pencilled in, then again replaced when the defendants indicated they intended to further amend their amended statement of defence. Examinations were rescheduled for April 20 and 21, 2023, but on April 18, 2023, defendants’ counsel sought confirmation that discovery would be rescheduled until after the pleadings had been dealt with. The plaintiffs refused, leading defendants’ counsel to cancel the examinations on the basis that they were premature given the anticipated amendments. A second certificate of non-attendance was obtained by plaintiffs’ counsel on April 20, 2023. A case conference then proceeded before Associate Justice Jolley on June 5, 2023, resulting in an agreed timetable covering discoveries, undertakings, mediation, and any undertakings/refusals motion. This timetable was meant to stabilize the procedural chaos. However, the defendants’ then-counsel retired around August 2023, and new counsel was only retained in October 2023. Against that backdrop, examinations were again scheduled for August 22, 2023. A misunderstanding about whether plaintiffs’ counsel was postponing the examination by a day or cancelling it outright led defendants’ counsel to advise that the defendant would not attend on August 22, 2023. Plaintiffs’ counsel then obtained a third certificate of non-attendance. Nevertheless, plaintiffs’ counsel also offered further dates (August 30, 31 or September 1, 2023), and August 30 was confirmed. A case conference presided over by Justice Chalmers addressed plaintiffs’ desire to bring a motion to strike the defence for non-attendance and non-compliance, but the motion was not scheduled before a judge because it fell within the jurisdiction of an Associate Justice. Ultimately, the examinations of the defendants did take place on August 30 and September 20, 2023, only about a month after the date set in Associate Justice Jolley’s timetable.

Conduct at examinations for discovery

The plaintiffs’ motion to strike the amended statement of defence relied heavily on what they characterized as disruptive or obstructive conduct during the virtual examinations of Austin held on August 30 and September 20, 2023. They pointed to disputes over Austin’s use of notes, the presence of another person entering the room during the examination, and the behavior of the defendants’ then-counsel, including raising his voice and unilaterally ending the day around 4:45–4:50 p.m. On the notes issue, plaintiffs’ counsel initially asked that Austin place his notes out of reach. Defendants’ counsel resisted, stating that any document Austin read would be produced. After an off-the-record discussion, however, Austin agreed not to use his preparatory notes and placed them at the side of his desk, and the examination continued. The court treated this as a resolved issue, not a lasting obstruction. The plaintiffs also complained that Austin had confirmed he was alone in his room, yet someone was seen entering. Austin explained that the person was his wife, briefly downstairs to obtain a printout. The Associate Justice found this explanation reasonable and distinguished these facts from more egregious cases where witnesses concealed third-party assistance during examinations. As for former defence counsel’s raised voice and decision to conclude the day near the end of the business day, the court acknowledged that raising one’s voice is not acceptable but viewed this as an isolated lapse after repeated efforts to move on from a line of questioning, and not a basis for the extreme sanction of striking pleadings. Ending the discovery day when further questioning was clearly going to require more time was also not considered unreasonable.

Refusals, undertakings, and alleged non-compliance

A significant pillar of the plaintiffs’ motion was the number of questions refused or taken under advisement and the alleged failure to answer undertakings by the deadlines in the Jolley timetable. Austin had refused to answer a large number of questions and taken many more under advisement. The plaintiffs stressed that the defendants often failed to give brief reasons for refusals, contrary to Rule 34.12. However, the court emphasized that no separate refusals or undertakings motion had yet adjudicated which refusals were improper or which undertakings remained outstanding or inadequately answered. Without such a determination on specific questions, the broad complaint that refusals remained unanswered could not, in itself, justify striking the defence. Regarding undertakings, the plaintiffs noted that no answers were provided by the October 31, 2023 deadline. Answers were eventually delivered on February 29, 2024. The Associate Justice accepted that there was a reasonable explanation for the delay, tied to the examinations having occurred later than ordered and the retirement of prior defence counsel. To the extent the plaintiffs now dispute the sufficiency of particular answers, that is a matter for the alternative relief (an undertakings and refusals motion), not a ground to strike the defence outright.

Document production and alleged spoliation

The plaintiffs also relied on alleged deficiencies in production, including a delay in producing the 700-page Positano documents (served in May 2021) and the asserted loss of access to Alibra’s QuickBooks records after the defendants’ subscription ended around or after September 2019. The court noted that while the Positano documents could have been produced earlier, they had in fact been produced years before this motion. On QuickBooks, the defendants pointed out that the plaintiffs already possessed some of the relevant documents in their own affidavit of documents, and that Austin had been examined with reference to specific QuickBooks entries. More fundamentally, the Associate Justice found that the plaintiffs had not supplied the necessary legal and evidentiary foundation for a finding of spoliation. Although the court cited the general principle that parties must preserve documents they know or should know are relevant, it was not provided with case law on the applicable test for spoliation, nor with concrete, document-specific evidence meeting that test. As a result, the court declined to find potential spoliation of documents on the record before it.

Motion to strike the amended statement of defence

The plaintiffs’ central request on this motion was to strike the amended statement of defence of Austin and Alibra. They argued that the defendants’ conduct—taken cumulatively across discovery scheduling, attendance, production, refusals, undertakings and behaviour at examination—demonstrated a pattern of delay, disregard for court orders, and indifference to the litigation. They characterized striking the defence as the only appropriate and proportionate remedy, particularly in light of the alleged prejudice and the need to preserve the integrity of the civil justice system. The defendants opposed this relief, relying on the strong line of authority that striking pleadings is an extraordinary, discretionary remedy reserved for rare, exceptional circumstances where no lesser remedy will suffice. The court reviewed jurisprudence emphasizing the dual goals of the Rules of Civil Procedure: ensuring cases are decided on their merits where possible and ensuring they proceed in an orderly fashion. The Rules reflect a balance—litigants must comply with procedures, but strict compliance can be relaxed in the interests of justice, and not every misstep justifies the harshest sanction. Guided by those principles, and after examining each ground advanced by the plaintiffs (discovery conduct, scheduling history, production, spoliation, undertakings, and refusals), the Associate Justice concluded that the collective conduct, while imperfect, did not reach the threshold required to strike the amended statement of defence. In all the circumstances, striking the defence would not be proportional or just.

Costs and next steps

Having dismissed the motion to strike, the court turned to costs. The defendants, as successful parties on this motion, requested costs on a partial indemnity basis in the amount of $24,316.25. The plaintiffs argued that if the motion failed there should be no costs, and conversely had sought $56,400 in costs had they succeeded. The Associate Justice held that the defendants were entitled to some costs but considered the amount claimed excessive in light of the history and nature of the motion. The court instead fixed costs at an all-inclusive figure of $7,500, payable by the plaintiffs to the defendants in the cause, and extended the time for payment beyond the usual 30 days as more just in the circumstances. Looking forward, the court noted that it had previously encouraged counsel to resolve or narrow the issues, particularly in relation to the outstanding alternative relief concerning undertakings and refusals. The endorsement concludes by directing counsel to confer and attempt to resolve or narrow these remaining issues, with the option to request a further case conference once such discussions have taken place.

Overall outcome and successful party

In this decision, the court does not decide the underlying merits of the DBI Loan dispute or any of the substantive causes of action such as breach of fiduciary duty, unjust enrichment, fraud, or oppression. No damages or compensatory awards on the merits are made at this stage, and the substantial sums claimed in the pleadings remain only allegations. Instead, the ruling addresses a procedural motion, concluding that the high bar for striking the defendants’ amended statement of defence has not been met. The defendants, James Austin and Alibra Financial Services, emerge as the successful parties on this motion. The only monetary order made in their favour is an all-inclusive costs award of $7,500, payable by the plaintiffs in the cause, and no other quantified monetary award or damages can be determined from this decision.