SUPREME COURT OF Nova Scotia
Citation: Rudolph v. Nova Scotia (Attorney General), 2021 NSSC 279
Date: 20211018
Docket: Hfx 470934
Registry: Halifax
Between:
Douglas G. Rudolph
Plaintiff
v.
The Attorney General of Nova Scotia Representing Her Majesty the Queen in Right of the Province of Nova Scotia
Defendant
Library Heading
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Judge: |
The Honourable Justice C. Richard Coughlan |
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Heard: |
March 31 and June 1, 2021 in Halifax, Nova Scotia |
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Last Written Submission: |
September 14, 2021 |
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Written Decision: |
October 18, 2021
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Subject: |
Summary judgment – limitation of actions – discoverability |
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Summary: |
National Bank Financial Ltd. (NBFL) was involved in litigation, concerning the collapse in the share price of Knowledge House Inc. (KHI), in which NBFL maintained it did not fail to properly supervise and monitor its employees including Bruce Clarke. In June 2005, NBFL reached a settlement with the Nova Scotia Securities Commission in which it admitted it failed to properly supervise its employees including Mr. Clarke and failed to maintain procedures that conformed to prudent business practices. Despite the admissions in the settlement agreement, NBFL continued to take the position in KHI related civil litigation that it had not failed to properly supervise Mr. Clarke. The settlement with the Securities Commission was not made public until December 4, 2012. |
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Issue: |
On December 1, 2017 the plaintiff commenced action against the Attorney General of Nova Scotia. The Attorney General moved to dismiss the action on the basis the claims were barred by the Limitation of Actions Act. |
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Result: |
Did the limitation period expire before the action was commenced? The motion is allowed as by March 18, 2013 the plaintiff had knowledge of the material facts upon which a plausible inference of liability on the part of the Attorney General could be drawn so that the limitation period expired prior to the commencement of the action. |
THIS INFORMATION SHEET DOES NOT FORM PART OF THE COURT'S DECISION. QUOTES MUST BE FROM THE DECISION, NOT THIS LIBRARY SHEET.
SUPREME COURT OF Nova Scotia
Citation: Rudolph v. Nova Scotia (Attorney General), 2021 NSSC 279
Date: 20211018
Docket: Hfx No. 470934
Registry: Halifax
Between:
Douglas G. Rudolph
Plaintiff
v.
The Attorney General of Nova Scotia Representing Her Majesty the Queen in Right of the Province of Nova Scotia
Defendant
D E C I S I O N
|
Judge: |
The Honourable Justice C. Richard Coughlan |
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Heard: |
March 31 and June 1, 2021 in Halifax, Nova Scotia |
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Last Written Submission: |
September 14, 2021 |
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Written Decision: |
October 18, 2021 |
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Counsel: |
Christopher I. Robinson, for the Plaintiff Greg Temelini, for the Defendant
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By the Court:
[1] Douglas G. Rudolph owned shares of Knowledge House Inc. (KHI), a company which produced and distributed medical education software. In August 2001 he suffered a loss stemming from the collapse in the price of KHI shares. The collapse was caused or contributed to by the negligence and/or breach of contract of National Bank Financial Ltd. (NBFL) and employees for whom NBFL was responsible. NBFL failed to properly control or monitor the granting of credit to its clients on margin. Further, NBFL extended credit to clients on margin to purchase KHI shares at excessive and unreasonable lending rates. The margin lending rates for KHI shares caused or materially contributed to the over concentration of NBFL shares in clients’ assets.
[2] NBFL acted negligently in failing to properly supervise and monitor its employees including Bruce Clarke, an investment advisor with NBFL, and NBFL is vicariously liable for Mr. Clarke’s negligence and/or fraud.
[3] NBFL commenced a series of court actions following the price collapse of KHI shares seeking to recover margin debts from its clients who held KHI shares. NBFL maintained a position in the litigation against the clients that it did nothing wrong and denied failing to properly supervise Mr. Clarke. NBFL asserted it dismissed Mr. Clarke only for his improper handling of margin credit and that there was nothing wrong or manipulative about Mr. Clarke’s trading in KHI shares. After maintaining Mr. Clarke did nothing wrong, NBFL commenced an action in 2003 alleging various individuals, including Mr. Clarke, had conspired to manipulate the price of KHI shares and committed a fraud against NBFL.
[4] On June 28, 2004, the Nova Scotia Securities Commission (Securities Commission) approved a settlement agreement with Mr. Clarke in which he admitted to numerous violations of the Securities Act, R.S.N.S., 1989, c.418, while employed by NBFL. Mr. Clarke admitted to manipulating the share price of KHI with a group of insiders starting in 1999.
[5] In June 2005, NBFL reached a settlement (Settlement Agreement) with the Securities Commission regarding KHI. In the Settlement Agreement NBFL admitted failing to properly supervise the trading activities of its employees, including Mr. Clarke, and failing to maintain procedures for dealing with clients that conformed to prudent business practices. In late May 2005, NBFL and the Securities Commission entered into an escrow agreement relating to the Settlement Agreement. Both parties agreed not to disclose the Settlement Agreement until such time as there was a final disposition of all regulatory proceedings relating to trading activity in KHI shares.
[6] Despite the admissions in the Settlement Agreement, NBFL continued to take the position in KHI related civil litigation that it had not failed to properly supervise Mr. Clarke. From at least 2005, if not earlier, NBFL knew this position to be false, as is clear from NBFL’s admissions in the Settlement Agreement.
[7] Douglas Rudolph reached an agreement on his margin debt with NBFL and an order dismissing his claim was issued January 19, 2012. Douglas Rudolph was not made aware of the Settlement Agreement at any time during his negotiations with NBFL to settle his claim.
[8] The Settlement Agreement was approved by a panel of the Securities Commission and publicly released for the first time on December 4, 2012.
[9] In addition to the above, the following has been established.
[10] On May 14, 2015, the Nova Scotia Court of Appeal released its judgment in National Bank Financial Ltd. v. Barthe Estate, 2015 NSCA 47, in which the Court undertook a detailed analysis of NBFL’s misconduct involving a deliberate and ongoing pattern of deception amounting to an intentional misleading of the Court, something so egregious as to strike at the very heart of the administration of justice. For more than 10 years the Bank maintained a position and asserted facts in its pleadings it knew to be false. It deliberately set out on a path to hide the truth from the Court and opposing parties. In doing so, NBFL deprived the adjudicative process of highly relevant and critically important facts.
[11] On December 4, 2015, Douglas Rudolph wrote to NBFL’s counsel R. Paul Steep seeking resolution of his claim against NBFL in which he stated:
I was one of the many litigants against National Bank Financial Limited in 2001. After waiting more than eight years for a first discovery to be held and having constantly been inundated with so-called disclosure documentation, I found myself in a position with no legal representation. Not long after these developments, my case was dismissed under what I will politely call dubious circumstances.
Since that time, based on research, document review, the trial decision released on August 7, 2013 and the appeal decision released on May 14, 2015, it has become apparent that National Bank Financial Limited did not deal with the litigants in good faith and were found to have completely abused the legal process in Nova Scotia.
I am happy to provide you with a detailed history of my situation in an attempt to end fourteen years of frustration with an appropriate and expedited resolution.
If you have no interest in an appropriate and expedited resolution, I will seek representation and all legal remedies available to me here in Nova Scotia.
I will also be serving notice to the Nova Scotia Attorney General as required under the Proceedings against the Crown Act to inform them the Nova Scotia Securities Commission and all associated parties are being sued.
I look forward to a response at your earliest convenience.
[12] Bruce Clarke pleaded guilty to conspiring to affect KHI’s share price and fraud in December 2015. Douglas G. Rudolph had decided to pursue action against NBFL and the Attorney General prior to Bruce Clarke’s guilty plea.
[13] By letter dated August 31, 2017, then counsel for Douglas G. Rudolph and Robert J. Rudolph, Richard A. Bureau, gave notice pursuant to the Proceedings Against the Crown Act to the Attorney General of Nova Scotia. Douglas G. Rudolph commenced action against the Attorney General of Nova Scotia on December 1, 2017. The notice of action was amended December 8, 2017 to correct Mr. Rudolph’s middle initial in the heading. On December 20, 2019 a notice of change of plaintiff’s counsel to Christopher I. Robinson was filed.
[14] The Attorney General filed a Notice of Motion for an order determining the plaintiff’s claims are barred by the Limitation of Actions Act, S.N.S., 2014, c.35, and an order dismissing the plaintiff’s action in its entirely. By letter dated February 1, 2021 counsel for the Attorney General stated the Attorney General was not pursuing relief under Civil Procedure Rule 12. The Attorney General is seeking summary judgment on the evidence against Douglas G. Rudolph who is opposing the motion.
Issue
[15] The issue before the Court is whether the applicable limitation period expired before Douglas Rudolph commenced this action and consequently his claims against the Attorney General should be dismissed.
Position of the Parties
[16] The Attorney General submits the essential question is why does the plaintiff claim the Attorney General ought to be held legally responsible for damages caused by NBFL’s acts and omissions. He says the link to the Attorney General is NBFL’s Settlement Agreement with the Nova Scotia Securities Commission and more specifically, the fact the Settlement Agreement was not made public before December 4, 2012. The limitation period started to run on December 4, 2012. By operation of section 23(3) of the Limitation of Actions Act, supra, Mr. Rudolph had to commence action by September 1, 2017. The action was not commenced until December 1, 2017, three months after the limitation period expired. If the release of the Settlement Agreement was not enough to start the limitation period, on May 14, 2015, the Nova Scotia Court of Appeal released a decision in which NBFL was held liable for damages to various investors. The Court of Appeal seriously admonished NBFL for failing to disclose the Settlement Agreement and taking positions in the litigation which were inconsistent with admissions in the Settlement Agreement.
[17] Douglas Rudolph submits he does not remember when or how he became aware of the Settlement Agreement as those events happened over eight years ago. When he did read the Settlement Agreement it stated the facts agreed to could not be used by anyone in any civil proceeding. Not having a lawyer at the time he had no idea what the Settlement Agreement might mean as regards any potential liability of the Province. Mr. Rudolph learned of the judgment of the Court of Appeal in National Bank Financial Ltd. v. Barthe Estate a short time after it was released and then spent many months researching what impact the judgment may have had on litigants, like himself, who had sued NBFL previously. By December 4, 2015 Mr. Rudolph felt he may have a claim against NBFL and the Province. By the time Bruce Clarke’s guilty plea was publicized on December 15, 2015, Mr. Rudolph was convinced he had a claim against NBFL and the Province. Mr. Rudolph says he did not discover he had a claim against the Province until mid-December 2015.
Analysis
[18] Summary judgment on evidence is governed by Civil Procedure Rule 13.04 which provides:
13.04 (1) A judge who is satisfied on both of the following must grant summary judgment on a claim or a defence in an action:
(a) there is no genuine issue of material fact, whether on its own or mixed
with a question of law, for trial of the claim or defence;
(b) the claim or defence does not require determination of a question of law, whether on its own or mixed with a question of fact, or the claim or defence requires determination only of a question of law and the judge exercises the discretion provided in this Rule 13.04 to determine the question.
(2) When the absence of a genuine issue of material fact for trial and the absence of a question of law requiring determination are established, summary judgment must be granted without distinction between a claim and a defence and without further inquiry into chances of success.
(3) The judge may grant judgment, dismiss the proceeding, allow a claim, dismiss a claim, or dismiss a defence.
(4) On a motion for summary judgment on evidence, the pleadings serve only to indicate the issues, and the subjects of a genuine issue of material fact and a question of law depend on the evidence presented.
(5) A party who wishes to contest the motion must provide evidence in favour of the party’s claim or defence by affidavit filed by the contesting party, affidavit filed by another party, cross-examination, or other means permitted by a judge.
[19] The manner in which a judge is to deal with a motion for summary judgment on the evidence was set out in detail by Fichaud, J.A. in giving the Court’s judgment in Shannex Inc. v. Dora Construction Ltd., 2016 NSCA 89 where he identified five sequential questions to be answered.
First Question: Does the challenged pleading disclose a “genuine issue of material fact” either pure or mixed with a question of law?
Second Question: If the answer to #1 is No, then: Does the challenged pleading require the determination of a question of law, either pure, or mixed with a question of fact?
Third Question: Does the challenged pleading have a real chance of success?
Fourth Question: Should the judge exercise the “discretion” to finally determine the issue of law?
Fifth Question: If the motion under Rule 13.04 is dismissed, should the action be converted to an application and, if not, what directions should govern the conduct of the action?
[20] In the same judgment Fichaud J.A. stated at para. 36 each party is expected to put its best foot forward:
“Best foot forward”: Under the amended Rule, as with the former Rule, the judge’s assessment of issues of fact or mixed fact and law depends on evidence, not just pleaded allegations or speculation from the counsel table. Each party is expected to “put his best foot forward” with evidence and legal submissions on all these questions, including the “genuine issue of material fact”, issue of law, and “real chance of success”. Rule 13.04(4) and (5); Burton, para. 87.
[21] The evidentiary obligation of parties on a summary judgment motion was set out by Bryson J.A., in giving the Court’s judgment in Nova Scotia Association of Health Organizations Long Term Disability Plan Trust Fund v. Amirault, 2017 NSCA 50, at para. 15:
Putting one’s best foot forward is an important obligation of parties to a summary judgment motion. A respondent to a summary judgment motion “must lead trump or risk losing” (Goudie v. Ottawa (City), 2003 SCC 14 at para. 32). Assuming there has been adequate time for disclosure, an absence of evidence cannot be overcome by arguing that something might turn up in the future. The Supreme Court emphasized the obligation of the parties in Canada (Attorney General) v. Lameman, 2008 SCC 14:
[19] We add this: In the Court of Appeal and here, the case for the plaintiffs was put forward, not only on the basis of evidence actually adduced on the summary judgment motion, but on suggestions of evidence that might be adduced, or amendments that might be made, if the matter were to go to trial. A summary judgment motion cannot be defeated by vague references to what may be adduced in the future, if the matter is allowed to proceed. To accept that proposition would be to undermine the rationale of the rule. A motion for summary judgment must be judged on the basis of the pleadings and materials actually before the judge, not on suppositions about what might be pleaded or proved in the future. This applies to Aboriginal claims as much as to any others.
[22] Is there a genuine issue of material fact, whether on its own or mixed with a question of law?
[23] It is common ground between the parties and I agree the Limitation of Actions Act, S.N.S., 2014, c.35, applies to this case.
[24] Section 23 of the Act provides:
(1) In this Section,
(a) “effective date” means the day on which this Act comes into force;
(b) “former limitation period” means, in respect of a claim, the limitation period that applied to the claim before the effective date.
(2) Subsection (3) applies to claims that are based on acts or omissions that took place before the effective date, other than claims referred to in Section 11, and in respect of which no proceeding has been commenced before the effective date.
(3) Where a claim was discovered before the effective date, the claim may not be brought after the earlier of
(a) two years from the effective date; and
(b) the day on which the former limitation period expired or would have expired.
…
[25] The “effective date” referenced in section 23 is September 1, 2015.
[26] In dealing with an application for summary judgment based on an expired limitation period in Nova Scotia Home for Coloured Children v. Milbury, 2007 NSCA 52, Roscoe J.A., in giving the Court’s judgment stated:
[20] Did the defendants establish that there are no genuine issues of fact on the question of whether the plaintiff’s action is statute barred because the limitation period has expired?
…
[23] When the defendant pleads a limitation period and proves the facts supporting the expiry of the time period, the plaintiff has the burden of proving that the time has not expired as a result, for example, of the discoverability rule: Soper v. Southcott, [1998] O.J. No. 2799 (C.A.) at para. 14; Gray Condominium Corp. No. 27 v. Blue Mountain Resorts, [2005] O.J. No. 793 (S.C.J.) at para. 18.
[24] In the context of a summary judgment application where a limitation defence is pleaded, the defendant applicant must first establish that there is no genuine issue of fact for trial. In this case the defendants have established that the statutory limitation period has long expired. Unless the discoverability principle applies, the defendants satisfied the first part of the summary judgment test on the facts alleged by the plaintiff, that is, that the wrongs were committed at the latest in 1947, and that the longest limitation period, six years, expired in 1972, six years after the plaintiff reached the age of majority in 1966. Since the defendants have met the initial threshold, the plaintiff has to demonstrate that there is a real chance of success by presenting evidence that the limitation period has not expired, because of the discoverability principle.
[27] Section 8 of the Limitation of Actions Act, supra, provides:
(1) Unless otherwise provided in this Act, a claim may not be brought after the earlier of
(a) two years from the day on which the claim is discovered; and
(b) fifteen years from the day on which the act or omission on which the claim is based occurred.
(2) A claim is discovered on the day on which the claimant first knew or ought reasonably to have known
(a) that the injury, loss or damage had occurred;
(b) that the injury, loss or damage was caused by or contributed to by an act or omission;
(c) that the act or omission was that of the defendant; and
(d) that the injury, loss or damage is sufficiently serious to warrant a proceeding.
(3) For the purposes of clause (1)(b), the day an act or omission on which a claim is based occurred is
(a) in the case of a continuous act or omission, the day on which the act or omission ceases; and
(b) in the case of a series of acts or omissions concerning the same obligation, the day on which the last act or omission in the series occurs.
[28] In this case the basis for any claim by Mr. Rudolph against the Attorney General was made public on December 4, 2012. Any claim, subject to the discoverability rule, would be statute barred as of September 1, 2017.
[29] In dealing with the discoverability rule in Grant Thornton LLP v. New Brunswick, 2021 SCC 31, the Court found section 5(1)(a) and (2) of the New Brunswick Limitation of Actions Act, S.N.B. 2009, c. L-8.5, codifies the common law rule of discoverability as set out in Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147, and subsequent cases. The common law discoverability rule provided “a cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence” (see paras. 29 and 32).
[30] The standard to be applied to determine whether a plaintiff has the requisite degree of knowledge to discover a claim under the New Brunswick Limitation of Actions Act, was set out by Moldaver J. in giving the Court’s judgment in Grant Thornton LLP v. New Brunswick, as follows:
(3)…In my view, a claim is discovered when the plaintiff has knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant’s part can be drawn. If follows from this standard that a plaintiff does not need knowledge of all the constituent elements of a claim to discover that claim.
[31] The only difference between the New Brunswick section and the equivalent provision in the Nova Scotia Limitation of Actions Act, supra, s.8 is the Nova Scotia section has an additional subsection 2(d) which provides “(d) that the injury, loss or damage is sufficiently serious to warrant a proceeding.”. I find the standard to be applied as set out by the Supreme Court of Canada in Grant Thornton LLP v. New Brunswick, also applies to the Nova Scotia Limitation of Actions Act.
[32] When did Douglas Rudolph discover his claim against the Attorney General of Nova Scotia?
[33] In late August 2001 the price of the shares of KHI collapsed. On September 13, 2001 trading of KHI shares was halted. There is no question by September 13, 2001 Douglas Rudolph knew he had suffered a loss.
[34] When did Mr. Rudolph know, or ought reasonably to have known, that the loss was caused or contributed to by an act or omission of the Attorney General of Nova Scotia?
[35] In his further amended Statement of Claim filed October 14, 2020 it states:
[94] The Plaintiff states that he did not discover his claim against the Defendant until Mr. Clarke pleaded guilty to criminal fraud charges on December 4, 2015 due to the fact that NBFL continued to deny Mr. Clarke acted improperly after the Settlement Agreement was disclosed. Mr. Clarke’s guilty plea removed all suspicion, guesswork, and speculation as to whether NBFL and PNS had engaged in wrongdoing. Mr. Clarke’s guilty plea revealed that the Plaintiff had a legal right to a judicial remedy for NBFL and PNS’ loss causing actions.
[36] In his affidavit sworn on March 18, 2021 Mr. Rudolph deposed:
23. I do not recall how or when I became aware of the Settlement and the related press release by the NSSC, as those events occurred over 8 years ago now.
24. Once I had learned of the Settlement, I believe I downloaded it from the NSSC website and read it. I recall that at that time, as I read the Settlement, I saw that it said that the agreed facts it contained were for the purposes of settlement only; that they were without prejudice to NBFL; and that the facts in the Settlement could not be used in any civil proceeding.
25. I did not have a lawyer and had not had one almost two years by this point. The conclusion I reached after reading the Settlement was that I was unsure what – if anything – it meant for me and my by-then dismissed lawsuit against NBFL. As well, by that time I had been through roughly a decade of litigation with NBFL and I was both financially and mentally beaten-down, and I was in no position to be able to afford to hire a lawyer to give me an opinion on what the Settlement might mean to me, legally.
[37] Mr. Rudolph terminated the services of his lawyer, Richard Bureau, on February 22, 2011. Almost two years from the date of termination of his lawyer’s services is sometime before February 22, 2013. Over eight years from March 18, 2021 the date Mr. Rudolph’s affidavit was sworn, is prior to March 18, 2013. Based on the evidence in Douglas Rudolph’s affidavit, by at least March 18, 2013 Douglas Rudolph knew the contents of the Settlement Agreement.
[38] Douglas Rudolph knew, or ought reasonably to have known, by at least March 18, 2013 that his loss was caused or contributed to by an act or omission of the Attorney General of Nova Scotia. By the same date, March 18, 2013, Douglas Rudolph knew, or ought reasonably to have known, that the loss was sufficiently serious to warrant a proceeding.
[39] Based on all the material facts that Douglas G. Rudolph knew, or ought to have known, I conclude by March 18, 2013, he had sufficient knowledge to draw a plausible inference of liability on the part of the Attorney General of Nova Scotia.
[40] Mr. Rudolph had the duty to exercise reasonable diligence in dealing with the facts of which he was aware. He deposed in his affidavit he did not consult a lawyer after learning of the Settlement Agreement. In his letter to R. Paul Steep of December 4, 2015, prior to consulting a lawyer, Mr. Rudolph stated he would be serving notice on the Attorney General of Nova Scotia as required under the Proceedings Against the Crown Act. Mr. Rudolph deposed he became aware of Bruce Clarke’s guilty plea after he sent the December 4, 2015 letter to Mr. Steep.
[41] Did Mr. Rudolph exercise reasonable diligence in the circumstances of this case? From at least March 18, 2013 until November 2016, Mr. Rudolph did not consult a lawyer about a possible claim against the Attorney General or Province of Nova Scotia.
[42] In discussing the discoverability rule in Nova Scotia Home for Coloured Children v. Milbury, supra, Roscoe J.A., stated at para. 27:
It is the discovery of the facts giving rise to a cause of action that starts the time running, not the discovery of the applicable law. Ignorance of the law does not postpone the starting of the time period. See: Coutanche v. Napolean Delicatessen, [2004] O.J. No. 2746 (C.A.) and Hill v. South Alberta Land Registration District (1993), 135 A.R. 266 (C.A.).
[43] Discoverability will not operate to extend a limitation period where plaintiffs “sleep on their rights or otherwise do not diligently pursue their claims”. Pioneer Corp. v. Godfrey, 2019 SCC 42 at para. 49.
[44] In not consulting a lawyer, Mr. Rudolph did not exercise reasonable diligence in dealing with the facts of which he was aware. Mr. Rudolph discovered the material facts on which his claim against the Attorney General is based by March 18, 2013. The cause of action arose by March 18, 2013 and was statute barred on September 1, 2017.
[45] If I am wrong that Mr. Rudolph discovered the material facts on which his claim against the Attorney General is based by March 18, 2013, he discovered the material facts upon which a plausible inference of liability on the part of the Attorney General of Nova Scotia could be drawn before the end of September 2015, that is before the end of summer 2015.
[46] The judgment of the Court of Appeal in National Bank Financial Ltd. v. Barthe Estate was brought to Mr. Rudolph’s attention a short time after it was released on May 14, 2015. In the months after he learned of the judgment, during the summer and into the fall of 2015, Mr. Rudolph conducted research relating to the KHI litigation against NBFL and the efforts by some litigants to rescind their prior agreements with NBFL. Mr. Rudolph knew of the contexts of the judgment during the summer of 2015. In such case, he discovered the material facts by September 30, 2015 and would have been statute barred by September 30, 2017. Mr. Rudolph’s Notice of Action and Statement of Claim was filed on December 1, 2017, after the limitation period expired.
[47] The Attorney General has established there are no genuine issues of material fact, either pure or mixed with a question of law. The challenged pleading does not require the determination of a question of law either pure or mixed with a question of fact. The motion for summary judgment is allowed.
[48] If the parties are unable to agree I will receive written submissions on costs within 30 calendar days of this judgment.
Coughlan, J.