Motion Record for Hyrniak - Heydary Hamilton PC

Court File No. 05-CV-285434 PD2 

ONTARIO 

SUPERIOR COURT OF JUSTICE 

BETWEEN: 

BRUNO APPLIANCE AND FURNITURE, INC. 

Plaintiff 

- and - 

CASSELS BROCK & BLACKWELL LLP, 

GREGORY JACK PEEBLES, 

and ROBERT HYRNIAK 

Defendants 

MOTION RECORD OF THE DEFENDANT, ROBERT HRYNIAK 

(MOTION FOR ADDITIONAL SECURITY FOR COSTS) 

(Motion returnable, Friday, May 29, 2009) 

DATED: March 23, 2009 LERNERSLLP 

Barristers & Solicitors 

130 Adelaide Street West 

Suite 2400, Box 95 

Toronto, ON 

M5H 3P5 

Don H. Jack LSUC#: 14307Q 

Jane Southren LSUC#: 39673G 

Tel: (416) 867-3076 

Fax: (416) 867-9192 

Solicitors for the Defendant, 

Robert Hryniak

-2 

TO: 

HEYDARY HAMILTON P.C. 

439 University Avenue 

Suite 1200 

Toronto, ON 

M5G 1Y8 

Natasha Bone LSUC#: 54541B 

Tel.: (416) 972-9001 

Fax.: (416) 972-9940 

Solicitors for the Plaintiff 

AND TO: 

STOCKWOODS LLP 

The Sun Life Tower 

150 King Street West 

Suite 2512 

Toronto, ON 

M5H 1J9 

Paul LeVay LSUC#: 28314B 

Luisa Ritacca LSUC#: 44214H 

Tel.: (416) 593-7200 

Fax. : (416) 593-9345 

Solicitors for the Defendant, Cassels Brock & Blackwell LLP 

AND TO: 

PAPE BARRISTERS 

One Queen Street East 


Toronto, ON 

M5C 2W5 

Jonathan Rosenstein LSUC#: 44914G 

Tel.: (416) 364-8755 

Fax.: (416) 364-8855 

Solicitors for the Defendant, Gregory Peebles

- 3 - 

INDEX 

TAB 

PAGE 

1. Notice of Motion, dated March 23, 2009 1 - 6 

A. Fresh as Amended Statement of Claim, amended 7- 

March 18, 2005 

B. Statement of Defence and Crossclaim of Robert 31 - 45 

Hryniak, dated August 12, 2005 

B1. Reply to the Statement of Defence of Robert Hryniak, 46 - 51 

dated October 7,2005 

C. Affidavit of Albert Bruno, in support of Summary Judgment, 52 - 68 

Motion sworn October 29, 2008, without Exhibits 

0 Responding Affidavit of Robert Hryniak, sworn January 6, 2009, 69 - 93 

without Exhibits 

E. Affidavit of Robert Fornelli, sworn January 8, 2009, without 94 - 99 

Exhibits 

F. Reply Affidavit of Albert Bruno, sworn January 29,2009, 100 - 102 

without Exhibits 

2. Affidavit of Jane Southren, sworn March 22, 2009 103 - 108 

Exhibit "A" - Costs Outline from Security for Costs Motion heard 109 - 114 

October 17, 2007 

Exhibit "B" - Reasons for Decision of Master Glustein, dated 115 -130 

October 25,2007 

Exhibit "C" - Letter from Natasha Bone, dated January 25, 2008 131 - 134 

Exhibit "0" - Mr. Hryniak's Draft Costs Outline 135 - 142 

1313760.1


ONTARIO 


BETWEEN: 


Plaintiff 

- and - 




Defendants 

NOTICE OF MOTION 

(Motion Returnable May 29, 2009) 

The Defendant, Robert Hryniak will make a motion to the court, on Friday, May 

29, 2009, at 10:00 a.m. or as soon after that time as the motion can be heard, at 393 

University Avenue, Toronto, Ontario. 

PROPOSED METHOD OF HEARING: The motion is to be heard 

in writing under subrule 37.12.1 (1) because it is on consent or unopposed or 

made without notice; 

in writing as an opposed motion under subrule 37.12.1 (4) 

X 

orally.

- 2 - 

THE MOTION IS FOR: 

(a) 

(b) 

(c) 

(d) 

An Order requiring the Plaintiff to post additional security for costs in the 

amount of $92,207.45 ($114,732.45 projected costs - $22,525 security for 

costs, including GST, already posted), including disbursements and GST, for 

the estimated costs to incurred by Mr. Hryniak up to end of the 

Summary Judgment Motion; 

An Order prohibiting the Plaintiff from taking any steps in this action until the 

security has been given; 

Costs of this motion on a substantial indemnity basis, plus disbursements and 

GST; and 

Such further and other relief as counsel may request and this Honourable 

Court permit. 

THE GROUNDS FOR THE MOTION ARE: 

(a) 

(b) 

(c) 

(d) 

(e) 

The Court has the authority to make an order requiring the Plaintiff to post 

additional security for costs where it appears that the amount initially posted is 

insufficient to properly secure the costs of Mr. Hryniak if the Plaintiff is 

unsuccessful in its action. 

The Plaintiff is a corporation resident in the United States of America. 

To date, the Plaintiff has caused Mr. Hryniak to incur significant legal costs in 

respect of this action and it is anticipated that legal costs will continue to be 

incurred as this matter proceeds to the next phases of litigation. 

If the Plaintiff's action proves unsuccessful, there is no evidence to suggest 

that the Plaintiff has sufficient assets in Ontario to pay Mr. Hryniak's costs of 

defending this action. 

A security for costs order was made in this case in October 2007. That order 

contemplated a "pay-as-you-go" order.

-3 

(f) The "pay-as-you-go" order made for security for costs in first instance 

contemplated security for costs incurred in the proceeding up to the summary 

judgment motion. The amounts ordered to be paid as security for costs in that 

instance have now proven to be inadequate. 

(g) The original request for security for costs was based on an of the 

complexity of the case, which hindsight has established was unrealistic. The 

case is factually complex and it has taken much more time and expense then 

was anticipated to respond to it thus far. 

(h) 

(i) 

It is clear that it will require significantly more expense to deal with the matter 

from this point forward. 

It would not be just to require Mr. Hryniak to proceed further in the litigation 

with such an extreme gap between what has been posted as security for costs 

and what it now appears is necessary to secure his costs in the event that the 

Plaintiff is unsuccessful. 

U) Rules 1.04, 56.01, 56.02, 56.03, 56.04, 56.05, 56.07 and 57.03 of the Rules of 

Civil Procedure. 

(k) 

Such further and other grounds as counsel may advise and this Honourable 

Court may permit. 

THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of the 

motion: 

(a) 

(b) 

The Affidavit of Jane Southren, sworn March 22, 2009 and Exhibits annexed 

thereto. 

The pleadings and proceedings herein, including those attached to this Notice 

of Motion: 

A. Fresh as Amended Statement of Claim, amended March 18, 2005 

B. Statement of Defence and Crossclaim of Robert Hryniak, 

dated June 11, 2007

- 4 - 

B1. Reply to the Statement of Defence of Robert Hryniak, dated October 7, 2005 

C. Affidavit of Albert Bruno, in support of Summary Judgment Motion, 

sworn October 29,2008, without Exhibits 

D. Responding Affidavit of Robert Hryniak, sworn January 6, 2009, without 

Exhibits 

E. Affidavit of Robert sworn January 8, without Exhibits 

F. Reply Affidavit of Albert Bruno, sworn January 29, 2009, without Exhibits 

(c) 

Such further and other materials as counsel may advise and this Honourable 

Court permit. 

DATED: March 23, 2009 LERNERSLLP 




Toronto, ON 

M5H 3P5 



Tel: (416) 867-3076 

Fax: (416) 867-9192 

Solicitors for the Defendant 

Robert Hryniak 

TO: 

HEYDARY HAMILTON P.C. 

439 University Avenue 

Suite 1200 

Toronto, ON 

M5G 1Y8 

Natasha Bone LSUC#: 54541 B 

Tel.: (416) 972-9001 

Fax.: (416) 972-9940 

Solicitors for the Plaintiff

- 5 - 

AND TO: 


The Sun Life Tower 


Suite 2512 

Toronto, ON 

M5H 1J9 

Luisa Ritacca LSUC#: 44214H 

Tel.: (416) 593-7200 

Fax.: (416) 593-9345 

Solicitors for the Defendant, Cassels Brock & Blackwell LLP 

AND TO: 

PAPE BARRISTERS 



Toronto, ON 

M5C 2W5 

Jonathan Rosenstein LSUC#: 44914G 

Tel.: (416) 364-8755 

Fax.: (416) 364-8855 


BRUNO APPLIANCE -and- CASSELS BROCK et al. 

Court 

No: 05-CV-285434PD2 

ONTARIO 


Proceeding commenced at Toronto 

NOTICE OF MOTION 

LERNERS LLP 


130 Adelaide West 

Suite 2400, 95 

Toronto, ON 

M5H 3P5 



Tel: (416) 867-3076 

Fax: (416) 

Solicitors for 


Defendant 

1313383.1

Court File No.' 05-CV-285434PD2 

ONTARIO 



- and- 


GREGORY JACK PEEBLES 


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CLAIM 

1. The Plaintiff claims from the 

(a) 

$5,000,000.00 in 

Hymiak's 

conduct; 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

$5,000,000.00 in damages arising from the Defendants, Gregory 

Jack Peebles and Cassels Brock & Blackwen LLP, fraud, 

conspiracy, negligence and/or breach of contract; 

$10,000,000.00 in punitive damages; 

$10,000,000.00 in exemplary damages; 

pre-judgment interest pursuant to s. 128 of the Courts of Justice 

Act, RS.O. 1990, c. C.43, as amended; 

costs of this action on a sUbstantial indemnity scale plus applicable 

GST; and 

such further and other relief as this Honourable Court may deem 

just. 

A. THE PARTIES 

2. The Plaintiff Bruno Appliance and Fumiture, Inc. ("Bruno Furniture") is a 

duly constituted corporation pursuant to the laws of the State of Illinois. Albert 

Bruno ("Bruno") is an individual that resides in the City of Chicago, Illinois in the 

United States of America and is the President of Bruno Furniture. 

3. The Defendant Gregory Jack Peebles ("Peebles") resides in the City of 

Toronto and was at all material times a senior partner at Cassels Brock & 

Blackwell LLP, with over 20 years experience with international investments and

4 

. He is a former managing partner of I.Jd:">:">t-: Brock & 

LLP. 

The Brock & I- LLP is a law 

firm with its head office in the City of Toronto. Cassels Brock is one of Canada's 

largest and oldest law firms. 

5. Robert Hyrniak ("Hyrniak") is an individual that resides in the City of Toronto 

and was a client of Peebles and Cassels Brock for over 15 years. 

6. Hymiak is the director and operating mind of Tropos Capital Inc., a 

Canadian Federal corporation, and Tropos Equities Corporation, an Ontario 

corporation (hereinafter referred to collectively as "Tropos"). 

Both companies 

were purportedly in the business of providing equity and finance opportunities for 

individuals and corporations at the relevant times. 

B. OVERVIEW OF HYRNIAK'S FRAUDULENT SCHEME 

7. Frontline Investments Ltd. ("Frontline") is an Ontario corporation that also 

purported to provide equity and finance opportunities for individuals and 

corporations. 

Frontline was one of the dummy companies used by the 

Defendants in their fraudulent scheme

5 

Plaintiff that Hymiak and were in an 

investment scheme that defrauded numerous investors across North America of 

millions of dollars. 

9. At all material times, Robert Cranston assisted Hymiak and Peebles in the 

fraudulent scheme by securing victims. On different occasions, Cranston in 

pursuit of the scheme, would further engage different individuals, through the use 

of dummy companies, such as Frontline, to secure victims. 

10. The scheme is a common one that is known to law enforcement and 

investment professionals across North America. It was a scheme that Peebles 

and Cassels Brock would have been aware of given their extensive legal 

experience in the securities and global investment areas. 

In fact, Robert 

Cranston has been charged by the RCMP and the Ontario Securities 

Commission with 15 counts of fraud over $5,000.00 (contrary to section 380(1)(a) 

of the Criminal Code of Canada) and 15 counts of conspiracy to commit fraud 

over $5,000.00 (contrary to section 465(1)(c) of the Criminal Code of Canada) as 

a result of this investment scheme. Currently, Hyrniak and Peebles are being 

investigated by the Royal Canadian Mounted Police about their role in the 

conspiracy and the fraudulent investment scheme. 

11. Under the fraudulent scheme, potential investors were offered extremely 

high yields in a relatively short period of time through access to "bank

6 

bank were bought at a and 

then were to be sold shortly thereafter for a premium. 

scheme was 

premised on the theory that large banks around 

by with face $100 million or 

number of times at a profit. The term of the 

world lend 

varied from 

other money 

rocnlrl a 

days to a year 

or more. For example, the group would purchase the note for 80 cents on the 

dollar and then resell it for 82 cents and then for 84 cents. Accordingly, within a 

one month period the investors were promised a sUbstantial profit, as much as 

20% per month. 

12. The investors were advised by Hymiak, Cranston, Peebles and their 

associates, that the funds would be secured and that there was no risk of losing 

their money as the money was being held in a non-depletable trust account, 

which would be retumed to the investor on 30 days notice. 

13. A number of investors, including the Plaintiff, were asked to send their 

money to dummy companies, such as Frontline, via the Cassels Brock trust 

account with TO Canada Trust. At the time, Cassels Brock and Peebles were 

counsel to Hyrniak and Tropos and were simultaneously providing advice to 

Bruno about the safety and security of the investment. 

14. Despite a request for a return of the funds, have not been 

returned to the investors. The Plaintiff states that Peebles and Hyrniak never

7 

had any intention uSing the funds for a investment instead 

deceived, conspired and/or engaged in fraudulent activities against the investors 

in order to have access to money for their own benefit. 

15. The Plaintiff states that in his capacity as a senior partner 

Cassels Brock, was an active participant in the fraudulent investment scheme. In 

fact the Plaintiff states that Peebfes and/or Hyrniak were the masterminds behind 

the fraudulent investment scheme. 

16. To the best of the Plaintiff's knowledge, the fraudulent scheme was 

perpetrated against over 50 investors resulting in approximately $10,000,000.00 

(USO) in losses. Full particulars of the Bruno investment are set out below. 

C. THE BRUNO INVESTMENT 

17. In the latter part of 2001, Bruno was introduced to Robert Cranston 

("Cranston"), an employee with Frontline. At that time, Bruno was advised of an 

investment opportunity of a life time wherein he could make·a tremendous profit, 

as much as 12% to 20% per month, from a $1,000,000.00 USD secured 

investment that involved securing standby letters of credit to large world banks. 

18. Bruno was advised by Cranston that an investment would be made 

through a I!Privately Managed Investment Strategy" whose aim was to preserve 

capital. 

investment would be made on a non-capital depletion basis.

8 

funds would 

and sell "M" or better fixed income financial instruments. 

19. Bruno was In was Hyrniak 

who was widely known as "the Trader" and who purportedly had expertise in 

these types of transactions. 

20. On January 24, 2002, Mr. Cranston provided Mr. Bruno with directions on 

where to electronically wire the $1,000,000.00 USD. He was directed to wire the 

funds to: 

Cassels, Brock & Blackwell in trust 

Gregory Peebles - File No. 18922-12 GJP 

TORONTO DOMINION BANK 

York at 141 Adelaide St. W. 

Toronto, Ontario 

Transit: 19922 (0620) 

ABA#: 026009593 

Trust AlC #: 732-7759 

21. Bruno decided to investigate the scheme that was being proposed before 

proceeding with the investment. 

22. In response to Bruno's inquiries, Cranston provided Bruno with information 

about Cassels Brock and Peebles. 

In particular, Cranston advised Bruno that 

Cassels Brock was one of the oldest and largest law firms in Canada with a 

reputation beyond repute. Bruno was also advised that Peebles was a senior 

partner with the firm, that he had even served as the firm's managing partner and

9 

that had advising clients on private and 

other international investrnents. 

The information provided about Peebles by 

Brock was as follows: 

joined Brock & Blackwell LLP in 1 has 

practised in Corporate/Commercial law with an emphasis on 

mergers and acquisitions and general commercial matters. Greg 

acts as advisor and legal counsel to entrepreneurs and owners of 

public and private companies and has completed major share and 

asset purchases and sales with involvement at all levels. Greg 

assists senior management on an ongoing basis with respe

10 

on 

as a result 

reputation, Mr. Bruno traveled to Toronto to meet with Hyrniak and Cranston at 

the of Brock discuss the proposed investment. 

The introduction of Bruno to Peebles and Hyrniak, the organizers of the 

scheme, was an extra step that had not been taken by Cranston in the past in his 

dealings with other victims. The Plaintiff states that Bruno was only given access 

to Peebles and Cranston as a result of his significant $1,000,000.00 (USD) 

investment and his insistence that he would not invest $1,000,000.00 (USD) 

without a face-to-face meeting with the principles behind the investment. 

On 

prior occasions, Peebles and Hyrniak had refused to meet with investors and 

instead used intermediaries and fictitious corporations to carry out the scheme. 

Accordingly, the only reason Peebles and Hymiak met with Bruno was because 

they could not pass up on the opportunity to secure a $1,000,000.00 investment. 

26. Upon arriving in Toronto, Bruno was advised by Cranston that Hymiak 

would not be attending and that instead Peebles would explain the details of the 

"investment" to him. During the course of the meeting Peebles advised Bruno of 

the following: 

I. that Peebles was an agent of the investment group, acting in his 

capacity as a senior partner at Cassels Brock;

11 

It 

was a secure and the had the 

personal guarantee of Peebles, and Cassels Brock, that this 

was a qenUlne venture and one without risks; 

was an 

man known 

to Peebles and Cassels Brock for over 15 years; 

IV. 

that the funds would be deposited in a non-depletion, interest 

bearing account; and 

v: that at any point Bruno could withdraw the money, upon giving 

30 days notice. 

27. Bruno states that at all times Peebles was aware that the representations 

that he was making would be relied upon by Bruno in determining whether or not 

to participate in the investment. 

28. After meeting with Peebles, Bruno returned to Chicago, Illinois. Based on 

the assurances and representations given by Peebles and based on his 

impressions of Cassels Brock, Bruno agreed to participate in the investment 

scheme. 

On March 3, 2002, Bruno wired $1,000,000.00 USD (approximately 

$1,594,200.00 CDN) to the trust account of Cassels Brock. 

29. On March 7, 2002, Bruno received verbal confirmation from Cassels Brock 

that the funds had been received. A short time later, on March 20, 2002, Bruno 

received his IICertificates of Joint Venture Interest" and was provided with the

12 

information for Robert Fomelli and 

would provide him with updates. 

of 

who 

From March 

2002 to 

monthly 

updates from employees at Frontline, as intermediaries of Peebles and Hyrniak, 

about efforts that were being made with respect to the investment. During this 

time, Bruno did not receive any interest payments. 

31. Furthermore, from March 2002 until May 2003, Bruno communicated on 

numerous occasions with Hyrniak and Peebles about the security and safety of 

his investment. 

In fact, on at least three occasions, Peebles, while a senior 

partner at Cassels Brock, reassured Bruno that his funds were safe and that the 

investment was secure and that he should be patient. 

Peebles made these 

representations knowing that they were false and having diverted the Plaintiff's 

funds to be used for the benefit of participants in the scheme. 

32. On May 2, 2003, Bruno, having waited for over a year to receive a return 

on his investment and having become highly suspicious, contacted Robert 

Cranston to terminate the investment contract. On May 7, 2003, Bruno wrote a 

letter to Cranston, with a copy to Peebles, requesting a return of his 

$1,000,000.00 USD investment.

13 

May wrote to him that 

$1,000,000.00 USD would be sent by June 23,2003. 

a 

an 

attachment from Tropos citing an obviously forged document that cited 

"unfortunate circumstances" which have led to the loss of the $1,000,000.00 

USD investment. 

The document stated that the funds have been stolen by a 

bank manager in Montenegro. 

35. From June 2003 forward, Bruno discovered the full extent of the fraud that 

had been perpetrated against him by Peebles and Hyrniak, through a number of 

means, including becoming aware that the Royal Canadian Mounted Police had 

laid criminal charges against Cranston. During this time, Bruno also confirmed 

that Peebles and Cassels Brock, against Bruno's instructions, had not deposited 

the funds into a non-depleting interest bearing account Furthermore, Bruno has 

since confirmed that the funds have actually been sent to the wrong party. 

36. Bruno has sent numerous letters to Cassels Brock requesting information 

about precisely where the funds were sent 

Cassels Brock has refused to 

provide this information.

14 

37 In UctoDer William Hurley, of 

Cassels Brock, advised Bruno that the firm did not respond to his numerous 

they sent the on Peebles for 

38. The Plaintiff has since discovered that William Hurley's employment with 

Cassels Brock has been terminated. The Plaintiff states that the termination of 

William Hurley's employment, when taken in conjunction with the refusal of 

Cassels Brock to provide the Plaintiff with details about what happened to the 

funds, demonstrates an attempt by Cassels Brock to cover up wrong-doing that 

occurred at the firm during the time that Peebles was a senior partner. 

39 Since the discovery of the fraudulent scheme, Peebles has acknowledged 

liability for the losses suffered by the Plaintiff that occurred while Peebles was a 

senior partner at Cassels Brock. 

40. The Plaintiff states that at all material times Peebles was acting in his 

capacity as a member of Cassels Brock and that Cassels Brock saw significant 

legal fees and profits from the investment scheme. 

In the circumstances, the 

Plaintiff states that Cassels Brock is vicariously liable for the actions of its senior 

partner and former managing partner, Peebles.

15 

41. Despite this acknowledgement of /iabiiity of 

firm in charge of the file, and despite the overwhelming 

of wrong-doing 

Brock has seen fit to 

continually 

to 

D. CONSPIRACY 

42. The Plaintiff states that Hymiak and Peebles were engaged in a common 

design to improperly obtain the Plaintiff's $1,000,000.00 (USO) investment for 

their own purposes and benefits. 

43. In particular, the Plaintiff states that Hyrniak and Peebles, along with their 

associates, continuously misled Bruno about the existence, purpose, security, 

safety and nature of the investment with the goal of luring Bruno into a false 

sense of security about the investment. 

The Defendants continuously made 

false representations about the existence of the investment scheme and about 

the rates of return that could be generated, when they were fully aware that the 

representations were untrue. 

The false representations were made with the 

express purpose of misleading the Plaintiff about the investment in order to 

secure the Plaintiffs $1,000,000.00 (USD). 

44. Furthermore, the Plaintiff states that once the conspiracy was discovered, 

the Defendants engaged in a further conspiracy to cover up their false 

statements and their actions by making false representations to the Plaintiff 

about where the funds had been sent. The Defendants also falsified and created

16 

of the 

and provided 

Plaintiff in order to prevent the Plaintiff from recovering the $1,000,000.00 (USO). 

as a 

Defendants, it sent the $1,000,000.00 (USD) to the trust account of Cassels 

Brock. As a result, the Plaintiff has lost the $1,000,000.00 (USD) investment. 

E. DECEIT I FRAUD 

46. In the alternative, the Plaintiff states that at all material times Hyrniak and 

Peebles, with the assistance of their associates, made false representations to 

the Plaintiff about the existence, purpose, security, safety and nature of the 

investment. 

47. The Plaintiff states that the Defendants knowingly made these statements 

to the Plaintiff when they knew that they were false or when they did not believe 

in the truth of the statements. 

In the alternative, the Plaintiff states that the 

Defendants made the statements recklessly, careless as to whether the 

statements were true or false. 

48. The Plaintiff states that the Defendants made the statements with the 

express purpose of inducing the Plaintiff to invest his $1,000,000.00 (USD) in 

their scheme.

17 

Plaintiff that it was made by Hyrniak, 

and their associates, which led Bruno to send the $1,000,000.00 (USO) into the 

trust account vc::i::it::!l::) Brock. d.."+c,,,, that as a result fraud 

lost $1 000.00 

F. NEGLIGENCE OF CASSELS BROCK AND PEEBLES 

50. In the alternative, at all material times Peebles and Cassels Brock were 

providing the Plaintiff advice and owed the Plaintiff a duty of care to ensure that 

they did not make representations about the scheme that were negligent. 

51 . The Plaintiff states that at all material times Peebles and CasseJs Brock 

were aware that the Plaintiff would be relying on the advice being provided and 

would act on that advice in deciding whether to participate in the investment 

scheme. 

52. Further, and in the alternative, the Plaintiff states that Cassels Brock and 

Peebles were aware that the Plaintiff would be relying on their statements and 

their purported expertise in the area to decide whether to invest in the scheme .. 

The Plaintiff states that in the circumstances Cassels Brock and Peebles owed it 

a duty to ensure that the advice that they were providing was not negligent. 

53. Bruno states that it was the negligence of Peebles and Cassels Brock that 

has resulted in the loss of the $1,000,000.00 USD principal that was invested,

18 

along with the loss of income from the 

negligence of Cassels Brock and Peebles include, but are not limited to the 

following: 

A) Negligence of Peebles: 

i. He negligently assisted, facilitated, or permitted Hymiak and his 

affiliated corporate entities in engaging in a dishonest and/or 

fraudulent scheme; 

ii. 

He was aware or should have been aware that his reputation 

and the reputation of Cassels Brock were being used to add an 

air of credibility to Hyrniak's dishonest and/or fraudulent scheme 

and he permitted this to continue when he knew or should have 

known that Bruno would be relying on the reputation of Cassels 

Brock to decide whether to proceed with the investment; 

iii. 

He failed to take steps to ensure that he did not become a dupe 

of Hyrniak and his affiliated companies in dishonest and/or 

criminal activity; 

IV. 

He failed to take into account clear evidence that the type of 

scheme being perpetrated by Hyrniak was widely known to 

investment professionals, including lawyers, as being a 

fraudulent scheme; 

v. Despite his over 20 years of experience as a senior commercial 

lawyer and investment professional, he failed to clarify the

19 

purpose ana nature of the complex 

unusual 

transaction that was being proposed by Hyrniak; 

vi. He failed to withdraw from acting for Hyrniak his 

r",,,, ..,,,finr"o

that would relying on to make a 

decision whether to invest in the scheme; 

xiii. 

knowingly an on viability and security of 

have 

information about the investment and knew that Bruno would be 

relying on his advice and opinion to make a decision about 

investing in the scheme; 

xiv. 

He failed to ensure that Bruno's funds were deposited into a 

non-depleting interest bearing account, in direct contrast to his 

representation and commitment to Bruno; and 

xv. 

He failed to conduct his activities to the standard of a competent 

or prudent practitioner. 

B) Negligence of Cassels Brock 

i. They permitted their trust account to be used to assist in the 

commission of fraudulent scheme, which is widely known 

among investment professionals, by a client of the firm; 

ii. 

They failed to keep a proper track of activities occurring in their 

trust account; 

iii. 

They permitted their firm's reputation and good name to be used 

by unscrupulous individuals to add an air of credibility and 

reality to a dishonest, fraudulent and/or illegal activity; 

iv. 

They failed to take steps to ensure that they did not become a 

dupe of an unscrupulous client;

21 

v. They to put in place a 

activities of Peebles and his use of the firm's trust account; and 

VI. They failed to ensure that instructions 

were TOllowea 

G. BREACH OF CONTRACT BY PEEBLES AND CASSELS BROCK 

54. In the alternative, the Plaintiff states that, at all material times, it retained 

Cassels Brock and Peebles to provide it with accurate and reliable advice about 

the investment between Hyrniak and Cranston. 

55. The Plaintiff states that Cassels Brock and Peebles failed to provide 

accurate and reliable advice about the investment and that this constituted a 

breach of contract. 

H. DAMAGES 

56. The Plaintiff states that as a result of the negligent and/or fraudulent 

activities of Hyrniak, Peebles and Cassels Brock,he lost his initial $1,000,000.00 

USD ($1,594,200.00 CDN),investment and lost the opportunity to use those 

funds for other investments. In the circumstances, Hyrniak, Peebles and Cassels 

Brock are responsible for the Plaintiffs full losses. 

57. .In the alternative, the Plaintiff states that Defendants, Cassels Brock 

and Peebles, have breached their contract with the Plaintiff to provide it accurate

and 

and that as a 

are 

for the Plaintiff's 

damages. 

as a 

of Hymiak's fraudulent 

improper 

conduct, this Honourable Court ought to exercise its discretion and award the 

Plaintiff punitive and exemplary damages. 

59. The Plaintiff states that the Defendants, Cassels Brock and Peebles, have 

been provided with evidence that clearly establishes their liability and that they 

have nonetheless refused to reimburse the Plaintiff for its loss. 

Furthermore, 

Cassels Brock have taken steps to cover up the wrong doing of Hymiak and 

Peebles. As a result of the Defendants' conduct, the Plaintiffs losses have been. 

exacerbated. 

The Plaintiff states that in the circumstances these are fit and 

proper circumstances in which an award of punitive and exemplary damages 

should be awarded against the Defendants. 

60. Furthermore, the Plaintiff states that in the event that this Honourable 

Court finds that Peebles and/or Cassels Brock were active participants in the 

scheme then these are fit and proper circumstances in which the Court ought to 

exercise its discretion and award punitive and exemplary damages.

61 The Plaintiff proposes that this action be tried in the City of Toronto. 

HEYDARY HAMILTON LLP 

rri~'~~r~ & 

30 St. Clair 

Toronto, ON 

M4V 3A1 

W. Xavier Navarrete, 

LSUC # 429078 

Glen Perinot 

LSUC # 49641Q 

Tel: 416-972-9001 

Fax: 416-972-9940 


BRUNO APPLIANCE AND FURNITURE, INC. v. CASSELS BROCK & BLACKWELL LLP et. al 

Court File No.: 05-CV-285434PD2 

ONTARIO 


Proceeding 

in 

FRESH as AMENDED 

STATEMENT OF CLAIM 


Barristers and 

Suite 803 

30 St. Clair Ave. 

Toronto, 

M4V 3A1 

Tel: (416) 972-9001 Fax: 416-972-9940 

W. Xavier 

LSUC #42907B 

Glen Perinot 

LSUC # 49641Q 

Solicitors


ONTARIO 


BETWEEN: 


Plaintiff 

- and - 




Defendants 

STATEMENT OF DEFENCE 

and CROSSCLAIM OF ROBERT HRYNIAK 

DEFENCE 

1. Except as expressly admitted in this Statement of Defence, the Defendant, Robert 

'. 

Hryniak (incorrectly named in the Fresh as Amended Statement of Claim as Robert 

\ 

" 

Hyrniak) ("Hryniak") denies all of the allegations set out in the Fresh as Amended 

\: 

Statement of Claim. 

Tropos Financial and the Joint Venture 

2. Robert Hryniak is an individual residing in the City of Toronto, in the Province of

" 

Ontario. Hryniak is the principal ofthe following corporations: Tropos Equities Corporation 

("Tropos Equities"), a Canadian corporation with its head office in the City of Toronto; 

Tropos Capital Inc. ("Tropos Capital"), an Ontario corporation with its head 

in the City 

of Toronto; and Tropos Financial Corporation ("Tropos Financial"), a Barbados corporation. 

3. In or about late 2000, Hryniak retained Gregory Peebles ("Peebles"), a partner at 

Cassels Brock & Blackwell LLP ("Cassels Brock"), to assist Hryniak in establishing a 

corporate structure for the purposes of allowing Hryniak to carry on basis trading, as 

described below, and other investment activity. Hryniak also retained Peebles and Cassels 

Brock to establish a joint venture structure, as referred to further below, for the purposes of 

raising capital with which to trade. 

4. With the advice and assistance of Peebles and Cassels Brock, Hryniak incorporated 

Tropos Equities, Tropos Capital and Tropos Financial for the purposes of investment 

activity in general, and the joint venture in particular. Tropos Equities does not carry on 

any business activities, other than its role as sole shareholder of Tropos Capital. Tropos 

Capital has in the past been registered with the Ontario Securities Commission ("OSC") as 

a limited market dealer. However, Tropos Capital does not presently carry on any business 

activities, apart from acting as bare trustee for Tropos Financial upon occasion. All 

business activities relating to the Joint Venture and the investments related thereto have at 

all times been carried on by Tropos Financial. 

5. With the advice and assistance of Peebles and Cassels Brock, Hryniak also 

established a joint venture (the "Joint Venture"). 

Peebles drafted joint venture

-3- 

documentation, including a subscription agreement, a joint venture agreement, and a 

certificate of joint venture interest (col/ectively, the "Joint Venture Documents"). 

Hryniak intended to carry on, and has carried on, basis trading through Tropos 

Financial. In essence, Tropos Financial purchases blocks of debt instruments issued by 

international banks and/or the United States government or other qualified issuers and 

resells those debt instruments for a profit. Hryniak sought to establish the Joint Venture as 

a means of raising capital for this trading activity. 

7. Pursuant to the Joint Venture Documents, an investor would provide funds to 

Tropos Financial as a principal and not as an agent in order to subscribe for an interest in 

the joint venture with Tropos Financial. In return, the investor would receive a share of the 

profits generated by Tropos Financial's trading activity for a period of 12 months. Tropos 

Financial would use the funds to purchase "bank issued senior debt instruments", on a 

"non-capital depletion basis" meaning that the funds would be held as cash or used to 

purchase instruments with an equivalent value. Investors had the right to terminate their 

involvement in the Joint Venture and be repaid their investment on 30 days written notice. 

8. The investments in the Joint VE?nture were made through Cassels Brock's trust 

account. Upon deciding to participate in the Joint Venture, investors provided the funds to 

Cassels Brock in trust. Peebles would prepare a certificate evidencing the investor's 

participation in the Joint Venture, Hryniak would sign the certificate, and Cassels Brock 

would then release the funds from the trust account to Tropos Financial. Peebles was 

responsible for ensure that the investor received a copy of the aforementioned certificate.

-4- 

9. Contrary to the allegations set out in paragraph 25 and elsewhere in the Statement 

of Claim, Hryniak never refused to meet with any party seeking to participate in the Joint 

Venture. In fact, Hryniak insisted upon meeting with the parties that subscribed to the Joint 

Venture. As set out in further detail below, Bruno did not subscribe to the Joint Venture or 

otherwise make an investment with Hryniak or Tropos Financial. Nor did Bruno make any 

effort to meet with Hryniak with a view to investing through Tropos Financial. 

Frontline's Participation in the Joint Venture 

10. In or about 2000, Hryniak was introduced to an individual named Robert Cranston 

("Cranston") by a mutual acquaintance who had informed Cranston about the Joint Venture . 

project that Hryniak was developing. Cranston represented to Hryniak that he had raised 

substantial funds for various other business transactions. 

11. . Cranston contacted Hryniak in early 2001 to discuss the Joint Venture. Hryniak 

informed Cranston that he hoped to assemble a block of funds in the amount of USD $10 

million, which would allow the Joint Venture to purchase blocks of debt instruments issued 

by international banks and/or the United States government or other qualified issuers, and 

resell those debt instruments for a profit. Cranston reiterated his earlier claim that he had 

experience in raising funds for such transactions, and represented that he had access to 

large equity funds within his control. Cranston further advised Hryniak that he had a 

company named Frontline Investments, Inc. ("Frontline") that could act as an investment 

vehicle. Frontline is a company originally incorporated in Panama on April 19, 1999, and 

registered in St. Vincent and the Grenadines on or about November 8, 2001 as an existing

-5- 

Panamanian company. 

1 In or about November 2001, Cranston introduced Hryniak to Robert Fornelli 

("Fornelli"), an individual residing in California, one of the United States of Ameriea. 

Cranston advised Hryniak that Fornem was one of Frontline's principals. Hryniak has since 

learned that Cranston ceded all of his interest in Frontline to Fornelli on or about November 

8, 2001. However, Hryniak did not know that Cranston had left Frontline until the late spring 

or early summer of 2002. 

13. On various occasions in 2001, Frontline advanced funds to Tropos Financial and 

received an interest in the Joint Venture. Upon each advance of funds, Frontline executed 

a set of Joint Venture Documents. Further, pursuant to the terms of the Joint Venture, 

. Frontline advanced the funds as principal. Tropos Financial had no contractual 

relationship with the various individuals that contributed funds to Frontline for the purposes 

of investing in the Joint Venture. 

14. Apart from its participation in the Joint Venture, neither Hryniak nor T ropos Financial 

had any contractual relationship with Frontline; nor did Hryniak or Tropos Financial have 

any contractual relationship with any of Frontline~s 

principals or employees, including 

Cranston and Fornelli. 

Hryniak expressly denies that Cranston was at any time an 

employee or agent of his, Tropos Financial, or any other company in which Hryniak has an 

interest (direct or indirect).

-6- 

The Joint Venture's Funds are Stolen by the New Savings Bank 

15. Between June and December 2001, Tropos Financial raised approximately USD 

$10.2 million for the Joint Venture. These funds came from Frontline and 4 other investors. 

described above, these funds were received into Cassels Brock's trust account and 

were subsequently transferred to New Savings Bank, A.D (aNSB"). The final transfer of 

capital to NSB took place on December 17, 2001 and, as of the end of December 2001, 

Tropos Financial had a total of USD $10,210,360.01 on account at NSB. 

16. Having raised its intended block of approximately USD $10 million for this Joint 

Venture, Tropos Financial ceased accepting further subscriptions for same in or about late 

December 2001. 

17. In January and February 2002, Tropos Financial attempted to negotiate a contract 

with NSB in which NSB would agree to solicit basis trading opportunities which it would 

present to Tropos Financial. Tropos Financial signed the contract in April 2002; however, 

NSB did not sign the contract back. 

Hryniak contacted NSB on several occasions 

thereafter in an effort to determine the reason for Nib's delay in executing the contract; 

however, Hryniak received no satisfactory response. 

18. By letter dated June 27, 2002, Hryniak instructed NSB to return the funds it held on 

deposit for Tropos Financial to Cassels Brock's trust account. NSB failed to return the 

funds and Hryniak subsequently learned that one of NSB's principals, Jay Pribble 

("Pribble") had closed all commercial accounts of the bank's depositors, including Tropos 

Financial, and had made off with the proceeds. Hryniak tried trace the funds, including

-7- 

contacting the United States Federal Bureau of Investigation ("FBI"), but all efforts to obtain 

the return of funds have to date proved unsuccessful, although the FBI's investigation 

continues. 

Bruno Appliance and Furniture Inc.'s Purported "Investment" 

19. On March 5, 2002, Cassels Brock received a wire transfer in the amount of USD $1 

million from the plaintiff, Bruno Appliance and Furniture Inc. and/or its principal, Albert 

Bruno (collectively, "Bruno") (the "Bruno Funds"). 

20. Approximately 2 weeks after Cassels Brock received the Bruno Funds, Peebles 

contacted Hryniak. Peebles advised Hryniak that he, Peebles, had met with Cranston and 

a potential investor, and that Cranston sought to enter into a investment with Tropos 

Financial. Hryniak had no prior knowledge of, and neither authorized nor attended this 

meeting. Further, Hryniak did not at this time know that the potential investor was Bruno, 

or that the funds above defined as the Bruno Funds came from Bruno. 

21. Upon learning of the receipt of the Bruno Funds, Hryniak informed Peebles that 

Tropos Financial had no further investment opportunities then available, and accordingly 

that the funds should be returned. 

22. Cranston subsequently contacted Hryniak with respect to the Bruno Funds. 

Cranston advised Hryniak that he, Cranston, and another investor had wired funds to 

Cassels Brock's trust account with a view to participating in the Joint Venture or pursuing 

another investment opportunity.

-8- 

23. Hryniak informed Cranston that Tropos Financial had no further investment 

opportunities at that time, and that Cranston should contact Peebles to get back the funds. 

Hryniak has since learned that Cassels Brock wired USD $1 million (less transfer fees) to 

Rhino Holdings, Inc. ("Rhino") on July 18, 2002 on Cranston's instructions. Rhino is a 

company through which Cranston has conducted business from time to time. Hryniak has 

no interest in Rhino, direct or indirect, and has no knowledge of its other business 

operations. 

24. In late 2002, Bruno contacted Hryniak to inquire about the status of "his investment", 

as he put it. Hryniak informed Bruno that he, Hryniak, had no knowledge of any investment 

by Bruno with Tropos Financial, either directly or through Frontline. 

25. Hryniak next spoke with Bruno in or about May of 2003. Hryniak informed Bruno 

that he had no knowledge of the funds advanced to Cassels Brock, but volunteered to 

make inquiries with Peebles. 

26. In June 2003, Hryniak contacted Bruno to advise him of the following: Bruno had 

made no investment with Tropos Financial, eitner directly or through Frontline; Tropos 

Financial did not receive the Bruno Funds; and, the Bruno Funds had been released by 

Cassels Brock to Cranston. 

27. Hryniak had no communications with or made any representations to Bruno prior to 

or at the time the Bruno Funds were wired to Cassels Brock's trust account. Hryniak did 

not solicit the Bruno Funds, or authorize Peebles, Cranston or Frontline to solicitthe Bruno 

Funds. Except as set out herein, all of Bruno's dealings with respect to the Bruno Funds

-9- 

were with Peebles and Cranston. 

28. At no time did Bruno make any investment with Hryniak or Tropos Financial. 

Neither 

T ropos Financial nor any other company in which he has an 

(direct or indirect) has ever entered into any agreement with Bruno, Cranston or Frontline 

with respect to the Bruno Funds. The sole agreement pertaining to the Bruno Funds is 

between Frontline and Bruno. However, Fornelli, the principal of Frontline at the relevant 

times, has advised Hryniak that he, Fornelli, never signed any agreement with Bruno and 

that Cranston had no authority to do so. 

Further, Fornelli has communicated this 

information directly to Bruno. 

29. Hryniak states that neither he, Tropos Financial nor any other company in which he 

has an interest (direct or indirect) ever received the Bruno Funds. From the date Cassels 

Brock received the Bruno Funds until the date Cassels Brock transferred the Bruno Funds 

to Rhino on Cranston's instructions, the Bruno Funds were in Cassels Brock's possession 

and control. At no time were the Bruno Funds transferred to or stolen from NSB. As set 

out above, no further capital was transferred by Tropos Financial to NSB after December 

17,2001. 

30. Hryniak understands that Peebles provided Bruno with an undertaking to return the 

funds to Bruno in the event that they were not applied to any investment. This undertaking 

was not made with Hryniak's knowledge or authorization, or on Hryniak's behalf. 

31. Hryniak has no knowledge of what other representations, if any, may have been 

made to Bruno by Peebles or Cranston. 

Neither Peebles nor Cranston had any

-10- 

authorization whatsoever to make representations to Bruno on behalf of Hryniak, Tropos 

Financial, or any other company in which Hryniak has an interest (direct or indirect). nor 

was there any ostensible authority to do so. 

32. With respect to the allegations made at paragraph 30 of the Statement of Claim, 

that Frontline employees provided Bruno with monthly updates. Hryniak has no knowledge 

of any such updates or their content. At no time was Frontline, nor were any of its 

employees, authorized to act as intermediaries for Hryniak or Tropos Financial. 

33. With respect to the allegations made at paragraph 34 of the Statement of Claim, 

that Cranston provided Bruno with a letter from iropos, Hryniak states that he provided 

Frontline and the other Joint Venture subscribers with a' letter describing the theft of 

investment funds from NSB. Cranston had no authorization to provide said letter to Bruno, 

or to make any other representations to Bruno on behalf of Hryniak of Tropos Financial. 

Further. and in any event, the Bruno Funds were not part of the funds stolen from NSB. . 

Any statement made by Cranston or Peebles to the contrary was a misrepresentation for 

which neither Hryniak, Tropos Financial, or any other company in which Hryniak has an 

interest (direct or indirect) are responsible. 

Bruno's Claims Against Hryniak 

34. Hryniak expressly denies that he ever conducted a fraudulent offshore investment 

scheme. or anything of the sort, and states that T ropos Financial has at all times carried on 

legitimate business activities - primarily basis trading. Hryniak is not aware of any 

investigation of him by the Royal Canadian Mounted Police ("RCMP"), and has never been

-11- 

contacted by them with respect to the matters referred to in the Statement of Claim. 

35. Hryniak has no knowledge whether Peebles and/or Cranston have conducted 

investment schemes, and that in any event neither nor Cranston 

have any involvement with Tropos Financial or any other company in which Hryniak has an 

interest (direct or indirect). 

36. With respect to the alleged charges against Cranston by the RCMP and Ontario 

Securities Commission, Hryniak states that he was not, and could not reasonably have 

been aware of same at any material time, and in any event, Hryniak puts Bruno to the 

proof of Cranston's alleged record. 

37. Hryniak denies that he, Tropos Financial, or any other company in which Hryniak 

has an interest (direct or indirect), engaged in any conspiracy, or deceitful or fraudulent 

activity. Hryniak made no false representations to Bruno with respect to the Bruno Funds, 

and made no effort to "cover up" where the funds had been sent. Bruno knew, or ought to 

have known, that Bruno had not made any investment with Hryniak or Tropos Financial. 

Indeed, Hryniak specifically informed Bruno of that fact. Further, Hryniak specifically 

informed Bruno that Cassels Brock had returned the Bruno Funds to Cranston. 

38. Hryniak denies that there is any basis for an award of damages, punitive damages, 

or exemplary damages as against him in respect of the Bruno Funds. Any and all dealings 

with respect to the Bruno Funds were between Bruno, Cranston, Peebles and Cassels 

Brock. Hryniak notes that Bruno, though aware of Cranston's activities as described 

above, has made no effort to include Cranston as a defendant in this action.

-1 

39. Hryniak requests that this action be dismissed as against him with costs on a 

substantial indemnity basis. 

CROSSCLAIM 

40. Hryniak claims as against Peebles and Cassels Brock: 

a) contribution and indemnity for any amounts that may be found due by 

Hryniak to the Plaintiff; 

b) pre-judgment and post-judgment interest on such amounts as may be found 

due by Hryniak to the Plaintiff in accordance with the Courts of Justice Act, 

RS.O. 1990, c. C.43, as am., sections 128 and 129; 

c) costs on a substantial indemnity basis; and, 

d) such further an other relief as this Court deems just. 

41. Hryniak repeats and relies upon the allegations set out in his Statement of Defence. 

Specifically, any and all dealings with respect to the Bruno Funds were between Bruno, 

Cranston, Peebles and Cassels Brock. 

42. Hryniak pleads and relies upon the provisions ofthe Negligence Act, RS.O. 1990, c. 

N.43, as am.

-13- 

43. Hryniak proposes that this cross-claim be tried together with the main action at 

Toronto, Ontario. 

DATED: August 12,2005 

LERNERS LLP 

Barristers and Solicitors 


Suite 2400, P. O. Box 95 

Toronto, ON M5H 3P5 

Don H. Jack (LSUC #143070) 

Marcus A. Knapp (LSUC #44359W) 

Tel.: (416) 867-3076 

Fax.: (416) 867-9192 

Solicitors for the Defendant, Robert Hryniak 

TO: 


30 St. Clair Avenue West 

Suite 803 

Toronto, ON M4V 3A1 

W. Xavier Navarrete 

Tel.: (416) 972-9001 

Fax.: (416) 972-9940 


AND TO: 


The Sunlife Tower 


Suite 2512 

Toronto, ON M5H 1J9 

Paul LeVay 

Tel.: (416) 593-7200 

Fax.: (416) 593-9345 

Solicitors for the Defendant, Cassels Brock & Blackwell LLP

-14- 

AND TO: 

PAUL J. PAPE, BARRISTERS 


Su~e1910,P.O.Box69 

Toronto, ON M5C 2W5 

PaulJ.Pape 

Jonathan L Rosenstein 

Tel.: (416) 364-8755 

Fax.: (416) 364-8855 

Solicitors for the Defendant, Gregory Jack Peebles 

G:\DOC\MAK\48S2S-0001 \Pleadings\Statement of Defence.doc

,BRUNO APPLIANCE AND FURNITURE, INC. - and - CASSELS BROCK & BLACKWELL LLP! ET AL 

No.: 05-CV-285434 PD2 

ONTARIO 


Proceeding commenced at 

Toronto 

STATEMENT OF DEFENCE AND CROSSCLAIM 

LERNERS llP 

Barristers & 


Suite 2400 

Toronto, ON 

M5H 3P5 

Don H. Jack (LSUC #14307Q) 

Marcus A. Knapp (LSUC #44359W) 

Tel: 416.867.3076 

Fax: 416.867.9192 

Defendant,

, 

1 B/B7 /2005 17: 13 41597299413 HEVDARV HAMILTON LLP PAGE 30/35 

.' 

ONTARIO 


Court File No.: 05-CV-285434PD2 , 

BETWEEN: 


Plaintiff 

- and- 



. and ROBERT HYRNIAK 

Defendants 

REPLY TO THE STATEMENT OF DEFENCE 

OF ROBERT HRYNIA:K 

1. The Plaintiff, Bruno Appliance and Fumiture, Jnc. ("Bruno It) denies 

the allegations contained In the Statement of Defence of Robert Hryniak 

C'Hryniak"), except as expressly admitted in the Reply herein. 

Bruno puts 

Hryniak to the strict proof of his allegations. 

2. Bruno denies Hryniak's claim that he was not involved in the 

investment scheme in which Bruno lost its "investment". At all times, Hryniak 

provided instructions to Gregory Jack Peebles ("Peebles") and to Robert

10/87/2805 · 17:13 4169729948 HEVDARV HAMILTON LLP PAGE 31/35 

, 

2 

Cranston ("Cranston") about the nature of the investment, the collection and the 

distribution of funds received from Bruno. 

In fact, Bruno states that Hryniak was to be in attendance 

the 

meeting which occurred at the offices of Cassels Brock on February 22, 2002, 

and that it was only a last minute cancellation which resulted in his failure to 

attend. 

4. Furthermore, Bruno states that after May 2003', when it formally 

demanded a return of its investment, Hryniak told Albert Bruno (ft Afbertl!, the 

President of Bruno) that the funds would be retumed. In particular, in December 

2004, Albert had a conversation with Hryniak wherein Hryniak reiterated the story 

that the funds had been stolen by Jay Pribble. Bruno states that, if the funds, as 

Hryniak alleges had been stolen in the summer of 2001 by Pribble, it would have 

been impossible for the Bruno funds, to have been stolen in 2002, and that 

Hryniak repeated this story to Albert in an attempt to cover up the fraudulent 

scheme. 

5. Bruno states that at all times, Hryniak was aware that Cranston wa$ 

holding himself out as an agent and representative of the Tropos corporations 

with full authority to act on behalf of Hryniak and his corporations. 

Hryniak 

provided standing instructions to Peebles and Cassels Brock to accept deposits

, 

10/B7/2005 17:13 4169729940 HEYDARV HAMILTON LLP PAGE 32/35 

,. 11' 

; 

3 

into their trust accounts for transactions initiated by Cranston and Frontline and 

their affiliated company, Rhino Holdings. 

6. In fact, in the transaction involving the loss of the Bruno 

both Peebles and Cassels Brock, accepted paperwork that only had Frontline 

signing as the party overseeing the investment scheme, without any reference to 

any of the Tropos corporations. 

Cassels Brock and Peebles further took 

instructions from Frontline via Cranston and permitted their trust account to be 

used for the transaction, notwithstanding that Peebles and Cassels Brock have 

alleged that their only clients were Hryniak and his Tropos corporations. 

Hryniak's claim that he was unaware of these matters is without any merit as 

evidenced by his personal dealings with another group of victims, represented by 

Fred Mauldin, in the summer of 2001. in which Peebles and Cassels Brock. on 

the instructions of Hryniak, accepted paperwork using Frontline as the investing 

corporation. Bruno states that throughout the investment scheme both Hryniak 

and Peebles accepted funds from "investors" irrespective of whether the 

paperwork was with one of the Tropos corporations or with Frontline. 

7. Furthermore, Bruno states that in meetings held with other 

"investors", in particular, Fred Mauldin and John Willock, Hryniak permitted 

Cranston to set up the meetings on his behalf. In addition, while in the midst of 

the meetings, held with Peebles at Cassels Brock, Hryniak allowed Cranston to 

represent himself as an agent of Hryniak and as an integral part of the

10/67/2005 · 17:13 4159729940 HEVDARY HAMIL TON LLP PAGE 33/35 

, .. .. " 

, " 

4 

"investment". In the circumstances, Bruno 

that Hryniak is vicariously liable 

for the actions, representations and omissions of his agent. Robert Cranston, and 

accordingly that it is not necessary for Bruno to add Cranston, or any other 

employees of the Tropos corporations, Frontline fnvestments or Rhino Holdings 

as parties to this action, as alleged ill paragraph 38 of the Statement of Defence 

of Hryniak. 

8. Furthermore, Bruno states that despite alleging that Peebles, 

Cassels Brock and Cranston, used his name to advance a scheme in which 

Bruno lost $1,000,000.00, Hryniak has not taken any steps to report.this alleged 

activity to any police, such as the RCMP, or regulatory authorities, such as the 

Ontario Securities Commission or the Law SOCiety of Upper Canada, despite the 

passage of over three (3) years and that he has failed to do so in order to avoid 

the discovery of his involvement in the scheme. 

DATE: October 7,2005 


Banisters & Solicitors 

30 St. Crair Ave. W., Suite 803 

Toronto, ON 

M4V3A1 


LSUC # 429078 

Glen Perinot 

LSUC # 49641Q 

Tel: 416-972-9001 

Fax: 416-972-9940 


. 

10/07/2005 17:13 4169729940 HEYDARY HAMILTON LLP 

1 

•" 

5 

PAGE 34/35 

TO: 

Lemers LLP 


Suite 2500· 

Toronto l Ontario 

M5H 3P5 

Marcus Knapp 

Tel: 416-601-4188 

Fax: 416-601-4189 

Solicitors for the Defendant, Robert Hryniak 

AND TO: 

Stockwoods LLP 

The Sun Ufe Tower 


Suite 2512 

Toronto, Ontario M5H 1 J9 

Paul La Vay 

Tel: 416-593-2493 

Fax: 416-593-9345 


Cassels Brock & Blackwell LLP 

AND TO: 

Paul J. Pape, Barristers 



Toronto t Ontario 

M5C2W5 

Paul J. Pape and Jonathan L. Rosenstein 

Tel: 416-364-8755 

Fax: 416-364-8855 


BRUNO APPLIANCE AND FURNITURE, fNC. v. CASSELS BROCK & BLACKWELL 

LLP at. af 

I-' 

Court File No.: OS .. CV·28S434P02 

ONTARIO 


Procaeding 

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REPLY TO THE 

STATEMENT OF DEFENCE OF 

ROBERT HRYNJAK 

HEYOARY HAMILTON LLP 

8arristers and Solicitors 

Suite 803 

30 St. Clair Ave. 

Toronto, Ontario 

M4V 3A1 

) ~ 

i. ~ 

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Tel: (416) 972~90011 Fax: 416~9n-9940 


LSUe #429078 

Glen Perinot 

LSUe # 49641Q 


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ONTARIO 


Court File No.: OS-CV-285434PD2 

BETWEEN: 

BRUNO APPLIANCE AND FURNITURE, lNC. 

Plaintiff 

- and- 




Defendants 

AFFIDAVIT OF ALBERT BRUNO 

I, ALBERT BRUNO, of the City of Chicago. in the State of Illinois, in the United 

States of America, MAKE OATH AND SAY AS FOLLOWS: 

1. I am the President of Bruno Appliance and Furniture Inc. ("Bruno Furniwre") as 

such I have full knowledge of the matters deposed to herein. Where I do not have 

persona! knowledge, I have stated the source of my information and believe it to be 

true. 

2. On March 2002, Bruno Furniture sent $1,000.000.00 (in U.S. dollars) to the trust 

account of Cassels Brock & Blackwell ("Cassels Brock"). a law firm in Toronto. Canada 

care of Gregory J. Peebles. 

The money was sent for an investment that involved 

1

Robert Hryniak of Tropos Capital Inc. and Tropos Equity Corporation, and Robert 

Cranston of Frontline Investments Inc. 

Attached as Exhibit" An is a copy of the wire 

transfer. 

3. The particulars of how it was decided to invest in the scheme are set out below. 

4. In December 2001, I was introduced to Robert Cranston, of Frontline 

Investments, by Jim Hamilton. 

It was my understanding that Jim Hamilton was a 

representative of Cranston in the United States and was responsible for securing U.S. 

investors. 

We discussed an investment with Frontline Investments and Cranston 

explained that the investment was a High Yield investment that involved investing in 

secured Prime Bank Notes which would be traded between the banks for short periods 

ofUme. 

5. At the time, I was advised that the investment was completely secure and that: 

L there would be a significant monthly retum on the investment; and 

it the investment would be held in the trust account of a lawyer, 

Gregory Peebles, in Toronto, Canada, that was a member of one of 

Canada oldest and largest law firms, Cassels Brock. 

6. An Acceptance letter from Rob Cranston about a Private Placement was sent 

with instructions to wire funds into the trust account of Cassels Brock cia Gregory J. 

Peebles. Attached as Exhibit "8" is a copy of the letter. 

2

7. At about that time, a Joint Venture Agreement was received setting out the terms 

of the proposed investment. I advised Robert Cranston that before funds would be wired 

a meeting would be necessary with the principals behind the investment 

8. In response, Cranston provided me with information about Cassels Brock and 

Gregory Peebles, including Mr. Peebles' profile from the Cassels Brock website. 

9. Notwithstanding the qualifications set out in the website, a meeting was 

requested with Me Peebles and the parties in charge of the investment. A meeting was 

arranged by Mr. Cranston in Toronto, Canada for February 22, 2002, with Robert 

Hryniak, Gregory Peebles and Robert Cranston. 

10. I flew out to Toronto in the late evening of February 21.2002. At the airport I was 

met by Mr. Cranston. Mr. Cranston advised that Mr. Hryniak would not be attending the 

meeting but that the meeting would be hosted and conducted by Mr. Peebles. 

11. During that meeting, the investment scheme with Tropos was explained by Mr. 

Peebles and I was advised that: 

a. this was a secure investment; 

b. that the Bruno Fumiture money would be deposited into a non-depletion 

interest bearing trust account with Cassels Brock; 

c. that Hryniak was a fang standing client of the firm; 

3

d. and that there was no need to worry about the security of the investment 

12. Annexed hereto as Exhibit "e" is a redacted page of a Cassels Brock account 

and attached Proforma bUt showing a meeting on February 22, 2002 between Peebles, 

Cranston and me to discuss "Tropos corporate structure, etc." 

13. Annexed hereto as Exhibit nD" is a signed statement by Peebles discussing this 

meeting, among other matters. 

14. It became clear to me during the meeting that Cassels Brock and Mr. Peebles 

were supportive of the investment scheme and that they had worked with the 

investment scheme for a number of years. 

15. Accordingly, I executed the documentation necessary to enter into the 

investment with Frontline. Annexed hereto as Exhibit "F' is a true copy of 

documentation signed by me with respect to the investment with frontline Investments 

Inc; 

. 16. On March 4, 2002, Bruno Furniture wired $1,000,000.00 (USO) to the trust 

account of Cassels Brock at TO Canada Trust. Annexed hereto as Exhibit "F" is a true 

copy of an outgoing wire transfer request form signed by me, dated March 4, 2002. 

17. On March 7, 2002, I received verbal confirmation that the funds had been 

4

eceived by Cassels Brock. 

18. On or about March 5, 2002, Robert Hryniak signed a Certificate of Joint Venture 

Interest for $1,722,000 usa between Frontline Investments Inc. and Tropos Financial 

Corporation. Annexed hereto as Exhibit "G" is a true copy of a Certificate of Joint 

Venture Interest, dated March 5, 2002, with handwriting indicating that the Original was 

sent by registered mail. 

19. From March 25,2002 until October 2002, Bruno Furniture received updates from 

Robert Cranston about the investment. During this time, Bruno Furniture did not receive 

any interest payments through the investment. Annexed hereto as Exhibit "H" are true 

copies of the updates received from Cranston. 

20. From March 25. 2002 until May 2003, concerns were raised by me about the 

status of the investment I was advised not to worry because the investment was safe 

and secure and that we needed to be patient because the investment takes time. 

21. On May 2, 2003, I contacted Rob Cranston and advised him that I wanted the 

$1,000,000.00 back. The conversation was followed up with a letter dated May 7, 2003. 

A copy of the letter was also sent to Mr. Peebles. Attached as Exhibit "I" is a true copy 

of my letter of May7, 2003 and my follow..up letter of May 15. 2003. 

22. On May 22. 2003, confirmation was received from Mr. Cranston that the funds 

5

would be returned by June 23, 2003. 

On June 23, 2003, the funds were not deposited 

into the Bruno Fumiture account 

Attached as Exhibit uJ" is a copy of the letter of 

May 22, 2003. 

23. On June 24, 2003, a letter was received from Rob Cranston, attaching a letter 

from Tropes, explaining that the funds had allegedly been stolen by a bank manager in 

July 2002. This was in direct contradiction to the representations and assurances that I 

had received from Mr. Peebles between March 2002· and May 2003. 

Attached as 

Exhibit "Kn is a copy of the letter. 

24. On October 22, 2004, Bonnie Brokaw and I, met with William Hurley, the 

Managing Director of Cassels Brock, to discuss Bruno Furniture's missing 

$1,000,000.00. At the time, Mr. Hurley indicated that he did not know the whereabouts 

of the money and that I should discuss the matter with Mr. Peebles. 

25. By way of background, Bonnie Brokaw was another investor who sent 

approximately $150,000.00 (USD) to Gregory Peebles for the purposes of the same 

investment During the latter part of 2004. We were working with Ms. Brokaw to obtain 

information about where our funds had been sent and to recover our funds. 

26. I am informed by my solicitors and do verily beHeve that in the late fall of 2004, 

Bonnie Brokaw and Bruno Furniture retained Heydary Hamilton PC (then named 

Heydary Hamilton llP) to assist with the reoovery of funds. 

6

27. In December 2004, an Agreement was reached between Bonnie Brokaw and 

Gregory Peebles for the return of a portion of her funds. Specifically. Peebles, through 

his company, Starburst Management, agreed to re-pay Bonnie Brokaw the sum of 

$155,000.00. Attached as Exhibit "l" is a true copy of the Agreement. 

ACKNOWLEDGEMENT OF LIABILITY 

28. Similarly, during this time, a conversation was held between Mr. Peebles and Mr. 

Heydary of Heydary Hamilton PC regarding a resolution of the amount owing to Bruno 

Furniture. On December 20, 2004, Mr. Peebles signed an acknowledgement confirming 

his "Iegalliabmty for Mr. Bruno'S losses at the time that [he] was a partner at Cassels 

Brock through [the] negligence in handling the funds youlr} firm held in trust". 

Attached 

as Exhibit "M" is a true copy of the Acknowledgement of liability. 

29. At that time, Bruno Furniture agreed to provide Mr. Peebles a fuMer 60 days to 

come up with the settlement funds and to avoid litigation. It was also agreed that the 

acknowledgement would remain confidential, save and except if Peebles denied lability 

for the funds owing. 

30. Notwithstanding the Acknowledgement of Uability, Peebles and Cassels Brock 

have refused to repay the money and have refused to provide an accounting of how the 

funds were handled. 

7

31. It appears from Cassels Brock Trust records and email communications between 

Cassels Brock staff and Robert Hryniak that Bruno Furniture's $1,000,000 investment 

was disbursed from Cassels Brock's trust account on March 26, 2002. Annexed hereto 

as Exhibit "N" is a true copy of a dient trust detail chart for account number 031796- 

Tropos Financial Corp. 

32. From this chart, it can be seen that Bruno Furniture's investment was wired in on 

March 5, 2002 (see entry number 9). 

33. It then appears that Bruno furniture's funds were comingled with a deposit of 

$823,839.43 from a Cassels Brock trust account called "Trust 2." This deposit appears 

to have been invested as a daily term deposit The combined funds appear to have 

been invested together as a term deposit and transferred back into "Trust 2." The 

combined total of this deposit was $1,823,829.43 (see entries numbered 9, 10 and 11). 

34. Emails exchanged between Laura Perri and Jasmine Chung confirm that, upon 

the instructions of "the client," the Bruno Furniture funds should be invested with other 

funds, and that the combined amount of theSe funds would be $1,823,829.43. The 

funds were to be invested for 18 days on a non-redeemable basis until March 25, 2002. 

Annexed hereto as Exhibit "0" are amaits exchanged between laura Perri and 

Jasmine Chung dated March 5, 2002 and March 7, 2002. 

8

35. The combined funds appear to have been returned to trust acoount number 

031796 on March 26, 2002. It appears that by that date, the funds had grown to 

$1,824,856.30. (See entry number 14.) 

36. Emails exchanged between Jasmine Chung, laura Perri and Hryniak indicate 

that on March 25, 2002, Hryniak instructed Laura Perri to prepare a draw of 

$1,000,0000 from the $1,823,829.43 which was set to mature on that date, and to 

reinvest the remaining amOunt. In addition: he' instructed' her to draw an additional 

$2,500,000, which was identified as coming "from Campo." Annexed hereto as Exhibit 

up" is a copy of emaiJs exchanged between Laura Perri, Jasmine Chung and Robert 

Hryniak on March 2? 2002, March 25, 2002 and AprilS, 2002. 

37. That same date, it appears that $825,771.09 was reinvested as a daily term 

deposit and sent to "Trust 2") (see entry number 15). 

38. This left $999,250.64 in trustacoount number 031796 (see entry number 15). 

39. Also on March 26, 2002, a daily term deposit of $2.500,914.79 was deposited to 

trust account number 031796 (see entry number 16). 

40. On March 26 1 2002. $3,500,000 was disbursed out of trust account number 

031796 to Tropos Capital Inc. (see entry number 17). 

9

41. As noted above, having had no return on aruna Furniture's investment, in May of 

2003, pursuant to the terms of the Subscription Agreement, I requested the return of the 

prindpal. On May 22, 2003, Robert Cranston relayed this request to Hryniak. requesting 

that $1}000,000.00 be returned to my account at CIB Bank. Annexed hereto as Exhibit 

HQ" is a copy of a letter dated May 22, 2003 from Cranston to Hryniak. 

42. I spoke to Peebles about the redemption of my investment several times over 

the telephone, and he repeatedly told me by telephone that my funds were available 

and returnable at any time. Annexed hereto as Exhibit "R is a true copy of a letter from 

me to Peebles dated July 15, 2004. 

43. Despite repeated inquiries to Peebles and Hryniak from 2003 onwards, I was 

only provided with the information necessary to cormon where Bruno Furniture's 

investment had gone recently. The trust records were first provided in an Affidavit sworn 

by Michael Varpio, counsel for Robert Hryniak, on August 28, 2007. The emaHs that 

make up Exhibits 0 and P of this Affidavit. were only provided in Cassels Brock'S 

Affidavit of Documents sworn March 6, 2007. 

44. Up until that point, I had received various stories about where Bruno Furniture's 

funds had gone. 

45. On April 30, 2004, I wrote to Peebles to ask where Bruno furniture's funds went 

after they left· his control. Jindicated in that letter that I had been told various stories 

10

about where the -funds were gone, namely that I had been told it was taken by a foreign 

banker, by Cranston, or by Robert Fornelli. I indicated that these stories did not add up, 

and indicated that it was my understanding that it was delivered directty to Robert 

Hryniak of Tropes Financial through Cassels Brock's escrow account, that Robert 

Hryniak was his client, and that I suspected that he was able to tell me where my money 

had gone. Annexed hereto as Exhibit ns is a copy of a letter from me to Peebles dated 

April 30, 2004. 

46. I did not receive a response to that letter until May 14, 2004. Despite having 

access to Cassels Brock's trust accounts and the entire Hryniak file, Peebles 

maintained that the Bruno investment had been misappropriated through the fraud of an 

officer of the foreign bank. Annexed hereto as Exhibit uT is a true copy of a leiter from 

Peebles to me dated May 14, 2004. 

47. However, it is apparent from the Defence of Robert Hryniak and the 

documentation supplied by Robert Hryniakregarding the funds on deposit at the New 

Savings Bank that Bruno Furniture's funds were not included in the funds that were 

allegedly stolen by Jay Pribble. 

48. Statements provided by Hryniak for Tropos Capital, Inc:s account at New 

Savings Bank indicate that no funds were deposited intt? that account from December 

17, 2001 to April 30, 2002. The balance of the account at Apri, 30, 2002 was 

$10,012,590.01. Annexed hereto as Exhibit "If' are account statements for New 

11

Savings Bank account #300.516.110801. 

49. On June 19, 2002 Robert Hryniak wrote to Denise Dwyer ("Dwyer"), International 

Direcfor of New Savings Bank AD. complaining that funds on deposit with New Savings 

Bank had sat idle, and that the bank had difficulty executing and fulfilling a contract 

between Tropos Capital Inc. and New Savings Bank. Annexed hereto as Exhibit "V" is 

a copy of an email to Dwyer from Hryniak dated June 19, 2002. 

50. On June 27, 2002 Hryniak wrote to'Dwyer cancelling the Collateral Agreement 

signed by Tropos 'on April 30, 2002, and adviSing that instructions'regarding funds on 

deposit would follow by separate cover. Annexed hereto as Exhibit "W' is a copy of a 

fax cover page addressed to Dwyer arid copied to Peebles at Cassels Brock. 

51. On June 27. 2002 Hryniak wrote to Dwyer demanding the sum of $10,012,400 

USD to be transferred to Cassels Brock. Annexed hereto as Exhibit "X" is a copy of an 

email from Hryniak to Dwyer dated June 27, 2002. 

52. It is apparent from the amount Hryniak demanded Dwyer to transfer that Bruno 

Furniture's $1,000,000 investment had not been deposited to New Savings Bank. 

53. In a letter dated June 28. 2004, Peebles writes to James Watson of the Ministry 

of Consumer and Business Services regarding the Bruno investment However, in this 

letter, Peebles takes the position that the Bruno funds were returned to Frontline and 

12

purports to be able to provide evidence of the transfer. He also indicated that all this 

information had been provided to me. Annexed hereto as Exhibit UY" is a true copy of a 

letter from Peebles to James Watson dated June 28, 2004. 

54. On July 13, 2004 Peebles wrote to me and implied that Bruno Furniture's 

investment was Jost in the New Savings bank debacle, writing "our client continues to try 

to recover the money through the U.S. federaf system." Annexed hereto as Exhibit '-r 

is a copy of a facsimile from Peebles to Bruno dated July 13, 2004. 

55. Annexed hereto as Exhibit U AA IJ is a copy ofa letter I sent in reply to Peebles 

on July 15, 2004. 

56. On February 28, 2005, my solicitors were informed that the monies deposited by 

me into Cassels Brock's trust account were paid out to Tropes Capital Corporation. 

Annexed hereto as Exhibit "B8" is a true copy of a letter from Mark Young, managing 

partner of Cassels Brock dated February 28, 2005. 

57. Another version of events promoted by Peebles and Hryniak was that the funds 

had been disbursed to Rhino Holdings Inc., a company controlled by Cranston, on July 

28.2002. 

58. As set out above, this cannot be troo t given that the trust records and email 

correspondence set out in exhibits Nt 0 ana P establish that the Bruno furniture monies 

13

were paid out, on the instructions of Hryniak, to Tropos Capital Inc. on March 26,2002. 

59. It is evident that Hryniak knowingly received Bruno Furniture's investment, has 

never accounted for its whereabouts, has never provided to Bruno Furniture either 

directly or through Frontline any profits from investment of the funds, has refused or 

faiJed to return the funds at my direction via the directions of Robert Cranston, and has 

knowingly misled me regarding receipt of said funds. 

60. It is further evident that Peebles either knowingly and defiberately misled me as 

to whom Bruno Furniture's investment was disbursed to or failed to make a proper 

investigation into records he had readily available to him which would have shown 

where the funds the Plaintiff entrusted to him were paid out. It is submitted that in so 

acting Peebles assisted Hryniak to fraudulently maintain possession of the Plaintiffs 

investment contrary to the terms of the applicable Subscription Agreements. 

61. It is "interesting to note that as of early as June 2001 f another commercial lawyer 

in the City of Toronto, Stephen Pike, had sat in on a meeting where the same 

investment was pitched to another investor, John Willock. 

Following the meeting, Mr. 

Pike, based on his limited familiarity with the investment raised concerns and "red flags" 

to Mr. Willock, and provided Mr. Willock with a copy of an Investor Alert from the Ontario 

Securities Commission warning about similar investments. Attached as Exhibit '·CC" is 

a true copy of Mr. Pike's letter, along with a copy of the OSC buRatio, dated November 

14,2000. 

14

62. 1t is inconceivable that Me Peebles, who was an experienced securities lawyer, 

and who had intimate knowledge of the scheme, was not aware that this was a 

fraudulent investment 

63. In January 2007, r instructed our lawyers to retain the services of Professor 

James Byrne, who is considered one of the leading authorities on High Yield 

Investments and fraudulent investment schemes. In fact, he has served as a consultant 

to the Secretariat on Commercial Fraud, has been Chairperson olthe Group of Experts 

on Commercial Fraud for the United Nations Commission on International Trade 

(UNICTRAl). An Advisor to the JnternationaJ Chamber of Commerce, and has testified 

at numerous criminal and civil cases in the United States on the precise issue which is 

before the Court. 

64. On January 10, 2007, Professor Byrne was sent the documents which were 

provided to Bruno Furniture by Gregory Peebles, while he was at Cassels Brock. and 

Robert Hryniak through Robert Cranston. 

I can confirm that they are the documents 

that were provided to me in this transaction .. Attached as Exhibit ((DO" is a true copy of 

the documents provided to Professor Byrne. 

65. Upon reviewing the documents, Professor Byme conduded: 

In my considered professional opinion, the transactions described in the 

materials that I have been shoWn are not legitimate commercial transactions. 

These materials constitute such a comprehensive distortion of legitimate 

financial transactions and are so artfully interwoven between reaflty and fiction, 

15

it is apparent that they have been deliberately devised with the intention of 

falsifying the fraudulent nature of the transaction. So patent is the fabrication 

and distortion that it would have been apparent to the person who prepared the 

materials that he or she either was aware of the falsity of the materials or had 

no understanding whatsoever of the matters to which the materials spoke. 

Moreover, the fraudulent character of these materia's would have been 

apparent to someone with expertise in financial matters unless that person 

acted in reckless disregard of the fraudulent character of the materials. 

Attached as Exhibit "EE" is a true copy of Professor Byrne's report. 

66. Furthermore, I have recently discovered that Cassels Brock had direct notice of 

the fraudulent nature of the Tropos .scheme from at least August 7. 2001 which happens 

a date before they received my funds. f particular, I am informed by my solicitors and 

do verily believe that on the day before the swearing of this Affidavit, counsel for 

Cassels Brock delivered further disclosure containing a letter from Jeffrey M. Siopen, a 

lawyer practicing out of Windsor, Ontario. In this letter, addressed to Cassels Brock and 

dated August 7, 2001, Mr. Slopsn attaches an articfe from the U.S. Department of 

Treasury describing Prime Bank fraudulent schemes. This articfe clearty demonstrates 

that the investment being offered by the Defendants is a Prime Bank fraudulent 

scheme. Mr. Slopen goes as far as stating that in light of the content of the articfe, 

Cassels Brock stop its involvement in the scheme by stating that: 

You may wish to cease your involvement with Tropes and Hrymiak. 

Annexed hereto as ~xhibit "FF" is a true copy of this fetter. 

16

67. I make this affidavit in support of the Plaintiff's motion for Summary Judgment 

and for no other or improper purpose. 

Swom before me at the 

City ofCHICAtAD , this 

day of October, 2008. 

) 

) 

) 

) 

~ 

"OfFICIAl. SEAL" 

ANDREA J BOSCO 

Co.w.IISSlON EXI'Il!ES 01/30/09 

17

ONTARIO 


Court File No. 

BETWEEN: 


Plaintiff 

- and- 



and ROBERT HRYNIAK 

Defendants 

AFFIDAVIT OF ROBERT HRYNIAK 

I, Robert Hryniak of the City of Toronto, in the Province of Ontario, MAKE OATH 

AND SAY AS FOLLOWS: 

1. I am a defendant in this matter and have direct knowledge of the matters to 

which I hereinafter depose. Where the facts to which I attest to are based on information 

and belief I have so stated, identified the source of the information and confirm that I 

believe those facts to be true. 

OVERVIEW OF THIS AFFIDAVIT 

2. This affidavit is delivered in response to the summary judgment motion being 

advanced against me by Bruno Appliance and Furniture, Inc. ("Bruno Furniture"). I have 

sworn this affidavit to address the essential facts that I rely upon in my defence and to 

demonstrate to the Court why this is not an appropriate case for summary judgment as 

against myself. 

3. For convenience, I have prepared and attached a Cast of Characters as 

Schedule A hereto which sets forth a description of all of the entities that have 

involvement in the matters giving rise to this lawsuit, whether or not they are parties to

- 2 - 

Capitalized terms in this affidavit have the same meaning ascribed to them 

as in the Cast of Characters. 

4. I have also provided with this affidavit an Appendix of documents which is 

marked collectively as Exhibit 1 to my All of documents in Exhibit 1 have 

!'"O\/IOIA/Or! by me and all are true copies what purport to When 

document included in Exhibit 1 is referred to in this affidavit.! will cite it by 

Exhibit 1 and its particular tab number. 

to 

THE ESSENTIAL FACTS RELATING TO BRUNO FURNITURE'S CLAIM 

5. Bruno Furniture appears to me to be proceeding under a misapprehension as to 

the cause of its loss and who is responsible for it. There are six essential factual issues 

that I will rely upon, each of which I propose to put forward at the trial of thiS action: 

1. Bruno Furniture knew or ought to have known that the funds that it 

delivered (the "Bruno Funds") were not invested in the Tropos Joint 

Venture but rather were delivered to Cranston and/or Peebles in relation to 

a purported Frontline Joint Venture which, through no involvement of my 

own, it now appears may have been fraudulent; 

2. In March 2002, without my knowledge or authorization, the Bruno Funds 

were deposited by Peebles, acting for Cranston, not myself or Tropos, into 

a Cassels Brock trust account under a client number assigned by Peebles 

to Tropos; 

3. In July 2002, also without my knowledge or authorization, the Bruno Funds 

were transferred to Cranston out of the same Cassels Brock's trust 

account by Peebles, on Cranston's instructions; 

4. The Tropos Joint Venture, which was not in any way involved in the 

forgoing events, was an .entirely legitimate commercial transaction, not a 

fraudulent scheme of any sort; 

5. Peebles misconducted himself and made misleading and inconsistent 

statements which were not in any way authorized by myself or Tropos; and 

6. Bruno Furniture's alleged losses were not caused, contributed to or 

acquiesced in by myself or Tropos.

- 3 - 

THE EVIDENCE RELATING TO EACH ESSENTIAL FACTUAL ISSUE 

6. 

1. Bruno Furniture knew or ought to have known that the Bruno Funds 

were not invested in the Tropos Joint Venture but rather were 

delivered to Cranston and/or Peebles in relation to a purported 

Frontline Joint Venture which, through no involvement of my own, it 

now appears may have been fraudulent. 

At paragraphs 47 through 

of Mr. Bruno's Affidavit he acknowledges that the 

Bruno Funds were not included in the funds that were on deposit at the New Savings 

Bank and wrongly taken by Jay Pribble. 

7. Bruno Furniture's claim against me therefore appears not to be based on the 

assertion that the Tropos Joint Venture was a fraudulent scheme ( even though this was 

originally pleaded) but rather, as now testified to by Mr. Bruno, that the funds that Bruno 

Furniture deposited with Cassels Brock were sent to Tropos, either erroneously or 

fraudulently, and that I am therefore liable to return them to Bruno Furniture. 

(a) 

Bruno Furniture was Defrauded by Cranston With Assistance 

from Peebles 

8. To the extent that, notwithstanding the above referred to testimony of Mr. Bruno, 

Bruno Furniture may seek to maintain its pleaded assertion that it suffered losses as a 

result of investing in the Tropos Joint Venture, it is my position that Bruno Furniture did 

not in fact invest in the Tropos Joint Venture, but rather was defrauded by Cranston, 

with the assistance of Peebles, when Bruno Furniture was convinced to invest in a 

purported Frontline Joint Venture. 

9. There will be several references to Cranston in this affidavit It should be noted in 

, 

this regard that I first became involved with Cranston in the circumstances described in 

the Cast of Characters. 

I believed, during my dealings with him, that he was a 

legitimate representative of Frontline, which was, and remains, the largest single 

investor in the Tropos Joint Venture. It was only much later, in 2003, that I became 

aware of Cranston's improper activity in relation to the Bruno Funds. It was at that point 

that J learned that Cranston did not, from November 2001 onward have any authority to 

represent or bind Frontline to any agreements as Cranston had purported to do,

- 4 - 

because, as confirmed by Fornelli, Cranston had all of his interest and authority 

in Frontline to FornellL ForneUi 

to in the Cast of Characters. 

Ref: 

Letter from R. Fornelli and Elise J. Tooley to R. Cranston and Brian 

Hardcastle, dated July 10,2003, Exhibit 1, Tab 1 

10. Moreover, it appears that the Joint which Bruno 

to invest may never have Frontline, through Fornelli stated it 

has no record of having entered any Joint Venture with Bruno Furniture. 

Ref: Email from R. Fornelli to R. Hryniak, dated November 6, 2008, 

Exhibit 1, Tab 2 

11. I rely on the following facts and documents which have been produced in this 

action in support of my position: 

(a) The subscription period for the Tropos Joint Venture closed in December 2001. 

Tropos, to the knowledge of Peebles and Cassels Brock, had reached the 

$10,000,000.00 subscription goal that it had set, and would accept no further 

subscriptions. 

Ref: Letter from R. Hryniak to Tropos Investors, dated January 21,2002, 


(b) 

The only transaction documents that Bruno Furniture has produced are Bruno 

Furniture's Frontline Joint Venture Documents. These are on Frontline letterhead 

and relate to a purported joint venture being offered by Frontline, not myself or 

Tropos. They reference an agreement with Frontline throughout and make no 

mention of me or of Tropos. They are also dated January 22, 2002, following the 

close of Tropos subscriptions. 

Ref: 

Bruno Frontline Joint Venture Documents, Affidavit of Albert 

Bruno, sworn October 29, 2008 - Motion Record, Tab 2 ("Bruno 

Affidavit"), Exhibit ''~O'' 

(c) 

Bruno Furniture's Frontline Joint Venture Documents appear to have been 

plagiarized from the Tropos Joint Venture documents that Peebles created for 

the Tropos Joint Venture. I did not authorize the copying of the Tropos Joint 

Venture Documents for any purpose, nor was I aware that this had been done 

until I saw Bruno's Frontline Joint Venture Documents for the first time when·

- 5 - 

Bruno counsel VVVI,.,\:::V them in this action. 

Ref: Draft Tropos Joint Venture Documents, Exhibit 1, Tab 4 

(d) 

I do not know the exact circumstances in which the Tropos Joint Venture 

Documents were misused in this way, but it appears to me that: 

original Tropos Joint Venture Documents 

to Cranston in a form in which Cranston could replicate and use without 

my authority or knowledge; or 

(ii) 

Peebles created the Frontline documents for Cranston, without my 

authority or knowledge, at Cranston's request. 

Neither of these activities was authorized or acquiesced in by myself or Tropos. 

(e) 

(f) 

Mr. Bruno asserts that Bruno Furniture's Frontline Joint Venture Documents were 

provided to him by Peebles, and by me, through Cranston. In fact, I did not 

provide these or any other such documents to Mr. Brund or Bru·no Furniture; 

Mr. Bruno was interviewed about the circumstances of this case by Canadian 

Business Magazine, for an article entitled "In Trust." In the article he described a 

meeting between himself, Peebles and Cranston that lasted about 20 minutes. It. 

appears from the article that Mr. Bruno made his decision to invest in the 

Frontline Joint Venture on the strength of that 20 minute meeting. He did not 

meet with me nor did he contact me about any proposed investment after his 

meeting with Peebles and Cranston. 

Ref: 

Canadian Business Magazine, Investigative Report, article by 

Matthew McClean, entitled "In Trust", Exhibit 1, Tab 5 

(g) 

i am advised by Fornelli, and I believe, that in early November, 2001, Fornelli 

informed Peebles that he had acquired Cranston's entire interest in Frontline. 

When Peebles, Cranston and Mr. Bruno met in February, 2002, Peebles and 

Cranston must both have known that Cranston was no longer a principal of 

Frontline, that Bruno Furniture's Frontline Joint Venture Documents, which they 

were reviewing with Mr. Bruno, were plagiarized from the Tropos Joint Venture 

Documents without my knowledge or consent, that subscriptions for the Tropos 

Joint Venture had closed in December 2001, and that Cranston no longer had 

authority to speak for Frontline. Notwithstanding tflis' knowledge, it appears that

6- 

,-"",.on.o

- 7 - 

knowledge or authority, when it was obviously no longer 

presumably to 

cover up or obscure the fraud that he had been perpetrating. 

Ref: 

Frontline Status Update Memos, Bruno Affidavit, Exhibits "H" and 

''~O'' 

(k) 

June In to Bruno Furniture's for 

Cranston sent to Bruno Furniture a attaching a of Jetter that I had 

sent to the investors in the Tropos Joint Venture in July 2002, explaining that the 

Tropos Joint Venture funds had been stolen at NSB. Cranston sent this letter 

knowing that the Bruno Funds had not been invested in the Tropos Joint Venture 

and had not been stolen as the Tropos funds had been. He received the letter 

from me in July of 2002 in the circumstances described above, but I did not 

authorize him or Peebles to send it to anyone aside from the. Tropos Joint 

Venture investors, of which Bruno Furniture was not one, and certainly not a year 

later. This appears to be another example of Cranston using Tropos documents 

to cover up the fraud he himself was perpetrating. 

Ref: Letter from A. Bruno to R. Cranston, Brian Hardcastle and R. 

Fornelli, dated May 15, 2003 and cancellation notice, dated May 7, 

2003, Bruno Affidavit, Exhibit "I" 

Letter from Frontline to A. Bruno, dated May 22, 2003, Bruno 

Affidavit, Exhibit "J" 

Facsimile from R. Cranston to A. Bruno, dated June 24, 2003, 

attaching Tropos letter to Tropos Investors, dated July 25, 2002 

(two versions). Bruno Affidavit, Exhibit "K" 

(I) 

I am advised by Fornelli, and I believe, that he has no record of Frontline entering 

into any Joint Venture with Bruno Furniture and that he never authorized the 

receipt of funds from Bruno Furniture on behalf of Frontline, nor has he dealt with 

Mr. Bruno. 

It therefore appears that Cranston completely misrepresented the 

facts to Bruno Furniture and Mr. Bruno. 

Ref: Email from R. Fornelli to R. Hryniak, dated November 6, 2008, 


(b) 

Alternatively, even if Cranston had Authority to Enter Into the 

Frontline Joint Venture on behalf of Frontline, then Bruno 

Furniture knew or ought to have known that it invested in the 

Frontline Joint Venture and not the Tropos Joint Venture. 

12. If I am incorrect in my view that Cranston and/or Peebles were perpetrating a 

fr~ud 011 Bruno Furniture as described above, and the purpo.rted Frontline Joint Venture

8- 

that Cranston proposed to Mr. Bruno was somehow legitimate, which I do not it 

was, Bruno Furniture nevertheless knew or ought to have known that it was investing in 

a Frontline Joint Venture being promoted by Cranston, and not in the Tropos Joint 

Venture. In particular: 

Joint Venture 

Mr. 

apparently 

on or about January 2002, clearly contemplated a 

transaction with Frontline. No mention was made of Tropos, the Tropos Joint 

Venture or me; 

Ref: 

Bruno Frontline Joint Venture Documents, Bruno Affidavit, Exhibit 

"DO" 

(b) 

(c) 

(d) 

On February 22, 2002, Mr. Bruno met with Cranston and Peebles alone. I was 

not at that meeting. In fact, I have never met with Mr. Bruno, nor have I ever 

been asked to meet with him. I made no representations to Bruno Furniture or 

Mr. Bruno whatsoever to induce Bruno Furniture or Mr. Bruno to enter into any 

investment. 

At their meeting, Cranston, Peebles and Mr. Bruno apparently reviewed Bruno 

Furniture's Frontline Joint Venture Documents, not Tropos Joint Venture 

Documents; 

The Frontline Status Updates that Mr. Bruno alleges he received all appear to be 

on Frontline letterhead, signed by Cranston, anq do not mention Tropos, the 

Tropos Joint Venture or me, with the exception of one delivered around the time I 

told Cranston and Peebles that the Tropos Joint Venture Funds had been stolen, 

as referenced earlier in this affidavit; and 

Ref: 

Frontline Status Update Memos, Bruno Affidavit, Exhibits "H" and 

"DO" 

(e) 

In May 2003, when Mr. Bruno asserts that he sought the return of his funds, he 

called Cranston, not me, and subsequently wrote to Frontline, care of Cranston, 

with a copy of the letter to Peebles, but none to me. Mr. Bruno never did contact 

me to have Bruno Furniture's money returned. We only spoke about it later, in 

May 2003, when t called Mr. Bruno, at Peebles' request, after Mr. Bruno had 

threatened Peebles, as referred to in more detaiJ below.

- 9 - 

2. In March 2002, without my knowledge or authorization, the Bruno 

Furniture Funds were deposited by Peebles and Cassels Brock, 

acting for Cranston, into a Cassels Brock trust account under a 

client number assigned by them to Tropos Financial. 

1 I was not told by or Cassels Brock precisely how they were handling 

money deposited with them trust 2001 and 2002 in relation to any of 

transactions Tropos was involved in, including the Tropos Joint Venture. It was 

Peebles's suggestion, while we were setting up the structure of the Tropos Joint 

Venture, that the funds of investors in the Tropos Joint Venture be collected in a 

Cassels Brock trust account and be disbursed as necessary to carry out the Tropos 

Joint Venture transaction. I agreed with this suggestion, but I did not receive any details 

or trust account records relating to the deposits or disbursements as they were being 

made. 

14. From a review of the Cassels Brock trust ledgers since obtained and produced in 

this action, it now appears to me that Cassels Brock did not segregate trust funds by 

transaction, or even by client, but rather lumped trust funds together noting each deposit 

or withdrawal with a client file number, now the only apparent way to identify the 

commingled funds. 

In my case, it appears that funds were ascribed the client file 

number for Greenfield Plastics (a former company of mine) in 2001, and of Tropos in 

2002. I had no input into the decision as to how to earmark funds or how to allocate 

them in the Cassels Brock trust account. That was done by Peebles and/or others at 

Cassels Brock without my knowledge. 

Ref: Cassels Brock's Trust Account ledgers, Exhibit 1, Tab 6 

15, Furthermore, I gave no unlimited or general authority to Peebles or others at 

Cassels Brock simply to accept funds on behalf of the Tropos Joint Venture. Funds 

were only to be deposited with Cassels Brock if J had met the proposed investor and 

authorized the investment or the funds. 

In any event, no further funds were to be 

deposited in relation to the Tropos Joint Venture after subscriptions closed in December 

2001, as noted earlier. 

16. After the date upon which it now appears that the Bruno Funds were deposited 

into the Cassels Brock trust account, Peebles told me that .funds had come in for a 

",

- 10- 

potential transaction between Tropos and Cranston and his "partner", who was not 

identified by Peebles. 

17. Cranston subsequently called me to say that he wanted to do a transaction with 

Tropos and that his "partner" had sent in funds for the purpose. 

18. In since subscriptions had closed, I told both and Cranston 

that were no other transactions available and that any such funds should be 

returned to those who had sent them. Neither Peebles nor Cranston advised me that 

any funds had been provided by Bruno Furniture. Bruno Furniture was not known to me 

at all until late 2002, when I had a general'discussion with Mr. Bruno and Cranston, on 

the telephone, not in person, at Cranston's request, about the concept of basis trading, 

not about a potential investment. Even then I was not aware that Bruno Furniture had 

deposited money in Cassels Brock's trust account in relation to any transaction 

involving Tropos, nor did Mr. Bruno say or suggest in any way that this had been done. 

19. Having now had the opportunity to review the trust ledgers provided by Cassels 

Brock, it appears to me that the Bruno Funds were deposited into Cassels Brock's US 

dollar trust account and that Cassels Brock or Peebles assigned to them the Tropos 

client number, apparently to indicate that the Bruno Funds were deposited in relation to 

something having to do with Tropos. In fact, the Bruno Funds had nothing to do with 

Tropos. I do not know why Cassels Brock purported to link the Bruno Funds to Tropos. 

The Bruno Furniture deposit was not made with my authorization, consent, knowledge 

or acquiescence. I did not know that the Bruno Funds had been so deposited. 

Ref: Cassels Brock's Trust Account ledgers, Exhibit 1, Tab 6 

20. Cassels Brock has produced a purported email from Laura Perri dated June 25, 

2002, supposedly sent to me and to Cranston. J have searched my documents and I 

have no record of having received this email, nor do I remember receiving it or the email 

from Cranston included in it. The first time I saw it was when it was produced in the 

present litigation. Bruno Furniture and Mr. Bruno were not identified to me as persons 

who sent funds to Cassels Brock until I later learned this, as earlier described. In 

addition, had I received the June 25, 2002 email, or learned of its contents, I would have 

object~d, 

because it appears from that document that trust funds were being

- 11 

commingled by Peebles and that 

information about the Tropos trust account balance. 

was disclosing to Cranston confidential 

Ref: Email from Laura Perri, dated June 25,2002, Exhibit 1, Tab 7 

21. In any the Bruno Funds should not have been gathered up at all, given 

that 

and Cranston that subscriptions for the Tropos Joint Venture 

had in December 2001, and that there were no other similar transactions being 

contemplated by me or Tropos at that time. 

3. In July 2002, without my knowledge or authorization, the Bruno 

Funds were transferred out of the Cassels Brock's trust account to 

Cranston by Peebles and Cassels Brock acting for Cranston and on 

his instructions. 

(a) 

Bruno's Funds Were Sent to Cranston 

22. Given the acknowledgments in Mr. Bruno's affidavit that the Bruno Funds never 

made it to NSB, Bruno Furniture's claim against me seems to be based upon the 

misapprehension, that the Bruno Funds ultimately ended up in the hands of Tropos. It 

is on that basis, it appears, that Bruno Furniture asserts that J am responsible to return 

the funds. In fact, as I told Mr. Bruno in the summer of 2003, as described below, and 

as has been confirmed by Peebles, the Bruno Funds were transferred by Peebles, on 

Cranston's instructions, out of the Cassels Brock trust account and into Rhino Holdings, 

Cranston's company. Neither I nor Tropos have any interest in Rhino Holdings, nor did 

lor Tropos have anything to do with their transfer. 

Ref: 

Memo from G. Peebles, dated March 31, 2005, Bruno Affidavit, 

Exhibit "0", para. 12 

23. I was not aware of the movement of funds in and out from the Cassels Brock in 

2002 when the Bruno Funds were deposited and disbursed. 

24. Having now reviewed the Cassels Brock trust ledgers, it seems clear that for 

several weeks after the Bruno Funds were deposited, and on several occasions in the 

months thereafter, there was more than enough money to enable Peebles to return the 

Bruno Funds to Bruno Furniture as he should have done. I do not know why he did not

- 12 - 

do so, but I do know that it had nothing to do with me or Tropos. 

Ref: Cassels Brock's Trust Account Ledgers, Exhibit 1, Tab 6 

It appears that between May 30 and July 18, 2002, Peebles and Cassels Brock 

disbursed some $1,250,000 to Cranston. This was done without the authority, 

knowledge or 

of Tropos or myself. 


Wiring Instructions pertaining to $1,000,000 and $250,000 transfers 

to Rhino, Exhibit 1, Tab 8 

26. Cranston did not have authority to give instructions to Peebles or Cassels Brock 

in relation to funds held in trust by Cassels Brock under a Tropos file number. Similarly, 

Peebles and Cassels Brock did not have authority to accept any such instructions from 

Cranston. 

(b) 

How I later learned that the Bruno Funds had been sent to 

Cranston 

27. I spoke to Mr. Bruno on two occasions with Cranston on the telephone, once in 

the fall of 2002, and once in early 2003. On both occasions we discussed general 

questions which Mr. Bruno had regarding basis trading. Mr. Bruno appeared to be a 

client of Cranston, but that was all I knew about him at the time. 

28. The next time I spoke to Mr. Bruno was in the summer of 2003 after Peebles had 

asked me to call Mr. Bruno because he had threatened, as Peebles told me, to have 

Peebles's legs broken. I told Peebles that I was sure Mr. Bruno was joking, but Peebles 

replied "You have never met him." 

29. I called Mr. Bruno, told him that threatening Peebles was not appropriate and 

asked him, what his problem was. He replied, much to my surprise, that he had invested 

funds with T ropos in the spring of 2002 and he wanted to know where his funds were. 

He also mentioned Frontline, Cranston and Peebles. I told him that he was mistaken 

about investing in Tropos but that I would try to find out what had happened and would 

call him back.

- 13- 

30. I then called and demanded an explanation of Bruno's allegations. I also 

called Frontline to see whether Bruno Furniture had done a transaction with Frontline. I 

spoke to Fornell;, who had earlier been identified to me by Cranston as Cranston's 

partner in Frontline. 

I thereby 

from Fornelli, that Bruno Furniture had never contracted 

with Frontline, and from Peebles that, following Cranston's instructions, and 

Cassels, Brock had disbursed the Bruno Funds to Cranston instead of returning them to 

Bruno Furniture. 

Ref: Email from R. Fornelli to R. Hryniak, November 6, 2008, Exhibit 1, 

Tab 2 


Exhibit "0", paras. 12-13 

32. I called Mr. Bruno back and told him that Peebles had sent the Bruno Funds to 

Cranston, that no contract had existed between Bruno Furniture and Frontline as 

Fornelli, the only authorized signing officer of Frontline, had never signed any 

agreement with Mr. Bruno or Bruno Furniture, and that Cranston had taken the Bruno 

Funds. Mr. Bruno, as I recall asked "How is this possible?" and told me that Peebles 

had said that if Tropos did not invest the Bruno Funds, they would be returned. I told Mr. 

Bruno that I did not know how or why the Bruno Funds had been disbursed, but that he 

should raise the matter with Cranston and Peebles as neither Frontline nor Tropos had 

his funds. Contrary to the assertions in his affidavit, I did not hear from Mr. Bruno, nor 

receive any correspondence from him thereafter until this litigation commenced. In 

particular, I did not receive a copy of the July 15, 2004 tetter that Bruno asserts was 

copied to me. 

Ref: 

Letter from A. Bruno to G. Peebles, dated July 15, 2004, Bruno 

Affidavit, Exhibit "RJf 

33. Peebles has on several occasions admitted bot~ to Mr. Bruno and to myself that 

he disbursed the Bruno Funds improperly and without authority and was responsible for 

Bruno Furniture's loss. In particular: 

(a) 

In the summer of 2003, when I asked Peebles to explain Mr. Bruno's allegation 

that he had sent money to Cas~els 

Brock in respect of an investment with

- 14 

and Tropos, told me that the Bruno Funds had sent to 

(b) 

In December 2004, it appears that Bruno's then counsel sent a letter to Peebles 

confirming acknowledgement that he was for Bruno Furniture's 

Ref: Letter to Heydary to G. dated December 20, 2004, Bruno 

Affidavit, Exhibit "M" 

(c) 

(d) 

In January 2005, Peebles told me that he was meeting Cassels Brock that week 

to finalize payment to ML Bruno of the $1 Million he had lost. Peebles went on to 

say that he wished he had never sent the money to Cranston; and 

On March 31, 2005, Peebles signed a lengthy statement, witnessed by his then 

counsel, confirming that he authorized the wiring out of the Bruno Funds to Rhino 

Holdings. 

Ref: 

Memo from G, Peebles, dated March 31, 2005, Bruno Affidavit, 


4. The Tropos Joint Venture was a legitimate commercial transaction 

and not a fraudulent scheme. 

34. Counsel for Bruno Furniture has provided a report from Professor James Byrne 

opining on the validity of the basis trading programme proposed for the Tropos Joint 

Venture. I note that Professor Byrne has not sworn to his report, or othelWise stepped 

forward as a witness on this motion, and thus wi!.! not be subject to cross-examination. 

Ref: Report of Professor James E. Byrne, dated February 22, 2007, 

Bruno Affidavit, Exhibit "EE" 

35. In any event, I disagree with Professor Byrne's conclusions. The Byrne report 

appears to be based on facts that bear little or no resemblance to the facts of this case, 

and the Byrne conclusions appear to have been reached after a review of Bruno

- 15- 

Furniture's Frontline Joint Venture Documents, not a review of the Tropos Joint Venture 

Documents. 

Ref: Report of Professor James E. Byrne, dated February 22, 2007, 

Bruno Affidavit, Exhibit "EEn 

36. the Court, I have out a description of trading. and how 

this trading concept was to be applied in the context 

description will be presented in greater detail at trial. 

the T ropos Joint Venture, which 

(a) 

Basis Trading 

37. Tropos Financial is an investment company engaged in value-based position 

trading in metals, equities and bonds. It employs a well known and widely used 

arbitrage strategy known as "basis trading. n or "cash and carry" trading. I myself have 

been active in and familiar with basis trading for many years. 

38. The word "basis" in this context refers to the difference that exists at any given 

time between the cost of acquiring a particular asset and the future value of that asset. 

If an investor were to buy a security such as a bond at a price less'than its face value, 

and subsequently were to sell the bond either at its face value or at a premium, the 

"basis" or profit thereby realized would be equal to the difference between the purchase 

price (plus associated fees and costs, known as "costs of carry") and the price received 

upon sale. 

Ref: 

Definition of Basis Trading Facility,. Dresdner Kleinwort Website 

pages entitled "Glossary", Exhibit 1, Tab 9 

39. An example of basis trading in the commodities market, as distinguished from the 

bond market, would be where an investor buys a commodity such as wheat, and at the 

same time sells a futures contract which promises to deliver the same amount of wheat 

at a future date. This transaction will earn a profit as long as the cash price paid for the 

wheat, plus associated costs is less than the amount received for selling the futures 

contract. 

40. Basis trading is a widely-recognized and legitimate practice that is carried on in 

various market sectors and deals with various types of securities. relating to both bonds 

and commodities. Hedge funds and investments companies dealing in currency

- 16 - 

markets, of which there are many, are for this reason said to be engaged in the "cash 

and carry 

Ref: 

Description of "Cash and Carry Trade", Montreal Exchange 

Website, Exhibit 1, Tab 10 

41. It is a well known among some money manaaers to to 

profits on 

by borrowing, to the maximum extent possible, against 

cash on hand. An ordinary brokerage' account might permit the holder to borrow up to 

ten times the cash value in the account. Many hedge funds leverage at a 20:1 ratio, and 

in some case~ as high as a 40: 1 ratio, which in the latter case means that for . every 

dollar of cash on hand there is a corresponding debt of $40 to finance the transaction. 

While the level of potential profit increases as the cash-to-debt ratio increases, so does 

the risk. The current financial crisis illustrates the perils associated with excessive 

leveraging. 

42. More conservative investors may engage in such trading on a "non-depletion" 

basis, meanrng that the cash on hand is not leveraged at all, and the price paid for the 

security purchased with that cash is less than the par value of the security. An investor 

wishing to conduct trades on a "non-depletion" basis in the bond market, for example, 

would ensure that the price paid for the bond is less than its maturity value. Because the 

redemption of the bond is an absolute obligation of the issuer that is subject only to the 

passage of time, and assuming the solvency of the issuer, which Tropos always chose 

with care, there is minimal risk to the capital thus employed. 

43. Tropos's model was based on this more conservative approach. While it is not 

possible to eliminate risk entirely, Tropos restricted its trades to securities that were 

highly rated, such as blocks of debt instruments issued by large international banks, the 

United States government and other qualified issuers, in order to ensure that the overall

- 17 - 

risk to capital was kept low. 

Ref: 

(b) 

Anatomy of the Medium Term Note Market, Federal Reserve 

Bulletin, Volume 79, Number 8, August 1993, Exhibit 1, Tab 11 

The Tropos Joint Venture 

44. I sought to establish Tropos Joint Venture as a means of a block of 

capital in the amount of USD$10 million for use in trading, which was the 

appropriate amount to enable Tropos Financial to buy and sell securities profitably. 

45. The Tropos Joint Venture Documents provided that the funds would be used to 

purchase only "bank issued senior debt instruments" on a '''non-capital depletion basis" 

in order to ensure that the funds would be held as cash or used to purchase suitable 

instruments with an equivalent value, and therefore to reduce to the extent possible the 

risk to investors' capital. 

Ref: Draft Tropos Joint Venture Documents, Exhibit 1, Tab 4 

Tropos Capital Executive Summary, Exhibit 1, Tab 12 

46. Through arrangements made by me with Peebles, investments in the Tropos 

Joint Venture were to be made through Cassels BroCK's trust account Upon deciding 

to participate in the Tropos Joint Ventur~, and after being accepted by me, investors 

were to provide their funds to Cassels Brock in trust Peebles was to prepare a 

certificate evidencing the investor's participation in the Joint Venture, I would sign the 

certificate, and Cassels Brock would then release the funds from the trust account to 

Tropos Financial to finance trades. Peebles was responsible for ensuring that each 

investor received a copy of its certificate. I signed no such Certificate for Mr. Bruno or 

Bruno Furniture. 

Ref; Draft Tropo$ Joint Venture Documehts, Exhibit 1, Tab 4 

(c) 

The Deutsche Bank Instruments and NSB 

47. In or about September, 2001, I came into contact with Ole Spaten of Aro Motor 

Corporation ("AMC"). AMC was in the business of importing foreign cars into the United 

States, and appeared to be a completely legitimate operation. Through Mr. Spaten I 

learned about certain securities (the "DBF Bonds") issued by Deutsche Bank Finance 

N.V., a very large international bank, which AMC had available for sale and which were

- 18 

New Savings Bank A.D. ("NSB") in Montenegro. After some research, I 

determined that the most efficient manner of acquiring and reselling the DBF Bonds 

would be to establish both banking and brokerage accounts at NSB. I therefore asked 

Mr. to conduct a check on NSB and requested that AMC confirm with HSBC, 

with whom I , that DBF Bonds were in fact on deposit at NSB. In addition, I 

HSBC to obtain 

DBF Bonds so that I could determine 

advisability of trading in them. My investigations in this regard confirmed that NSB and 

Spaten appeared to be legitimate and that there was a sufficient market in DBF Bonds 

to make them an appropriate investment for this trading strategy. 

Ref: 

Due Diligence Research Results conducted by Cassels Brock on 

NSB, Exhibit 1, Tab 13 

Due Diligence Research Results, conducted by Cassels Brock on 

Ole Spaten, Exhibit 1, Ta.b 14 

Cassels Brock Account, dated December 31, 2001, November 14, 

2001 entry, page 7, Exhibit 1, Tab 15 

Letter from Denise Dwyer, NSB, to C. Begic, HSBC, dated 

November 1,2001, Exhibit 1, Tab 16 

Stock Quote re DBF Bonds, Bloomberg Professional, dated 

November 7,2001, Exhibit 1, Tab 17 

(d) 

The Investments 

.h 

48. Between June and December 2001, Tropos raised approximately USD $10.2 

million for the Joint Venture. These funds came from five investors. Frontline, which up 

until November, 2001 involved Cranston, was one such investor. After being received 

into Cassels Brock's trust account, the funds, of which Bruno Furniture was not one, 

were transferred to NSB. The final transfer of capital to NSB took place on December 

17, 2001 and, as of the end of December 2001, Tropos had a total of USD 

$10,210,360.01 on account at NSB. My contact there was Denise Dwyer, the 

International Director of NSB. 

Ref: NSB Statements o~Account, Various Dates, Exhibit 1, Tab 18 

49. The funds thus transferred to NSB did not include the Bruno Funds, which never 

went there, subscriptions earlier having been limited to $10 million. Having raised the

- 19 

intended block of approximately $10 million for the Tropos Joint Venture, Tropos ceased 

accepting further subscriptions in or about late 2001. 

Ref: Letter from R. Hryniak to Tropos Investors, dated January 21, 2002, 


In IJtLtl 2001 Tropos a trade to 

be to carry on trades through NSB on a long-term 

13, 2001, I instructed Ms. Dwyer: 

whether it would 

By fax dated December 

(a) 

(b) 

to effect the purchase by Tropos of OBF Bonds with a face amount of 

USO$5,OOO,OOO by crediting to AMC's NSB account from Tropos' NSB account 

the amount of USO$4,950,OOO and delivering the OBF Bonds to Tropos' account; 

and 

to sell the OBF Bonds at the "best available price at retail (providing the selling 

price is in excess of [the] face value" of the OBF Bonds), and to deposit the 

proceeds from the sale back into Tropos' account. 

Ref: Fax from R. Hryniak to Denise Dwyer, dated December 13, 2001, 


Fax from AMC to Denise Dwyer, dated December 13, 2001, Exhibit 

1, Tab 20 

Invoice from AMC to Tropos, dated December 13, 2001, Exhibit 1, 

Tab 21 

51. By fax dated December 14, 2001, Ms Dwyer confirmed my instructions and 

informed me that the order had been effected that day. The DBF Bonds were sold on 

December 17, 2001 for USD$5, 197,500, yielding a net return of 3.9%. 

Ref: Fax from Denise Dwyer to R. Hryniak, dated December 14, 2001, 


NSB Statements of Account. Exhibit 1, Tab 18 

Letter from R. Hryniak to Tropos Investors, dated January 21, 2002, 


(e) 

'The Attempts to Recover the'Money 

52. Unfortunately, other than the test trade, we were never able to use the proposed 

trading model fully because the Tropos Joint Venture Funds, which we had put on 

deposit with NSB, were taken by Pribble. I learned this aft~r ,spending several months

20 

attempting to get NSB to execute its contract with Tropos and getting no 

Ultimately I Ms Dwyer for the reason that NSB was not responding. After she 

unsuccessfully attempted to locate and get a response from Pribble, I cancelled the 

project and demanded the return of the funds. When the funds were not returned I 

to Ms Dwyer by phone and told me, and I that Pribble had closed 

account and made off with the funds. 

Ref: Email from R. Hryniak to Denise Dwyer, dated June 19, 2002, 


Fax from R. Hryniak to Denise Dwyer, dated June 25, 2002, Exhibit 

1, Tab 24 

Email from R. Hryniak to Denise Dwyer, dated June 27, 2002, 


Fax from Denise Dwyer to R. Hryniak, dated April 17,2003, Exhibit 

1, Tab 26 

53. Thereafter, I tried to recover the investors' funds from Pribble. The steps I took 

included notifying the FBI, because Pribble is a U.S. citizen and I had located him in 

Florida. Unfortunately, recovery of the funds proved impossible. 

Ref: Fax to Mark Pinto, FBI, from R. Hryniak, dated September 17, 2003, 


Letter from R. Hryniak to Tropos Investors, dated July 25, 2002, . 


' 

Letter from R. Hryniak to R. Fornelli, dated August 28, 2003, Exhibit 

1, Tab 29 

Letter from G. Peebles to Attorney General of Ontario, dated May 

14, 2004, Exhibit 1, Tab 30 

Letter from G. Peebles to Financial Services Commission, dated 

July 13,2004, Exhibit 1, Tab 31 

54. I was never notified by any law enforcement authority, or anyone else that any 

investigation was being undertaken into my activities or those of my companies in 

relation to the Tropos Joint Venture, nor do I believe that any such investigation was 

undertaken, nor was it ever suggested that I had been guilty of any wrongdoing in 

connection with the disappearance of the funds at NSB. Similarly, no Tropos investor 

has sued me for return of their funds, including Frontline. 

55. Subsequently, Cranston was prosecuted in Canada on charges of tax evasion. 

was subpoenaed to bea witness for the prosecutor. Cranston pleaded guilty to some

- 21 - 

aspect of the charges against him (particulars were not provided to and was 

sentenced to prison. The testimony I was being asked to give related to among other 

things, to Cranston taking funds to which he was not entitled from Cassels Brock's trust 

account. 

Ref: 

(f) 

Subpoena, dated January 3, 2001 and Will Say of Robert Hryniak, 


eRA Audit 

56. The Tropos Joint Venture was reviewed in detail by the Canada Revenue 

Agency rCRA") in the course of its audit of Tropos Capital Inc. in relation to the 2001 - 

2006 taxation years. Tropos Capital had sought to claim non-capital losses in its tax 

returns for those years. The audit conducted by the CRA was extensive, and 

included an analysis of Tropos's investment model. Tropos cooperated fully with the 

audit and provided access to all pertinent information, the Tropos Joint Venture 

Documents and its records from Cassels Brock, and in addition answered all of the 

CRA's inquires. The CRA ultimately concurred in my view that Cranston and Pribble 

had fraudulently misappropriated investor funds, but disallowed Tropos' deduction of 

non-capital losses on the basis that losses resulting from fraud were non-deductible. 

The CRA also concluded that Tropos was not entitled to the deductions claimed 

because beneficial ownership of the funds was with the investors, not Tropos. 

Ref: letter from Steve Esseltine, Enforcement Division, CRA, to R. 

Hrynial

- 22- 

Mr. 

attached an article published by the US Department of Treasury. 

Ref: Letter from Jeffrey Slopen to Lome Sattman, dated August 7,2001, 

Bruno Affidavit, Exhibit "FF" 

58. I spoke to Mr. Siopen after he 

trading I was using. Mr. Slopen 

further on subject from Mr. Siopen. 

this letter and described to him the basis 

my , and I nothing 

5. Misconduct and inconsistent statements by Peebles. 

(a) 

In Dealings with Tropos and Myself 

59. Peebles failed to obtain or follow my instructions with regard to the following: 

(a) 

(b) 

Without my authority or knowledge, Peebles met with Cranston and his partner, 

subsequently identified as Mr. Bruno, purportedly in relation to an investment 

with Tropos. This meeting occurred in circumstances where Peebles knew there 

were no more investments of this type to be made with Tropos since 

subscriptions for the Tropos Joint Venture had closed· three months earlier. 

Peebles later admitted to me that he had been wrong in doing so; 

Peebles accepted the Bruno Funds into the Cassels Brock trust account, and. 

assigned to them Tropos's client number, without my knowledge, authorization, 

acquiescence or consent. This deposit, which Peebles tater described to me as 

being from Cranston and his "partner" (then unidentified) was assigned the 

Tropos client number notwithstanding that it appears to have been deposited on 

the instructions of Cranston or otherwise in relation to Cranston's business, not 

mine. It appears that Peebles may also have had a solicitor-client relationship 

with Cranston, which makes it all the more unacceptable that the Bruno Funds 

were assigned a Tropos number; 

Ref: Cassels Brock's Trust Account Ledgers re Oito Mundus, Exhibit 1, 

TabS, p. 8 

(c) 

(d) 

Peebles failed to retum the funds deposited by Cranston's "partner," later 

identified as Mr. Bruno, when I instructed him to do so; 

Peebles apparently initiated and caused to be carried out numerous entries in the 

Cassels Brock trust account under the client file numbers relating to Greenfield 

Plastics or Tropos Financial that I did not authoriie, acquiesce in or even know

at the time. These transactions appear to made on the 

instructions of Cranston, and for the of Cranston, not myself or Tropos. 

They included the following: 

Paying to Brian $28,000 in November, 2001; 

r~nr of the Brock trust account under 

Tropos client number to Rhino Holdings on or about May 30, 2002; 

(iii) Transfer of $1 ,000,000 to Windsor Provident Bank on July 10, 2002; 

(iv) 

(v) 

Reversal of that payment and a corresponding deposit back into the 

Cassels Brock trust account under the Tropos Financial client file number 

on July 17, 2002; and 

Disbursement of $1,000,000 to Rhino Holdings, Cranston's company, on 

July 17, 2002. 


None of these transfers were approved by me or even known to me when they were 

made. 

2.' 

60. As I understand it, based upon what Peebles has told me, the above noted 

disbursements would have had to be approved by at least two partners from Cassels 

Brock, although the documentation relating to these approvals has not been produced 

to date. It seems clear, however, from other documentation in relation to other 

disbursements that I have produced in this action that Cassels Brock had a policy of 

having two partners authorize disbursements from the Cassels Brock trust account. 

Ref: 

(b) 

Cassels Brock Cheque payable to Tropos, dated March 26, 2002, in 

the amount of $3,500,000, Exhibit 1, Tab 34 

In Dealings with Bruno 

61. Notwithstanding his knowledge, as earlier explained, that Cranston had ceded 

his interest in Frontline to Fornelli in November 2001, Peebles appears to have treated 

Cranston as though he were still a principal of Frontline. In particular, Peebles appears 

to have participated in a review of the Bruno Furniture Frontline Joint Venture 

./ documents with Mr. Bruno and Cranston in February :2002. Those documents

- 24- 

purported to be executed by Cranston on behalf of Frontline, a clearly unauthorized 

transaction, given what Peebles knew. 

Ref: 

(c) 

Bruno Furniture Joint Venture Documents, Bruno Affidavit, Exhibit 

"DO" 

In Regard to Explaining What Happened to Bruno's Funds 

Between May 2004 and March 2005, Peebles made a variety of statements and 

representations in regard to what happened to the Bruno Funds. He asserted on various 

occasions that: 

(a) 

The Bruno Funds had been retumed to Frontline, which we now know they were 

not, since there is no such disbursement record in the Cassels Brock trust 

ledgers; 

Ref: Letter from G. Peebles to ~. Waton, Ministry of Consumer and 

Business Services, dated June 28, 2004, Bruno Affidavit, Exhibit 

nyn . 

(b) The Bruno Funds were lost in NSB, which they were not. As Bruno has 

acknowledged in his affidavit, his money never got to NSB; and 

Ref: 

Letter from G. Peebles to A. Bruno, dated May 14, 2004, Bruno 

Affidavit, Exhibit "Tn 

Letter from G. Peebles to A. Bruno, dated July 13, 2004, Bruno 

Affidavit, Exhibit "z" 

(c) 

The Bruno Funds were paid out to Cranston (Rhino Holdings), which does clearly 

ultimately appear to be what happened. 

Ref: 



I am not aware of Peebles ever taking the position that Tropos has or had the Bruno 

Funds, which in fact it did not and has not. 

(d) 

Peebles' Conflict of Interest 

63. I am not responsible for Peebles' misconduct, which was entirely unauthorized by 

me. Moreover, when Peebles met with Bruno, he appears to have done so as 

Cranston's counsel, not mine. They were reviewing Frontline documentation in relation 

to a Frontline Joint Venture. That documentation made no mention of Tropos or of me, 

and neither I nor Tropos were aware of, or acquiesced in wnat Peebles was doing.

- 25 - 

93 

Ref: Bruno Furniture Frontline Joint Venture Documents, Bruno 

Affidavit, Exhibit '' ~O'' 

64. I was not aware at the time that Peebles, as now appears to have been the case, 

had a solicitor-client relationship with Cranston, or that he had opened a file in this 

regard (evidenced by the client number in the trust ledgers), or was dealing with trust 

funds for Cranston as a client. Had I been aware of this, an apparent conflict of interest, 

I would have terminated my relationship with Peebles and Cassels Brock. 

Ref: Cassels Brock's Trust Account Ledgers re Oito Mundus, Exhibit 1, 

Tab 6, p. 8 

6. Who Caused Bruno Furniture's Alleged Loss? 

65. If anyone is liable to Bruno Furniture for its lost funds, it is: 

(a) 

First and foremost Cranston, who appears to have misrepresented himself as an 

agent of Frontline, induced Bruno Furniture to deliver the Bruno ' Funds to 

Cassels, Brock under false pretences, and then induced Peebles to send the 

Bruno Funds to him; 

(b) Peebles, who on Cranston's i ns~ructions effected the payment out of the Bruno 

Funds to Cranston through Rhino Holdings; and 

(c) 

Cassels Brock, on whose behalf Peebles was acting. 

I myself had no involvement in the loss which Bruno Furniture has thereby suffered. 

" 

66. I make this Affidavit in 'order to set forth the facts contained in it, and for no other 

or improper purpose. 

j, 

SWORN BEFORE ME at the City ) 

of Toronto, in thl!rovince of ) 

Ontario, this C. day of ) 

I January, 200 ~ ) 

o 

A 

issioner for Taking Affidavits, etc. 

_14.doc 

q

ONTARIO 


Court File No. 05-CV-285434PD2 

BETWEEN: 


Plaintiff 

- and - 



and ROBERT HRYNIAK 

Defendants 

AFFIDAVIT OF ROBERT FORNELLI 

I, Robert Fornelli, of the City of EI Cajon, in the State of California, MAKE OATH 

AND SAY AS FOLLOWS: 

1. I am the President and sole shareholder of Frontline Investments Inc. 

("Frontline") and as such have knowledge of the matters to which I hereinafter depose. , 

Frontline 

2. Frontline was incorporated on April 19, 1999 in the Republic of Panama. I was 

given the general Power of Attorney for the Corporation, pursuant to Panama law, upon 

taking over the company. Robert Cranston ("Cranston") had been Frontline's principal. 

Now produced and shown to me and marked as Exhibit "An to this my Affidavit are 

copies of the Corporate documents relating to the incorporation of Frontline. 

3. In or about October or November, 2001, Cranston introduced me to Robert 

Hryniak so that Mr. Hryniak and I would be able to deal directly with one another in 

relation to an investment Frontline was making in a Joint Venture undertaken by 

Hryniak's company, Tropos Financial Corp. ("Tropos"). 

4. On November 7, 2001, I purchased from Robert Cranston his entire interest in 

Frontline. On November 8, 2001, I had Frontline registered in S1. Vincent, and the

2 - 

Grenadines as an existing Panamian company. Now produced and shown to me and 

marked as Exhibit "B" to this my Affidavit is a to me confirming that the Frontline 

documents were registered in St. Vincent and the Grenadines on November 8, 2001 

and a Certificate of Good Standing from St. Vincent and the Grenadines International 

Companies Act, confirming that Frontline was a company in good standing under the 

laws of St. Vincent in the Grenadines. 

5. I was aware at the time that I purchased Frontline from Cranston that Frontline 

had been dealing with Greg Peebles at Cassels Brock & Blackwell LLP ("Cassels 

Brock") in Ontario with regard to Frontline's investment in the Tropos Joint Ventures. I 

called Mr. Peebles shortly after purchasing Frontline to advise him that I was the owner 

of Frontline and that he would now be dealing with me in respect of the Frontline 

investment in the Tropos Joint Venture. 

6. From and after November 7, 2001, Mr. Cranston did not have any authority to 

engage in business on behalf of Frontline. I had also not given him authority to act as 

an agent for Frontline. The only individuals with authority to act on behalf of Frontline 

after November 7,2001 were me and, for a time, my colleague, Elise Tooley. 

Frontline's Relationship with Cranston 

7. Notwithstanding having sold his interest in Frontline to me in November, 2001, 

between November, 2001 and the summer of 2003, Cranston appears to have 

continued to represent himself as an agent of Frontline, even though he did not have 

authority to do so. He improperly used Frontline letterhead and purported to create 

Frontline documentation in dealing with investors, all unknown to me at the time, but 

now apparent from the history of Mr. Bruno's transaction. 

8. In or about May, 2003, I received a telephone call from Robert Hryniak asking 

me, among other things, what Frontline's relationship to Cranston was, and whether or 

not Mr. Bruno had made an investment in Frontline in or around March, 2002. 

9.· AS,I told Mr. Hyrniak at the time, neither I nor Frontline received, or authorized 

the receipt of money from Mr. Bruno or Bruno Furniture. 

Moreover, neither I nor

- 3 - 

Frontline had or have records of any dealings with Mr. Bruno or Bruno Appliance and 

Furniture Inc. ("Bruno Furniture"). 

10. I immediately began making inquiries of Cranston in order to investigate some of 

the issues raised with me by Mr. Hryniak. In response to my inquiries, Cranston 

me a letter dated June 18, 2003, a copy of which is now produced and shown 

me and marked as Exhibit to this my Affidavit 

11. In that letter, Cranston said that in May, 2002 he was frustrated with the delays in 

receiving a return on the investment in the Tropos Joint Venture, among other things, so 

he entered into a second Joint Venture and transferred $530,000 into it. . He had no 

authority to take any such action, and he did so without my knowledge, consent or 

acquiescence. 

12. On June 6, 2003 I received, in response to some inquiries that I had made of 

Cranston, an email setting out what he said were a list of wire transfers to and from the 

Cassels Brock Trust Account in relation to the Tropos Joint Venture. Now produced 

and shown to me and marked as Exhibit "D" to this my Affidavit is a true copy of that 

email. 

13. On June 19, 2003, I had a conversation with Cranston in which we discussed the 

identity of individuals who had invested money in Frontline in 2001 and 2002, and those 

who had their investments refunded. I reduced the information I received in this 

telephone call to writing. A copy of the document 1 wrote at that time is now produced 

and shown to me and marked as Exhibit "E" to this my Affidavit. 

"-' 

14. It was clear from my conversations with Cranston that, without me knowing it, he 

had continued to represent himself as the principal of Frontline, or at a minimum its 

agent, long after he had sold his interest in Frontline to me even though I had given him 

no such authority, express or implied. 

15. I continued to investigate in order to determine exactly what Cranston had been 

up to in that period, and on July 10, 2003 together with my colleague Elise Tooley, I 

wrote a detailed letter to Cranston and his associate, Brian Hardcastle, setting out what 

I bad I~~rned from my investigations and how I expected Cr~nston to act in future. Now

- 4 

produced and shown to me and marked as Exhibit 

of my letter dated July 10, 2003. 

to this my Affidavit is a true copy 

16. In the letter I: 

(a) 

(b) 

(c) 

(d) 

(e) 

confirmed that Ms. Tooley and I were the only authorized principals of 

Frontline from and after the date on which Cranston signed over his 

interest; 

objected to the conduct that Cranston had engaged in which I viewed, and 

still view, as wrongful, in particular, the allocation of $530,000 of Frontline 

funds without authorization; 

stated my view that the wire transfer of Frontline funds in the amount of 

$28,000 from the Cassels Brock Trust Account to Brian Hardcastle on 

November 22, 2001, and the use by Cranston of Frontline paperwork to 

solicit $1 million dollars of Mr. Bruno's funds, leading him to believe he 

was involved in an investment with Frontline, were inappropriate and 

unauthorized; 

demanded that Cranston cease operating under Frontline's name; and 

demanded that Cranston respond with further information and return all of 

the misappropriated funds, together with any other funds that had been 

collected from Frontline clients, or people who thought they were Frontline 

clients. 

17. Over the course of the summer of 2003, i had further conversations and 

communications with Mr. Hyrniak, who was continuing to investigate Cranston's actions 

and the effects of them. Now produced and shown to me and marked as Exhibit "G" to 

this my Affidavit is a true copy of an exchange of correspondence between Mr. Hryniak 

and myself on July 22,2003, in which I answered further questions that he had posed.

-5- 

18. I have provided copies of various documents, including those described above, 

to Mr. Hyrniak at different times in 

of our communications about 

investigations that he was doing into Cranston's conduct 

Frontline's Investment in the Tropos Joint Ventures 

19. Over the course of 2001, Frontline had raised funds in order facilitate its 

investment in the Tropos Joint Ventures. It was, and remains, my understanding that 

Frontline was investing as a principal and as the owner of the funds, which Frontline 

had raised through its own fund raising activities, and not that it was investing as an 

agent for any of Frontline's investors. In a Funds Ownership Declaration of May 15, 

2004, the fact that Frontline had legal title to the $4.6 million it had invested in the 

Tropos Joint Venture was confirmed by Frontline. 

20. I am aware that the funds deposited in New Savings Bank for the Tropos Joint 

venture were stolen in 2002 and that recovery efforts, which included the notification of 

various law enforcement agencies, have been unsuccessful. 

21. In August, 2003, I received a letter from Mr. Hryniak advising that he had 

exhausted all efforts to collect the funds, and that he did not intend to pursue the matter 

further. He also confirmed that there were several other investments that he was 

pursuing in order to attempt to earn the money back, and that once the returns were 

realized he would disburse those returns on a pro-rata basis among investors in the 

Tropos Joint Venture. Now produced and shown to me and marked as Exhibit "H" to 

this my Affidavit is the letter I received dated August 28, 2003. 

Allegations By the Plaintiff About Frontline 

22. It is my understanding that the Plaintiff in this matter, Bruno Furniture has alleged 

that Frontline is a "dummy corporation" that was used by Cranston and Mr. Hryniak to 

perpetrate a fraud. To the contrary, Frontline was, before investing in the Tropos Joint 

Venture, and remains now an active business which has clients and investments of its 

own and is involved in business endeavours separate and apart from its investment in 

the Tropos Joint Venture. It is not a "dummy corporation".

- 6 - 

99 

23. I make this Affidavit to set forth the facts herein and for no other or improper 

purpose. 

I 

SWORN TO AND SUBSCRIBED 

before me this day of January, 

2009. 

) 

) 

) 

) 

) 

, ) 

lllJYX)'41 Cb\tCO- G ( Ul \e( ~ 

Notary Public ) 

~~ ) 

~=~~~ 

1269578.2 

I 

StAtlol~ 

COIIftty fi{ '1Ill t)i§g!1 

S~bed and sw~ to (or affir.med) bef'trneon1his&daJ . 

Of~W LtG fr ([ , 20~ by 'J1()Qy ~lL \ 

OFFICIAL SEAL 

rAMARA COLTON-GRENIER 

"JNOTARY PUBUC.CAUFORNIAi!B 

'I 

. factory evidence to be the ~ 

~ COIvlM.NO.1802681 .c. 

SAN DIEGO COUNTY 

Iv!':' COMM. EX P. JUNE. 20, 20)2 

leal 

.- 

I 

I 

I

ONTARIO 


Court Fife No.: OS-CV-285434P02 

B ETW E E N: 


Plaintiff 

- and- 




Defendants 

AFFIDAVIT OF ALBERT BRUNO 

I, ALBERT BRUNO, of the City of Chicago, in the State of Illinois, in the United 

States of America, MAKE OATH AND SAY AS FOLLOWS: 

1. I am the President of Bruno Appliance and Furniture Inc. ("Bruno Furniture") as such 

I have full knowledge of the matters deposed to herein. Where ( do not have personal 

knowledge, I have stated the source of my information and believe it to be true. 

2. I have read the affidavit of Robert Hryniak (UHryniak") sworn January 6,2009. 

3. With respect to paragraph 7 of that affidavit. I deny that I am abandoning the 

position that the Tropos Joint Venture scheme was fraudulent. My position that Tropos 

Capital received the funds Bruno Furniture invested is not inconsistent with this position. 

4. With respect to paragraph 28 of Hryniak's affidavit, I haye never threatened to have 

1

anyone's legs broken, and I strongly deny the allegation made by Hryniak that r - 

2 

threatened to break Peebles' legs. 

5. I have read the affidavit of Gregory Peebles ("Peebles") sworn January 7, 2009. 

6. At the meeting referred to at paragraph 9 of Peebles' affidavit I Peebles did nearly all 

of the talking. Robert Cranston was present but was virtually silent throughout. Peebles 

stated that he had represented Hryniak for years. and that Hryniak had been successful 

in his previous investment schemes. Peebles discussed the returns I was likely to see 

on Bruno Furniture's investment (up to 20%). These were the same returns that 

Cranston had discussed with me earlier. Peebles also stated that Bruno Furniture's 

money would be safe because it was deposited in a non·depletion account and could be 

gotten back at any time. When I asked Peebles where the money would be going, 

Peebles said that it would be going into the firm's trust account. He said that Cassels 

Brock was Toronto's second largest law firm. When I asked him whether my investment 

would be safe, Peebles stated that such a prestigious law firm would not be overseeing 

an investment that was not legitimate. 

7. From what was said to me at that meeting. I thought I was investing in Tropos. No 

mention of Frontline was made until after that meeting. 

8. AHhough I sent in the investment funds to Cassels Brock, I wanted to speak to 

Hryniak directly about his investment methods before the funds were invested. Peebles 

agreed to hold the funds in escrow until J could speak to Hryniak about the particulars of 

the investment. 

2

9. Such a conversation occurred. This was the conversation about basis trading to. 

3 

which Hryniak refers in his affidavit. In that conversation, Hryniak explained what was 

going to happen to my investment, and how Hryniak was going to use my money to 

make more money. 

It was absolutely clear from what I said to Hryniak and what 

Hryniak said to me that J was an investor in the Tropos/Frontline joint venture. 

10.1 spoke to Hryniak about my investment over the phone numerous times following 

that first conversation. Often our conversations would be by way of conference calls 

initiated by Peebles. 

11.1 have read the affidavit of Mark Young affirmed January 5, 2009. 

12.1 am informed by Javad Heydary and I verily believe that the Document included at 

Exhibit 0 of this affidavit was not prepared by my counsel. I do not know Who it was 

prepared by. 

) 

Sworn before me at the ) 

City of C.H1~ I this a..qw ) 

day of January, 2009. ) 

~ 

A NOTARY PUBLIC 

~ ·OFFICIAl SEAL" . 

= ANDREAJ BOSCO 

~ COI.WlSSIQN EXPti5 01130/09 

P"""'!"""""""""III 

3

ONTARIO 



BETWEEN: 

BRUNO APPLIANCE AND FURNITURE INC. 

Plaintiff 

- and- 




Defendants 

AFFIDAVIT OF JANE SOUTHREN 

AND SAY: 

I, Jane Southren, of the City of Guelph, in the Province of Ontario, MAKE OATH 

The Nature of the Action 

1. The Plaintiff has commenced this action against the Defendant, Robert Hryniak, 

claiming damages in excess of $10,000,000. The Plaintiff has chosen to proceed by 

way of a summary judgment motion (the "Summary Judgment Motion"), notwithstanding 

that discoveries have not yet taken place. Affidavits have been exchanged in relation to 

the Summary Judgment Motion, copies of which appear at Tabs "C" through "F" of the 

Notice of Motion, without exhibits. To the extent that it is necessary or useful for this 

Court to see the exhibits, copies of the complete affidavits will be available at the 

hearing of this motion.

- 2- 

Security for Costs Already Ordered 

2. The Defendants advanced a motion for security for costs in October 2007. The 

motion was brought on the basis that the Plaintiff is a corporation that is not resident in 

Ontario, and there is good reason to believe that it does not have sufficient assets in 

Ontario to satisfy a costs award in favour of the Defendants in the event it is 

unsuccessful in the action. In support of the motion, Mr. Hryniak submitted a costs 

outline, a copy of which is attached hereto as Exhibit "An. 

3. On or about October 25, 2007, Master Glustein made an order requiring the 

Plaintiff to post security for costs (the "Costs Order") on a "pay-as-you-go" basis: 

Attached as Exhibit "B" hereto is the Endorsement of Master Glustein. The Costs Order 

provided for the posting of security in the following amounts for the costs incurred to the 

date of the motion, as well as for the next intended stage in the litigation, which was the 

Summary Judgment Motion: 

·1;J·AUI\JQJ\PIfQ.Nt~~PQtit;{f;.i'~.·I\JP;

- 3 - 

4. On January 25, 2008 the Plaintiff posted into Court the aforementioned amount 

of $59,915.44 pursuant to the Costs Order. A copy of a letter from the Plaintiff's counsel 

to Lemers LLP confirming such payment is attached as Exhibit "C." 

Further Security for Costs Is Necessary 

5. At the time of the motion for security for costs the matter was still in its initial 

stages. Production had not yet been made, no materials had yet been filed by any of the 

parties in relation to the Summary Judgment Motion and the full extent of the facts and 

legal issues in dispute were not yet known. 

6. The matter has also ultimately proven to be more factually complex than was 

originally anticipated. Consequently, it took longer than anticipated to prepare Mr. 

Hryniak's responding materials and it will require significantly more time and expense 

than originally estimated to complete the hearing on the Summary Judgment Motion. If 

the Plaintiff is unsuccessful, as I anticipate it will be, even more time and expense will 

be incurred to bring the matter to trial. 

7. In addition, between June and December 2008 the parties were engaged in 

extensive discussions about the contents of the Affidavits of Documents filed on behalf 

of Mr. Hryniak and Cassels Brock, which culminated in a motion by the Plaintiff for 

further and better affidavits of documents. The parties were able to resolve the majority 

of the issues in dispute prior to the hearing but the Plaintiff proceeded with its motion in 

relation to certain documents over which Mr. Hryniak and Cassels Brock have asserted 

solicitor-client privilege. Although the costs relating to the preparation for and 

attendance at the hearing of the Plaintiff's motion, which was ultimately dismissed 

without prejudice, were dealt with in the endorsement of the Master, who ordered that 

there be no costs of the motion, the time spent in discussions among counsel and the 

assemblage of the documents sought consumed much more time than had been 

estimated for the preparation and delivery of the Affidavit of Documents in the costs 

outline attached as Exhibit "A".

- 4- 

Costs Incurred to Oate 

8. Mr. Hryniak retained Lemers LLP in relation to this action in March 2005. To 

date, the following steps have been taken: 

(a) 

(b) 

(c) 

(d) 

Pleadings have been filed; 

Affidavits of Documents have been prepared and served; 

Summary Judgment Motion Records have been exchanged; and 

Motions relating to production issues have been heard, completed and 

complied with. 

9. The costs incurred to date by Mr. Hryniak in relation to the above-referenced 

steps, in relation to which he could reasonably expect to obtain to a costs award if 

successful, amount to $62,215.00. A breakdown of this amount can be found in Mr. 

Hryniak's draft Costs Outline attached to this affidavit as Exhibit "D." 

Estimate of Future Costs to be Incurred up to the End of the Summary Judgment 

Motion 

10. The following steps remain to be taken in this proceeding: 

(a) 

Motions scheduled for May 29,2009 relating to: 

(i) 

(ii) 

further security for costs; and 

Mr. Peebles's Motion for Directions seeking leave to proceed with 

his crossclaim against Cassels Brock regardless of the time line 

pursuant to which the main action will proceed. 

(b) 

(c) 

(d) 

(e) 

Examinations of all of witnesses on a pending motion; 

Cross-examinations of witnesses who filed affidavits in regard to the 

Summary Judgment Motion; 

Preparation and service of Facta in relation to the Summary Judgment 

Motion; and 

Attendance at the Summary Judgment Motion hearing, which it is 

anticipated will require one to two days.

- 5 - 

11 . The estimated amount of the fees associated with steps is $49,975.00 in 

the aggregate. A breakdown of this amount can be found in Mr. Hryniak's draft Costs 

Outline at Exhibit "D." The estimates contained therein are based upon the experience 

of counsel generally, as well as on this matter to date, and represent the minimum 

estimated amount required to complete the tasks listed therein. They have taken 

into account duplication that may arise due to the fact that this action is proceeding in 

tandem with the Fred Mauldin et al. v. Cassels Brock et al. action (the "Mauldin Action"). 

In particular, to the extent that any work that will be required relates to both proceedings 

(for example legal research relevant to both actions and the drafting of portions of facta 

that can be used for both actions), I have divided the costs associated with that work in 

half and allocated 50% to the costs outline filed on behalf of Mr. Hryniak in the motion 

for additional security for costs being advanced in the Mauldin Action, and the other 

50% to the attached Costs Outline. 

12. As may be observed by a review of the pleadings and the affidavits filed in 

respect of the Summary Judgment Motion, this is a complex action with numerous 

factual and legal issues in dispute. 

13. This matter has required much more preparation than would ordinarily be 

required for a matter that is still at the pre-examination stage. Given the issues in 

dispute, I have no reason to expect that costs will not continue to accrue at this 

accelerated pace. It is likely, therefore, that if he is successful on the Summary 

Judgment Motion, Mr. Hryniak will thereafter be required to bring a further motion to this 

Honourable Court, seeking an order compelling the Plaintiffs to post further security for 

costs in respect of the costs that he will have to incur to defend the matter to the 

conclusion of a trial. 

Counsel 

14. Don Jack, who has 34 years of experience as counsel, has carriage of this 

matter. He is certified by the Law Society of Upper Canada as a specialist in civil 

litigation. His practice involves complex civil and commercial matters. His current hourly 

rate is $650 plus GST.

I 

- 6 - 

loq 

15. I am a partner with Lerners LLP and was called to the Bar in 1997. My hourly rate 

is $400 plus GST. I will be assisting Mr. Jack on this matter and as such will be carrying 

out many of the day to day tasks associated with the defence of this action. 

16. I make this' Affidavit to set forth the facts herein and for no other or improper 

purpose. 

I 

I 

SWORN BEFORE ME at the City ) 

of Toronto, in the Province of ) 

Ontario, this 22nd day of ) 

March. 2009. _~ A ) 

tY~ lV&-L C' - , ) 

missioner for taking ) 

affidavits, etc. ) 

A1::ie IEIJAJe K. /.OOobYIfIe.b ) 

1309797.5 

) 

I

This is Exhibit "A" referred to in the 

affidavit of Jane Southren 

sworn before me, this 22 nd 

day of March, 2009. 

A CommisSioner for Taking Affidavits 

fI-'bR I G'NN6 t· WlOJ:.rIi1(D

Court File No_ 05-CV-285434 PD2 

ONTARIO 


BETW 

EN: 


Plaintiff 

- and- 




Defendants 

ESTIMATED DRAFT BILL OF COSTS 

OF THE DEFENDANT, ROBERT HRYNIAK 

(Prepared on a partial indemnity scale) 

Pleadings 

• Review of Statement of Claim 

• Review of Demand for Particulars 

• Review of Statements of Defence 

• Review of Reply and Defence to the Statement of Defence and Counterclaim of 

Gregory Peebles 

• Preparation of Statement of Defence of Robert Hryniak 

Description Hours and Rates Amount Total 

Review of documents, 

pleadings and 

preparation of statement 

of defence; meetings 

with client 

" 

Don Jack (called to the 5 hours @ $350/Hour $1.750.00 

Bar in 1974) 

GST - $122.50 $1,872.00 

-

-2- 


Marcus Knapp (called to 10 hours @ $200/Hour $2,000.00 

the Bar in 2001) 

GST $140.00 $2,140.00 

Total $4,012.50 

Review of documents and preparation of affidavit of documents 

• Reviewing client documents 

• Preparing affidavit of documents and production briefs 


Don Jack 8 hours @ $350/Hour $2,800.00 $2,996.00 

GST - $196.00 

Michaef N. Varpio 12 hours @ $200/Hour $2,400.00 

(called to the Bar in 

1999) GST - $168.00 $2,568.00 

Yvonne M. Matthews 25 hours @ $80/Hour $2,000.00 

(law Clerk - 30 years 

experience) GST - $140.00 $2,140.00 

Total $7,704.00 

-! --- 

--- 

Mediation 

• Preparation of statement of issues of the defendant 

• Reviewing plaintiffs mediation brief and co-defendants mediation briefs 

• Attendance at one day mediation 

..• 


Don Jack 7 hours @ $350/Hour $2,450.00 

Michael N. Varpio 20 hours @ $200/Hour $4,000.00 

GST .. $171.50 $2,621.50 

GST - $280.00 $4,280.00 

Yvonne M. Matthews 5 hours @ $80/Hour $400.00 

i 

GST - $28.00 $428.00

lP .. 

-3- 


Total $7,329.50 ! 

Preparation for and conduct of examinations for discoveries 

• Preparation for and conduct of examination for discoveries 

• Preparation for and attendance at examinations of the plaintiff, defendant and 

co-defendants (estimated 5 days) 



GST - $2.450.00 $37,450.00 


.• 

GST - $1,120.00 $17,120.00 

Total $54,500.00 

.-~~ . ---- - -... - 

Answering Undertakings 

• Reviewing transcripts of both plaintiff and defendants 

• Meeting with client to obtain answers 

• Obtaining and reviewing documents 

• Preparing undertakings briefs 



GST - $122.50 $1,872.50 


GST - $224.00 $3,424.00 


GST - $112.00 $1,712.00 

I 

I 

Total $7,008.00 

'-- 

_______...._____ l.-...------..-____

-4- 

Preparation for and attendance at pre-trial conference 

• Drafting pre-trial conference memorandum 

• Preparation for and attendance at pre-trial conference (estimated half-clay 

hearing) 



GST - $245.00 $3,745.00 


GST - $210.00 $3,210.00 

Total 

$6,955.00 I 

Preparation for and conduct of trial 

• Contacting and interviewing witnesses 

• Preparing for trial 

• Attendance at trial (estimated 10 days) 


Don Jack 200 hours @ 350/Hour $70,000.00 

GST - $4,900.00 $74,900.00 

Michael N. Varpio 240 hours @ 200/Hour $48,000.00 

GST - $3,360.00 $51,360.00 


GST - $448.00 $6,848.00 

Total $133,108.00 

- - - ..... 

Estimate disbursements 

Description 

Total 

Court fees $200.00 

Transcripts $2,500.00 

Summonsl0 Witnesses (3 x: $19.00) $57.00

Description 

Total 

Expert witness $10,000.00 

Photocopies $1,500.00 

Fax $300.00 

Process server fees $150.00 

Couriers $200.00 

On-line legal research fees $500.00 

Total disbursements $15,407.00 

GST on taxable disbursements ($ ) $1,078.49 

Total disbursements and GST $16,485.49 

S f fi , disb -- -----_._--- t _._--dGST 

Description 

Total 

T olal fees and GST 

$220,617.00 I 

Total estimated disbursements and GST 

$16,485.49 I 

i 

Total estimated fees, disbursements and GST $237,102.491 

921329.1

This is Exhibit "8" referred to in the 




A Com'mfssioner for Taking Affidavits 

/h:J:JENtJG 1(. fA)oo1>Wtf(O

OCT-25-2007 16:12 CASE MANAGEMENT MASTERS 416 326 5416 P.002/016 

I 

SUPERIOR COURT OF JUSTICE - ONTARIO 

t 

RE: 

BEFORE: 

i 

n.IJIJ,t1(ll1 ....'" and Furri.itlJre mc. v ...... ~~l:> 

!& Blackwell rlLP et al. 

i 

I 

i 

l 

Master Glustein I I 

I 

! 

I 

COURT FILE NO.: 

i 

05-CV-300149PD2 

I DATE: 20071025 

I 

I 


~2- 

the ctl'Ancrth 

and 

its discretion 

sition that 

ordered since it Gannot be 

ar~ not llIl'lJe(:;w)101;1$ 

costs shoUld 

I 1 I ' 

[5] With to Bruno Motiorls. I find that JJruno not established strength 

of its claim is overwhelming such that security for costS ought not to be ordered. While Bruno's 

action may have merit at trial. it is not Possible for m~ to conclude, based on the pleadings and 

evidence on these motions, that the merits of Bruno's IClaim are overwhelming. The pleadings 

and evidence establish many issues of fact and credibility which may have to be determined by 

the trial judge, and it cannot be said ~th any degrtf of certainty that Bruno will succeed. l 

Consequently, I grant the Bruno MOtions,land 9rder Bruno to post security for costs. 

, , t ' , 

[6] With respect to the Mauldin Motions, I find that the individual plaintiffs have not 

satisfied the onus on them to establish illpecuniosi~. The plaintiffs failed to provide full 

financial disclosure, so it :is not possibl~ for the court to conclude that they Me impecunious. 

While the plaintiffs, through one affiantt(Mr. Myers), tnake general statement? that they do not 

have sufficient funds either themselves pr from otherS, the plaintiffS were required to produce 

evidence with "robust particularity" about their financi


- 3- 

from Hryniak (for alleged fraudulent conduct) froljn and alleged fraud, 

conspiracy, negligence and/or breach of contract). The plaintiffs also claim $10 million in 

punitive damages and $10 million in exekplary damag~. , 

I 

I 

2007 

investment should 

[11] The plaintiffs also rely on an aljIeged acknowledgement of liability signed by Peebles 

(relating to the Bruno investment) in which Peebles stated that with respect to allowing the trust 

funds out of the Cassels trust account, h~ ··aeknowledg~ legal liability for MI .. Bruno's losses at 

the time [Peebles was] a partner at ~asse1s Broc~ & Blackwell LLP through [Peebles'] 

negligence in handling the funds [Ga... ~sels] held~'n trust relating to this matter" (the 

"Acknowledgement"). This document i~ referred to in the statement of claim and attached as an 

exhibit to the affidavit of MI. Albert Bruno ("Mr. B , 0"), president of the corporate plaintiff. 

The Acknowledgement waspurportedt obtained aifer conversations between Mr. Bruno's 

counsel and Peebles. .' I 

[12] The defendants deny all of the fey allegation~ of the plaintiffs. All of the defendants 

deny that the investment was fraudulent: Cassels andiPecbles deny that they owed any duty to 

the investors, as they allege that Hryniak:was their client, not the investors. All' of the defendants 

deny making the representations at issue. Cassels.bd Peebles deny any knowledge of, or 

participation in, the investment. Hryniak denies any ~ud, and alleges he dealt with Frontline as 

principal, not as agent for the investdrs. Hryniak: /further alleges that the funds were for 

legitimate investment. but were stolen from a bank acCount at the New Savings Bank ("NSB") 

by Mr. Jay Pribble ("'Pribble"), a PrinciPf ofNSB. _I 

[13] With respect to the Acknowledgement, PeebI6 pleads that any ackitowledgement he 

made was in the reasonable belief that the funds shoula not have been paid out of trust because 

I 

Bruno had not received aCertincate of Joint Venture (the "Bruno Certificate"J. Peebles pleads 

that Bruno in fact had the Bruno Certifitate at the time of the Acknowledgement and knew that 

Peebles' belief was mistaken. Conseq~ently, Peebld pleads that he properly paid the Bruno 

investment funds out of trust. ; i ' 

[14] Peebles further pleads that ~e was coerced and intimidated into making the 

Acknowledgement since Mr. Bruno thr~atened to hO* a press conference in which he would 

accuse Peebles of being an active participant in the alleged fraud, which would irreparably harm 

,I . 

·Peebles'reputation. 

I 

I 

Analysis 

I 

[15J There. are two issues before melon this moti~ First, I must review thc law and the 

evidence and determine whether the indirdual plaintiffs in the Mauldin Action; are impecunious. 

If so, then based on my analysis of the pleadings an~ evidence~ the plaintiffs the Mauldin 

Action would not be required to post seCurity for costs; since it cannot be said that their case has 

no merit ! I ' 

I 

I


-4- 

I 

[16] issue is whether the merits of thJ arc This is the 

determinative issue if the Mauldin )Plaintiffs are I not impecunious, an

; I 

OCT-26-2007 16:13 CASE MANAGEMENT MASTERS 416 326 6416 F.006/01G 

- 5 - 

I 

I 

I 

Similarly, Master Dash in v. ~2006] OJ. 2370 (Master) ("Uribe") 

held that "bald statements unsupported detail" arel not acceptable (Un'be, at para. 12). He 

held that "the 'plaintiff must provide full particulars! of [ exigible] assets and the court must 

"Aa.U.LU~'" the quality and ;f those assets 

r 

their exigibility and whether they are 

at DW'a. 4). : i 

[23] thnrtmah rdiew of the ca$e law on 

, I 

~aster) (at par~s. 69-76) sets out 

holds (Shuter, at para. 76): I I ' 

there is a high evidentia.rJ threshold that must be l!net before a court can find that a plaintiff is 

impecunious, and ... this threshold can only be rdached by tendering complete and accurate 

disclosure of the plaintiff's income, assets, expe.t!.ses; liabilities and borr~wiug ability, with 

fun supporting documentation for each categorY where available or an explanation where 

not available. At the very least, this would require an individ1k:U plaintiff to submit his most 

recent tax return, complete banldng records and teoords attesting to income and expenses ... 

[emphasis added] ; J ' 

[24] Similarly; Cromwell, J.A. of thl Nova Scoti Court of Appeal held in Wall v. Horn 

Abbott Ltd., 1999 CarswellNS 120 (CA.) ("Wall''), Juter a thorough reviewi of the case law, 

including the leading Ontario authoritiesl(Wall, at parat83): 

I : 

... If,the plaintiff resists security that would otherw se be ordered on the basis that the order will 

stifle the action, the plaintiff must establish this detailed evidence of its financial positiou 

including not only jts income. assets and liabilitY. t but also its capacity to iraise the security. 

[emphasis added] ! WI 

[25] The reason for such a high onus to establish ir4ecuniosity is that the court must balance 

the interests of defendants to obtain payment of costs awards against the interests of truly 

impecunious plaintiffs who will be ~eprived of their day in court. Consequently, if 

impecuniosity can be established, secur;1ty of costs will not be ordered unless: it is obvious that 

the case has no merit This policy was summarized by promwell J.A. in Wall (Wall, at para. 83): 

Where the order for security will :prevent the p~infiff from proceeding ~ the claim, tbe 

order should be made only where the claim obViously has nO merit, bearing in mind tbe 

difficulties of making that ass~ment at the inttrlocutory stage. Where the choices are, on 

one l;tand, allowing an unmeritorio~s claim to go to trial and, on the other,: stifling a possibly 

meritorious claim before trial, the pplicy of Our 1a~ is clear. While there is a!risk of injustice on 

either account, stifling a possibly meritorious claim is the greater injustice. [emphasis added] 

i I' , 

[26] Conversely, if a plaintiff is not impecunious. the high threshold requiring a plaintiff to 

establish "overwhelming" merit (discuSsed in my ~ysis of the merits below) protects the 

interests of defendants to recover their costs. 

I 

[27] Finally, the onus on the plaintiff~o establish Jecumosity means that the defend~t can 

choose not to cross-examine.if the plamtiff fails to lead sufficient evidence. : Master Hawkins 

stated this principle succinctly in Tallmfco-Robertson! v. Communique Group; Inc" [2004] O.J. 

No. 1648 (Master) ("Tallarico-Robertsof'j, in which ~e noted that a defendanrs decision not to 

I 

'

OCT-25-2007 16:13 CASE MANAGEMENT MASTERS 416 326 5416 P.OO7/016 

ero$$-exarnme on the 

-6- ! 

I 

I 

evidence did not "COlIvert insufficient evidence into :SUllll..:lgll 

evidence", if the plaintiff did not oth~e meet this o:dus (Tallarico-Robertson, at para. 5). 

I 

[28] not amount 1f> of the bald statement of 

impecuniosity material !filed not meet that test 

RnhPrt"

OCT-25-2007 16:13 CASE MANAGEMENT MASTERS 4 6 326 5416 P.008/016 

(b) 

-7- 

j 

I 

children, is no evidence that Mr. Myers could not the 

litigation from those children£ While Mr. ~yers states that it was in summer 

that his children could save ~ough money ~o pay for Mr. Myers and his wife to visit 

them in the Northwestern. part of the Uni1jed States, thcre is no evidence as to the 

CUlTent financial those childrt!n. no that Mr. 

could not 

litigation 

pm:t1cwars a statement I 

Mauldin: The only ev1dence is that IMr. Mauldin is 75, resides in LanCflSte:I', 

California, works as a COIL..~tant. and had ~ family gross income in 2006 of $8,172 

and in 2005 of$14,416. [I : 

Thcre is no evidence about Mr. Mauldin'slassets) which would be a bare minimum 

required of financial disclosUre. It may nGt be surprising that an :individual of Mr. 

Mauldin's age has little incdme, but a p~1 on's income does not provide sufficient 

infonnation about his or her abiJity to pay a sts award. , 

t, : 

(c) Robert Blomberg: The oniy~ evidence is that Mr. Blomberg is 76,! resides in Weed, 

California, receives nominal ~ployment iricome, and received $28,533 in income in 

2005 from his investment retirement acdount and social security benefits, with 

$18,673.56 of that income oftset by credit ¢ard payments incurred for ongoing living 

. /1 

expenses. i I 

Again, there is no evidencJ about Mr. Blomberg's assets. 

i 

Further, th.ere is no 

evidence that Mr. Blombergl could not obtain funding for the litigation from other 

. sources, let alone particulars of such a statement. 

l. I , 

(d) Theodore Landkmnmer: Mr. [Landkammcr is 79, resides in San Jose, California. with 

a total family income of $4,~0 per month,/ and he has difficulty paying medical and 

other expenses because of th1 income. I 

While Mr. Landkammer's eYidence is tha~ he has no savings, he has two homes! 

which are mortgaged. There is no infonmition as to the value of the homes, or the 

amount of the mortgage. Further, Mr. M~ers does not state that Mr. Landkammer 

could not obtain funding for the litigation from other sources, let alone particulars of 

such a statement. . '[ I 

(e) Lloyd Chelli: ,Mr. CheUiis ,an owner 

• vineyard in California, with fluctuating 

family income between $22,?74 (in 2003) ~d $35,450 (in 2004). , His recent crops 

have been successfuL r.. I 

There is no evidence as to any of Mr. Chelli's assets. and in particular. the value of 

Mr. ChelIi's vineyard, whic~ is of criticallimportance to a court assessing whether 

Mr. Chelli could post security for costs. Further, there is no evidence that Mr. Chelli 

could not obtain funding for the litigation f'fom other sources, let alone particulars of 

such a statement. i ! 

I 

·1 

I ,

OCT-25-2007 16:13 CASE MANAGEMENT MASTERS 

416 326 5416 P.009/016 

- 8- 

(f) Stephen Yee: Mr. Yee is 53 old and !lives in San Francisco. California with an 

adjusted family gross income in 2006 of $~3,371 which is stated t~ be iru."Ufficient to 

cover his son's tuition, household and living expenses. His evidence is that he is in a 

difficult financial position. 

As while is e.,pdence that ~1r. Yee has no sav'ln{'S. 

is no as to Mr. Yeds partibuJarlyas to the 

San 

'I 

I 

I 

I 

(g) Marvin and Carolyn Cleair: fThe Cleairs *e 67 years old and live in Cedar Falls, 

Iowa. The Cleairs' total household incont in 2004 was $38,210 and in 2005 was 

$33,920. The evidence is thih the Cleairs own a home they purchased for $222,500, 

with a mortgage of $174,825.1 . I 

I , 

I 

I 

While there is a blanket statdment that "'they ""ill not be able to obtain any eredit or 

equity in their home", thde is no supporting docmnentation ito establish this 

statement. In particular, thqe is no evidence as to when they pu.r:chased the home, 

nor any evidence of the value of the hom~. Further, there is no 'evidence that the 

Cleairs could not obtain tupding for the l' I litigation from other sources, let alone 

particulars of such a. statement. 

[ 

(h) Richard Hanna: Mr. Handa is a resid t of Denver, Iowa and earns $74,038 

currently. His income derives from assets /which cannot be cashed in or commuted. 

However, Mr. Hanna resides fin a home which is mortgaged, which the ex.pects to pay 

offin 8 V2 years. ! I ' 

As with Mr. Landkammer. ~ere is no iJonnation as to the value of Mr. Hanna's 

home, or the amount of the mortgage. Th~ fact that the mortgage:is expected to be 

paid off in 8 V2 years does not provide evldence as to the am.ount of equity in the 

home, as Mr. Hanna may be making smatl ~ayments given his income. Further, there 

is rio evidence that Mr. Ha:nrla could not o~tain funding for the litigation from other 

sources, let alone partiCulars Of such a statement. 

(i) Douglas Laird: Mr. Laird is ~1 years old Jth an adjusted family ~come of $58,288 

in 2006; At the time of the id:vestment, he invested bis life savings. : He has very little 

income and the major sowke of incom6 is his Social Security benefits which 

I 

I 

represent less than $30,000 per year. 

. . I 

There is no evidence at all abput Mr. LaiId'~ assets. Further, there is no evidence that 

Mr. Laird could not obtain :fUnding for tht litigation from other sources, let alone 

particu1arsofsuchamm~ent. 

i 

I 

I , 

I 

I 

I , 

I , 

(3) Charles Ivans: Mr. Ivans is 62 and resides ~n Oceanside, California. He is currently 

unable to work due to a br9ken leg. . Mr~ Ivans owns his home with a valu~ of 

$500,000 and a home equity fline of credit in the amount of $400,000. His adjusted 

family income was $21Jz07 in 2006, $40.052 in 2005, and $43.616 in 2004. 

i 

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! 

\.

OCT-26-2007 16:14 CASE MANAGEMENT MASTERS 416 326 6416 P.OiO/016 

-9- 

I 

While Mr. e"i.dence ~ot have any source~i of moome or 

investments from which draw upon ~o pay security for costs, there is no 

docUlnentary disclosure to such a statement (for example. 'a list of assets or 

Further, Mr. Ivan~ has two children who have moved out of 

;;;".'","",1,'''''' there is no as to their ability to a costs award, 

broad Mr. ~vans has no sources to 

~cularity ..",rmi..",rl 

I 

' 

l 

(k) Lyndon White: Mr. White :ftad a family ~comc in 2006 of $70,520 and a family 

income in 2005 of $30,264. ! Mr. White ~t his savings on visiting his son during 

his son's convalescence in 2Q03 and 2004 Jnd "has had to assist his daughters to pay 

, for their college educations"'IHe has "falle1 on extremely difficult times". 

However, there is no evidenCe at all aboutlMr. White's assets. Further, there is no 

evidence that Mr. White ccluld not obtaih funding for the litigation :from other 

OJ :=: ::::n:~=:J::h:::j: has been forero to move from sWe 

to state, taking part-time jobs. Mr. Myerf was unable to locate her and could not 

provide any further infonnation. I ' , 

Consequently, there was no current infonnation provided about Ms. Smith, let alone 

any evidence about her asset$ or her abilit)[l' to obtain funding for the litigation from 

other sources. I ' 

[33] The above evidence does not ~eet the test 10f "robu~i particularitY'. While some 

infonnation is provided, the evidence raises as many qpestions as it answers. It is not sufficient 

to know a party's income - assets muJt be set out in sufficient detail to satisfY the court of 

impecuniosity. There are numerous 4~answered material questions" about :the ability of the 

plaintiffs to post security for costs.~, 

f 

[34] Consequently, I find that the pl~tiffs in the Mauldin Action have not met the test to 

establish impecuniosity, Given that firuno acknowledges that it is not impecunious, the 

remaining issue for both motions is! whether the !plaintiffs' 'case in both actions is so 

overwhelming that no security for costs s,hould be or! 

! 

(b) Strength of the plaintiffs' case 1 ,. , , 

(1) The app~cable law i . . 

[35J A court can consider the merits o~the case in d1ermining whether it is appropriate not to 

order security for costs. However, it is I not sufficient Ito avoid security for cOsts for a party to 

establish that the plaintiff'has a better chance of success than the defendant. Rather, the evidence 

before the court must "overwhelmingly favour'" the pl.lintiff. Jm.iice D.S. Ferguson set out this 

principle in Nieh v. Sea Land Holding Corp., [2006] oj. No. 4564 (S.C.J.) at para. 13: 

. t . I 

I 

! I 

I


- 10- 

! I 

I 

r 

. . hal. h I 

an mterest m not vmg er access to put 

up security. In the absence of evidence of impedmiosity or financial haruship, I do not see 

how being obliged to protect th~ defendant f..qm the risk of unrecoverable costs can be 

unjust simply because the plaintiff has some xaerit or more merit in her position in the 

claim. I can imagine a alse whdre the merits t.verwheImingly favour the plaintiff as an 

exception but the evidence before Ime does not sht.w this to be such a case. 

I , I ' 

In v. Luminart [1996] O.J. No. ~549 Div.) J. 

adopted the analysis of McKinlay 1. (~she then was) in Horvat v. Feldman (1986), 15 C.P.C. 

(2d) 220 (Ont. H.CJ.) that the extent to which m~ are considered on a .security 

motion depend on (i) the nature of the action, (ii) the complexity 'of the pleadings, and (iii) 

whether the defendant can satisfY one of subrules 56.o!l(1)(a) to (t) (Padnos, at para. 4). Merits· 

have a role in any application under rule 56.01, but iri a continuum with rule 56.01(1)(a) at the 

low end (Padnos, at para. 4). I I . 

costs 

[37] In Padnos, Kiteley J. states that ~e co\lrt on a Jecurity for costs motion is not required to 

embark on an analysis such as in a moti~n for s~ judgment. The analysis is primarily on 

the pleadings with recourse to the evidence filed on ithe motion, and in appropriate cases, to 

selective references to excerpts of the ex~ation for discovery where it is available (Padnos, at 

para. 7).. I 1 

[38] Kiteley J. further held that credibility was eriti I to the issues in the ~e'before her. and 

that "the result is not a foregone c6nclusion eithbr for the plaintiff or. the defendants". 

Consequently. Kiteley J. held that the merits, based qn the pleadings and evidence before her, did 

not compel her to find that it was justr for the mOtirfOr security for costs: to be granted or 

dismissed. Kiteley 1. then ordered security for costs a . stthe non-resident plaintiff (Padnos. at 

paras. 8-10). 

I 

[39] Th~ c""{amples of Kiteley J. as tol circumstanceS in which security for costs might not be 

appropriate demonstrate the type of evid~ce that a cotirt can rely on to find overwhelming merit 

to the action. Her examples (citing Master Donkin inlHorvat v, Feldman (1985), 5 C.P.C. (2d) 

267 (Ont. Mast.» include: if pleadings ihdicate that damages, not liability are at issue) or if there 

was an admission in discovery that at lcltst some amo-dnt is owing (Padnos. at ,para. 6). In other 

words, the court must b~ satisfied th~t the merits 1Jn favour of at least P(J:rtiaJ success are 

overwhelming. 

i 

[40J A motion for security for costs okght not to be ~e occasion to determine the merits of the 

case when it is closely tied to credibilitY, assessments ~see the analysis of Doherty J. (as he then 

was) in Hallum v. Canadian Memorial Chiropractic CMlege(1989), 70 O.R. (2d) 119 (H.C.». 

[41] Cromwell J.A. summarized the above PrlnciPld in Wall (Wall, at para. 83): . 

~ I . 

From this review of the authorities, ~ reach tht; folldwing conclusions. The merit of the plaintiff's 

case is a relevant consideration to tpe exercise of discretion to 

or retuse security fot' costs. 

The el.'tent to which tbe merits m~y properly be ~onsidered varies depenaing on the nature 

of the ease. If the case is comple;, or turns. on eJjedibiJity, it is generally not appropriate .to 

make an assessment of the merits at the interloCutory stage. The assessment of tbe merits 

, I . . 

I 

r


[42] 

- 11 - 

I : 

I 

should be decisive only where (a) ~e merits may be properly assessed on an interlocutory 

application; and (b) success or fajJ~lre appears obVious. added] 

1 1 

In light of the case law, 11 now considex1 whether the plaintiffs have the 

on and that fheir case has 6verwhelming 

i 1 

I 

I 

Application of the Jaw to the facts of this fast 

1 I 

(43J in both actions rely on four evid~ntiary bases to argue that their case 

overwhelming merit: : r 

I 

(i) 

(ii) 

an affidavit from Mr. Brhno setting ou~ his ven.ion of the events leading to the 

investment and loss, incl~ding the aIle~d representations made to him about the 

investment, and a similar !affidavit filed py Mr. Myers in the MaUldin Action; 

the Acknowledgement, *hich is attacJed as an exhibit to the affidavits and is 

pleaded in the statement ~f claim; 

(iii) the Byrne Report; and r . . , 

(iv) an Investor Alert from I the OntariojsecuritieS Commission (""OSC") dated 

November 14, 2000 wl#ch warns in estors of fraudulent schemes allegedly 

similar to the type ofinvestments made ~y the plaintiffs (the "InvQ,"1or Alert"'). 

[44J . I will address each of these bases L tum. ' 

(1) The affidavits 

[45] The affidavits effectively repea;t~ the allegatio~ in the statement of ~laim in affidavit 

fonn. However,; the affidavits read in ligbt of the pleat1ings and the evidence do not enable the 

court to conclude that the merits of the plttlntif'fs' action!s are "obvious" or "over,whelming". 

f . I 

[46) The defendants deny (i). the ~legations as ~o the representations made, (ii) their 

knowledge of any fraud~ and (iii) any duty of care owed to the plaintiffs. There is no evidence 

attached to the affidavits such as an e-mail or other doctnnents which confirm the representations 

allegedly made by the defendants. Furthyr, the issue o~the defendants' knowledge oftha alleged 

fraud is not addJ;cssed by the affidavits (other than filing the Byrne Report and the Investor Alert, 

which I address below). 

t 

I 

[47] Con$equently~ based on the plead~ngs and evidep.ce. it remains a question of credibility as 

to whether the plaintiffs will be believed as to the circumstances of the investments and the 

! I 

representations made. These issues of predibility sh¥d not be determined on a security for 

costs motion without compeUing evidence that one party is not credible. This . not the case. 

I I 

[48] The plaintiffs affirm in their affidavits that Crariston induced them to provide investment 

funds to Cranston and Frontline, who ih tutn providJd the funds to Hryniak in March 2002. 

Howevcr, the plaintiffs have not sued F~ont1ine OT. Crabston, who had direct involvement in the 

fraud pleaded. j . I 

f 

I 

}

OCT-25-2007 16:15 CASE MANAGEMENT MASTERS 416 326 5416 P.013/0i6 

-12 - 

[ 49J While Hryniak by Pribble, 

neither of those parties have sued. 

[50] The plaintiffs' 

unanswered questions on 

I 

some 

the 

[51] some of the written airectly to Hryniak and that 

believe be was not involved in scheme against th~ that they still a high regard for 

:- There also remain other unanswL quest;on, lout Hryniak-s liability; inclw:ting: 

(i) 

whether the plaintiffs inJested with ~ak or Frontline as principal (Hryniak 

produced documents whieh show that I' e accepted funds from Frontline which 

stated that it had "complete legal title"), , 

(ii) 

(ill) 

whether Cransto:, acted w,ithout authorit . at Frontline t~ procure funds under fa:-se 

pretenses (Hryniak prodlked a legal n ce from a clrumant to' that effect which 

would be consistent withf Hryniak's p~tion that he had no knowledge of funds 

being transferred), and [II . 

I , 

whether Pribble at NSB iabsconded wiith the funds (there is evidence as to an 

investigation by the Federal Bureau ofIhvestigation in the United States as to the 

lost funds, and evidence that Hryniak aS$isted in the investigation). 

'l 

[53] Consequently, Hryniak's pleadinlg that he had Ino involvement in any iimproper activity 

cannot be said to be without merit based bn the plaintiffs' affidavit evidence. 

[54] In summary, given the matteJ of credibiliJ and outstanding issues based on the 

pleadings and evidence before me, I Cat.ro9t find that $e affidavits disclose an: "overwhelming" 

case in favour of the plaintiffs. ' . 

I 

Cll) 

The Acknowledgement 

[55] A similar difficulty exists with kespect to thfAeknOWledgement. Under Web Offset 

Publications Ltd. v. Vickery, 1999 Cars'o/eUOnt 2270 A.), documents specifically referred to 

and relied upon in the statement of claim are not "evid nee", but incorporated into the pleading, 

. , . 

so ,it is uncertain whether attaching the ACknOWledglent to an affidavit givesithem any greater 

eVldentiary value. .' i 

I . 

[56] In any event, even if attaching ~e Acknowleagement as an exhibit were accepted as 

evidence that it was signed, there is no eYidence in the ~eria1 filed by the plaintiffs that would 

refute Peebles' position in the pleadings that (1) Peebles signed the Acknowledgement under a 

false understanding that Bruno did not h~ye the Bruno /Certificate when Bruno 'had it, (ii) Bruno 

knew of Peebles' incorrect understanding when Pceb~ signed the Acknowledgement, and (iii) 

Peebles was coerced into signing the Acl{:nowledgem . These defences may be proven at trial, 

I 

. r'! 

I 

I 

I


- 13 - 

and the plaintiffs' inability to establish otherw:ik, on 

means that the 

Acknowledgement falls below the high standard req~ed to establish that the plaintiffs have an 

overwhelming case. II . 

il 

[51] Again, it was'not necessary foq Peebles to fi~e an affidavit in response; or to cross~ 

the by the ,Just as evidence of 

U1:)UUlvlvnt not transfonned into! bv '"''''''''''''''''u 

crc'ss"-tlx.wnme or file responding materiaL . 

(iii) The Byrne Repo~ i . 

[58] Similarly, the Byrne Report doA not establisJ an overwhelming case in favour of the 

plaintiffs. While Professor Byrne concludes that the Hwestment scheme was an obvious fraud, 

this docs not answer the issue as to the ~efendantg' *olvement in the alleged fraud. It is the 

latter question that is critical to a court finding an overpthelming case in favour of the plaintiffs. 

All of the defences raised by the defendkts still rem~n at issue to be determined based on the 

evidence and the credibility findings of the trial judge. . 

. . ' ! 

, 

(iv) 

The Investor Al~ 

I 

I 

[59] Finally, the Investor Alert advises investors not to participate in these types of 

investments since they were "legitimate ~ounding" butr"used as a means to lure individuals into 

illegal investment scams". However, this document agam does not answer the question as to the 

defendants' involvement in the fi:aud. Itrs the latter q~estion that is critical to a court finding an 

overwhelming case in favour of the plaintiffs. All of tJ;le defences raised by the defendants still 

remain at issue to be determined based OIl the evidence and credibility findings of the trial judge. 

[60] While the plaintiffs allege that ~t is '''inCOn~vable'' Peebles was not aware that the 

investment was fraudulent, the lnvestor. Alert does not enable the court to conclude whether 

Peebles' alleged limited involvement as~ counsel for ~ropos would be sufficient for a court to 

find liability on him to the investor plaintiffs, since ~ issues of duty of care~ knowledge, and 

participation in the alleged scheme all remain open for a court to decide. 

[61] Similarly, the Investor Alert dles not demlnstrate an overwhelming case against 

Hryniak. He may be able to establish his defence tha:~he owed no duty of care to the plaintiffs 

and that the funds were stolen from a le~timate Inves ent. While the Investor Alert may assist 

the plaintiffs' case, it does not meet the high onus of" verwhelming merit" required for a court 

to enable impecunious non-resident plairttiffs to sue Orltario defendants without posting security 

for costs. . I I . : 

(v) 

Sununary of my lieview of the Jleadings and evidence 

I 

[62] Consequently, 1 find that on the pleadings and erdence before me, the plaintiffs have not 

established overwhelming merit. The pl~inti:ffs' case Ifts merit on the face of the pleadings and 

evidence, but the defendants' position I also has metJt in that it could be accepted at trial. 

However. even if 1 found that the plaint~s' .case had ~trorig merit (an isSue I GO not decide), it 

would not suffice to avoid posting security for costs. Having failed to establish impecuniosity, 

I 

I


- 14- 

the plaintiffs not mct threshold establish '''$1 ease where the merits 

overwhelmingly favour the plaintiff'. 

(c) 

defendants in bill of costs to Celene! an 

cm:Uleag(:Q by th~ 

it is not reasoD:able, 

at this to the same will be *quired to defend each that 

there is certain to be at least some, not considetable, duplication in the preparation for 

productions, examinations for discovery; and trials. 2 I ; 

[64] The extent of the overlap was mJrie clear by th~e motions for security for costs, in which 

much of the separate material prepared (or each motio, was duplicative. Further, the defendants 

properly sought only one set of costs for[fue two motio:{ls. 

[65] I also agree with Quinn J. in M~rton that "whbe 

l 

an action is in its procedural 

' 

infancy. 

with examinations for discovery yet to be scheduled, ~ pay-as-you-go order is usually the most 

appropriate one" (A/orton, at para. 42), : 

(66] Consequently, I order payment of security for 

J 

osts by the plaintiffs in both actions, for 

the pleadings to date and for the next ~ge of these abtions. which is the plaintiffs' motion for 

summary judgment in both actions. 1 

. I 

i 

[67] The defendants may seek furth~ orders for ditional security for costs prior to other 

steps which may be taken in this action. t I do not addrciss the quantum of those: costs at this time, 

but I will remain seized of this matter. I [ 

(68] In the Mauldin Action. Cassels and Hryniakin urred similar costs for the preparation of 

the pleadings (Cassels: $3,306, Hryniak:r $3,750), while Peebles incurred $10,750. In. the Bruno 

Action, . Cassels and Hryniak again incUrred similar dests for the preparation of the pleadings 

(Cassels: $6.,274, Hryniak: $4,012.50)~ ~while PeebI~ again incurred a much greater amount 

($16,500). I find the costs claimed byrCasseIs and rak for preparation of pleadings to be 

reasonable. : 

[69] For the purposes of the security (or costs motion only\ I find the costs sought by Peebles 

for pleadings to be excessive in light of the costs c1aimM by the other parties and in light of what 

an unsuccessful party would expect to p~y for this stagb of the action. Nevertheless, IrecogruZc 

that Peebles' costs may be higl)er than Cassels as he was the principal person involved at Cassels 

and might have more knowledge oftha ~vents at issue. I 

I I . , 

[70] With respect to preparation and ~ttendance forlthe proposed summary judgment motion 

in the Mauldin Actio~ these costs are lsought on a partial indemnity basis by Cassels in the 

amount of$22,000 with the same amount sought forthb Bruno Action. 

I 

I 

2 The actions are not currently scheduled to be *eard together or bODSOlidafed, but there will nevertheless be some 

overlap. . i' 1- 

J There is no evidence before me as to the co~lexity of Peebles! pleadings and my decision is not intended to be 

binding 011 the trial cos~ a.."lSessrnent process. t I 

t ! 

r 

I 

I 

I 

I 

I 

I 

I


- 15- 

i 

[71] Hryniak seeks his costs for the sUmmary judgnhent motion in the amount of $27.500 

each action on a full indemnity scale, onlthe basis that lRule 20.06(4) provides that costs shall be 

fixed on a substantial indemnity basis ~ess the court ~s satisfied that the making of the motion, 

though unsuccessful, was nevertheless rreasonable. 1 do not decide the judgment 

motion as the full record that motion is hot me. However. the 

t 

I 

appear reqord fir' a court 

I 

summary 

was not 

I 

I 

[72J Peebles provides no assessment of his anticipated costs for the summary judgment 

motion but is prepared to accept an amo~t that this Cofrt considers reasonable: . 

Order and costs 

[73] As security 

. 

for 

. 

costs for the pleadings 

It. 

in the Ma.uldin Action, I order the plaintiffs to post 

53,306 for Cassels, $5,000 for Peebles, apd $3,750 for flryniak. I 

[74] As security for costs for the pleaftings in the B~O Action, I order th~ plafu.tiffs to post 

$6,274 for Cassels, $7,000 for Peebles, apd $3,750 for ftyniak. 

[75] As security for costs for the swbnary judgment motions I order the iplaintiffs to post 

$22,000 for each of Cassels and Peeblest, reflecting $*,000 as a reasonable amount on a partial 

indemnity basis for the summary judgment motion, with an additional $4,000 allotted for partial 

duplication. I order the plaintiffs to pos~ $35,000 as s9curity for costs for Hryniak, based on his 

request for $27.500 on a substantial indemnity basis wi~ $7,500 for partial duplication. 

[76] The plaintiffs shall post the sumlary judgment costs divided equally between the actions 

as they both will need to be prepared, 1 it is unfair to urden one action more'than the other. 

[77] All of the above amounts are exclusive of GST, which the plaintiffs are to post as 

security for costs as well as the principal :amounts. I 

[78] Consequently, the plaintiffs in ~e Mauldin ~ction shall post $5L,556 plus GST as 

security for costs and the plaintiffs in th* Bruno ActiolJl shall post $56,524 plus GST as security 

for costs, each amount to bc posted withih 60 days of tliis order. 

[79] The parties agreed that if the dlfendants werJ successful on this motion, Cassels and 

Hryniak would receive $6,000 each, andlPeebles would receive $3,000 each. l:so order, as these 

amounts are more than reasonable give~ the volume df motion material, factums, and briefs of 

authorities before the court. 

. .. I 

i I 

DATE: October 25 , 2007 

I 

! ~~~ 

! ~ Master Benjainm Glustein 

t 

4 A.s discussed above, Peebles did not submit a ~eparat

This is Exhibit "c" referred to in the 




A Comiiiis.sfoner for Taking Affidavits 

/J'I:::jeI'ENNG K· l.()oD:i:>YFI tiD

f)HEYDARY 

. PC 

HAMILTON 

Barristers, &.,licitors 

January 2008 

Trade-mark 

ext. 211 

Email: [email protected] 

Don H. Jack 

Lerners .LLP 

130 Adelaide St. West 

Suite 2500 

Toronto, ON M5H 3P5 

VIA FAX 

Your client: Robert Hryniak 

Dear Mr. Jack: 

Re: 

Bruno v. Cassels Brock & Blackwell LLP et. al 

Please be advised that on January 21, 2008 the plaintiff, Bruno Furniture and 

Appliances Inc., deposited $59,915.44 in satisfaction of its obligation to post 

security for costs pursuant to the October 25, 2007 decision of Master Glustein 

(copy of receipt enclosed). 

Please also find enclosed a cheque for $3,000, as satisfaction of the plaintiff's 

contribution to costs for the Motion of October 17, 2007. 

J trust that this satisfies the plaintiff's obligations with respect to the decision of 

Master Glustein of October 25, 2007. 

Finally, please find enclosed a draft Order in accordance with the decision of 

Master Glustein for your approval as to form and content . 

. Sincerely, 

\,\'V\,\.,· 

Toronto, ON, Can~d~f M5G JY8 

972-9940 Email: [email protected] 

.HEYDARYCOM ........... wW\.,·

TJUH 

auog BlfsB:P:?N 

z

CANADIAN IMPERIAL BANK OF COMMERCE 

DEPOSITOR'S COpy 

NO . 802100008 

TORONTO, 

RE: BRUNO APPLICANCE & FURNITURE VS CASSELS BROCK & 

COURT FILE NO.: OS-CV-285434PD2 

ACCOUNT NUMBER: 505 939 

THIS IS TO CERTIFY THAT: 

HAMILTON PC 

HAS DELIVERED FOR CREDIT OF THIS MATTER IN THE 

$59,915.44 PURSUANT TO J.E.100CT07 

RECEIPT OF THE CANADIAN IMPERIAL BANK OF COMMERCE 

"!t, ..

This is Exhibit "0" referred to in the 




A '"C'omm~ioner for Taking Affidavits 

,tf;y?/€NNG t:. U)()o':c,Yl9-ib

ONTARIO 



BETWEEN: 


Plaintiff 

- and - 




Defendants 

COSTS OUTLINE OF THE DEFENDANT, ROBERT HRYNIAK 

(Security for Costs Motion to be Heard May 29, 2009) 

The Defendant, Robert Hryniak provides the following outline of the submissions to be 

made at the hearing of the motion seeking additional security for costs motion in support 

of the costs the party will seek if successful on the Summary Judgement Motion: 

To End of Summary Judgment Motion 

Fees (as described below) $103,140.00 

GST on fees $5,157.00 

Disbursements $ 6,435.45 

Total $114,732.45

-2 

The following points are made in support of the costs sought with reference to 

the factors set out in subrule 57.01 (1): 

• the amount claimed and the amount recovered in the proceeding 

The damages claimed exceed $10,000,000. 

• the complexity of the proceeding 

The factual issues are highly complex requiring a sophisticated understanding of 

investment theory and a particular understanding of a form of investment' known 

as basis trading, which is not generally well understood, as well as a 

consideration of fraudulent activities undertaken by non-parties to the action. 

This matter will require also the determination of complex legal issues. 

• the importance of the issues 

The plaintiff has alleged, inter alia, fraudulent behaviour by Mr. Hryniak and 

this allegation is very important to Mr. Hryniak. 

• the conduct of any party that tended to shorten or to lengthen unnecessarily the 

duration of the proceeding 

The plaintiff has refused to join these actions arising from the same factual 

matrix, parties and allegations. 

• whether any step in the proceeding was improper, vexatious or unnecessary or 

taken through negligence, mistake or excessive caution 

The plaintiff allowed the suit to languish in a dormant state and are now 

attempting to bring a motion for summary judgment despite clear factual 

disputes as evidenced by the pleadings. 

• a party's denial of or refusal to admit anything that should have been admitted 

NIA 

• the experience of the party's lawyer 

Mr. Jack was called to the Bar in 1974, Ms. Southren in 1997. 

• the hours spent, the rates sought for costs and the rate actually charged by the 

party's lawyer

- 3 - 

Meetings with client 

Total for this section: 

Partial Indemnity fees: $8,000.00 

(b) Case Conferences and Status"Hearing 

Prepare for and attend Case I Don Jack 1.4 I $350.00/hr I $600.00/hr 

Conferences on: 

I Jane Southren 3.5 , $250.00/hr I $400.00/hr 

Develop and draft case timetables 

Michael Varpio 1.5 I $200.00/hr I $360.00/hr 

Total for the Section: 


(c) Preparation of Affidavit of Documents and Review of Other Parties Documents 

Reviewing client documents 

Preparing Affidavit of Documents 

and Production Briefs 

Preparing Supplementary Affidavit 

of Documents 

Don Jack 19 $350.00/hr I $600.00/hr 

Jane Southren 20 $250.00/hr I $400.00/hr 

Karen W. Kiang 20 $175.00/hr I $245/00/hr 

Law Clerk 30 $80.00/hr I $160.00/hr 



(d) Preparing and Serving Responding Record in Summary Judgment Motion 

Reviewing motion materials of 

moving party 

Don Jack 

Jane Southren 

20 

45 

$480.00/hr 

$320.00/hr 

$600.00/h~ 

$400.00/hr 

Preparing Responding Motion 

Ruth Aleixo 

Law Clerk 

15 

$130.00/hr 

$160.00/hr

- 4 - 

Record 

(e) Omnibus Motions in Relation to: 


Substantial Indemnity fees: $25,950.00 

( i) Second Security for Costs Motion; 

(ii) Attendance of Plaintiffs pursuant to Rule 39.03; and 

(iii) Peebles Motion to advance crossclaim against Cassels Brock 

Prepare motion material for Don Jack ! 10 $350.00/hr $650.00/hr 

additional security for costs 

Jane Southren 30 $250.00/hr $400.00/hr 

Research 

Ruth Aleixo 5 $80.00/hr $160.00/hr 

Review other parties' motion Law Clerk 

materials 

Articling Student 2.5 $60.00/hr $160.00/hr 

Prepare Factum and Book of 

Authorities 

I 

I 

Attendance at Omnibus Total for this section: 

Hearings, one full day 

Partial Indemnity fees: $11,550.00 . 

(f) Remaining Summary Judgment Motion Procedures 

Witnesses Examinations Don Jack 35 $480.00/hr $650.00/hr 

Undertakings and Refusals Jane Southren 60 $320.00/hr $400.00/hr 

Motions 

Ruth Aleixo 12.5 $130.00/hr $160.00/hr 

Research 

Law Clerk 

Preparation of Factum and Book Articling Student 8 $100.00/hr $155.00/hr 

of Authorities 

Attendance at Hearing 


Substantial Indemnity fees: $38,425.00 

-~-----------~----.~--.-. "-- -------- ---------- - 

• any other matter relevant to the question of costs

- 5 - 

LAWYER'S CERTIFICATE 

I CERTIFY that the hours claimed have been spent, that the rates shown are correct 

and that each disbursement has been incurred as claimed. 

March 23, 2009 

Signature of

- 6 - 

APPENDIX 

Amounts Claimed for Disbursements 

I ClII;:>IJllfJl;:> 

Photocopies $2,500.00 

I Fax $300.00 

Process server fees $300.00 

Couriers $300.00 

On-line legal research fees $800.00 

Postage $25.00 

Corporate Searches $54.00 

Total disbursements $6,129.00 

GST on taxable disbursements $306.45 

Total disbursements and GST $6,435.45


Court File No: 

-£u ..... ..,..;.., PD2 

ONTARIO 



COSTS OUTLINE OF THE DEFENDANT, 

ROBERT HRYNIAK 

LERNERSLLP 

Barristers & 


Suite 2400, Box 

Toronto, ON 

M5H 3P5 



Tel: (416) 

Fax: (416) 

Solicitors for 

Robert H 

1309819.4


Court File 

05-CV -285434PD2 

ONTARIO 


commenced at Toronto 

AFFIDAVIT OF JANE SOUTHREN 

LERNERSLLP 



Suite 2400, 

Toronto, ON 

M5H 3P5 

Don H. Jack 14307Q 


Tel: (416) 

Fax: (416) 

Defendant 

13133'83.1


Court File No: 05-CV-285434PD2 

ONTARIO 



MOTION RECORD OF THE DEFENDANT, 

ROBERT HRYNIAK 

(MOTtON RETURNABLE FRIDAY I MAY 29, 2009) 

LERNERSLLP 

Barristers & Soli,citors 



Toronto, ON 

M5H 3P5 


Jane Southren LSUG#: 39673G 

Tel: (416) 867-3076 

Fax: (416) 867-9192 



1313183.1

Motion Record for Hyrniak - Heydary Hamilton PC

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