Powers v Greymountain Management Ltd (In Liquidation) & Ors (Approved)

Factual and Procedural Background

This case concerns the Plaintiff's application for pre-trial discovery against the Defendants, heard remotely on 29 January 2021. The Plaintiff was originally one of 35 claimants in prior proceedings against the same Defendants, which were ordered by a prior judgment to proceed by way of separate trials. The Plaintiff’s claim arises from online trading in binary options through a platform called Glenridge Capital. The Plaintiff alleges that this trading was part of a fraudulent binary options scam operated by the Defendants and that he lost USD$130,072 paid as premiums for binary options. The Defendants include a company in liquidation and several individuals alleged to have operated and managed the trading platforms and related entities. The Plaintiff seeks discovery of documents relevant to both his personal transactions and broader fraudulent trading activities allegedly conducted by the Defendants. The Defendants have partially complied with discovery but refused categories of documents relating to broader operations and regulatory communications.

Legal Issues Presented

1. Whether the Plaintiff is entitled to pre-trial discovery of documents relating solely to his own transactions with the Defendants or also to documents concerning broader fraudulent activities involving other parties.
2. The relevance and necessity of discovery of documents relating to alleged broader fraudulent conduct by the Defendants in the context of the Plaintiff’s claim.
3. The adequacy and specificity of the Plaintiff’s pleadings concerning the alleged broader fraud.
4. The appropriateness of costs orders in relation to the interlocutory application for discovery.

Arguments of the Parties

Plaintiff's Arguments

• The Plaintiff contends that the alleged fraudulent scheme was broader than just his own transactions and involves a pattern of similar conduct by the Defendants.
• The Plaintiff emphasizes that his pleadings, given the clandestine nature of the fraud, have sufficient particularity and that discovery is necessary to establish the full extent of the Defendants’ activities.
• The Plaintiff argues that discovery should not be limited narrowly to his own transactions but should include documents relating to other entities and activities connected to the Defendants.
• The Plaintiff denies that the request for broader discovery is speculative or a fishing expedition and asserts it is relevant to proving the fraudulent character of his own transactions.

Defendants' Arguments

• The Defendants argue that the Plaintiff’s pleadings on the broader fraud lack the necessary specificity.
• They contend that the Plaintiff is seeking documents that are not probative of any wrongdoing against him personally.
• The Defendants accuse the Plaintiff of impermissible “fishing” for documents beyond the scope of his individual claim.
• They assert that discovery relating to broader fraud is irrelevant and that any such documents would only serve to attack the Defendants’ credibility, which is not a proper purpose for discovery.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court began by acknowledging the procedural history and the nature of the Plaintiff’s claim alleging a fraudulent binary options scheme involving the Defendants. It recognized the well-established legal principle that allegations of fraud must be pleaded with particularity, yet also accepted that victims of fraud may lack full information until discovery is obtained. The Court found the Plaintiff’s pleadings sufficiently particular given the clandestine nature of the alleged fraud and accepted that discovery relating to broader fraudulent activities was relevant and necessary to prove the fraudulent character of the Plaintiff’s own transactions. The Court rejected the Defendants’ argument that the broader discovery request was speculative or merely aimed at attacking credibility, noting the Plaintiff had pointed to independent information corroborating the broader fraud allegations. The Court further reasoned that individual transactions could be better understood in the context of a wider pattern of conduct, and that proof of similar fraudulent conduct in other transactions could be probative. The Court also noted that the Defendants’ general denials left room for discovery to rebut possible defenses. Finally, the Court adopted the reasoning of O’Moore J. concerning the severance of claims, while emphasizing that similarity between other claims may assist in proving the Plaintiff’s case. The Court thus concluded that the Plaintiff was entitled to broad discovery related to the Defendants’ binary options operations, communications, software, and regulatory interactions within specified timeframes.

Holding and Implications

The Court granted the Plaintiff’s application for pre-trial discovery against the second to fifth Defendants, ordering them to disclose documents relating to:

• Binary trading operations carried on personally or through connected entities or websites, including Glenridge Capital, UKTVM, and Beeoptions, between 20 May 2014 and 13 July 2017.
• Communications between the fourth and/or fifth Defendants and the first Defendant concerning binary options trading operations associated with the fourth and fifth Defendants within the same period.
• Computer software and hardware used in the binary trading operations for trading or payment processing during the relevant period.
• Notices, allegations, pre-investigation or pre-proceeding notifications, or actual proceedings received from financial regulatory authorities in any jurisdiction, including Ireland and Ontario, Canada.

Regarding costs, the Court ordered that the Plaintiff’s costs of the discovery motion be costs in the cause, with no order as to the Defendants’ costs, meaning each party bears their own costs for this interlocutory application regardless of the trial’s outcome.

No new legal precedent was established; the decision primarily clarifies the application of existing principles on discovery in fraud claims involving complex, multi-party schemes.