Executive Summary: Key Legal and Evidentiary Issues

• Continuing non-compliance by Iberbanco with multiple court-ordered disclosure obligations, including production of bank statements and native electronic records.
• Credibility concerns arising from Iberbanco’s shifting and inconsistent explanations for not producing FINTRAC compliance reports.
• Deficiencies in Iberbanco’s efforts to retrieve documents and emails from its systems and email service provider, despite regulatory and litigation duties.
• Failure to promptly locate or generate documentation evidencing an asserted freeze or restriction on a customer bank account.
• Ongoing breaches of disclosure orders prompting the applicants to seek a contempt motion timetable and to incur additional case-management costs.
• Fixing and awarding of substantial costs against Iberbanco to indemnify the applicants and signal the court’s intolerance for disregard of its orders.

Background and parties

This case arises from an application brought by Labyrinth Partners Ltd. and Athena Advisory Ltd. (the applicants) against Iberbanco Ltd. and several individual and corporate respondents connected to Iberbanco. The matter comes before the Ontario Superior Court of Justice at the case-management stage, specifically during case conferences on March 4 and March 6, 2026, presided over by Justice Parghi. The endorsement focuses on Iberbanco’s repeated failures to comply with prior disclosure orders and the consequences of that non-compliance, rather than on the underlying merits of the broader dispute between the parties.

Procedural context and disclosure orders

Over a period of months, the court issued several orders directing Iberbanco to provide specific categories of documents and information. These obligations were crystallized into numbered disclosure items, including banking records, compliance reports, and related correspondence. By the time of the March 6, 2026 case conference, the court had already expressed concern about Iberbanco’s non-compliance at an earlier March 4 conference, and had required that Iberbanco’s in-house counsel personally attend to address the outstanding disclosure issues.

The March 6 conference confirmed the court’s view that Iberbanco did not appreciate the seriousness of its disclosure obligations and had not taken adequate, proactive steps to comply. The judge highlighted that Iberbanco was under a duty to engage thoughtfully with the orders, not merely to pass along whatever incomplete or improperly formatted records it happened to have.

Outstanding banking records and native format documents

A key group of issues involved court-ordered items 1 and 33 on the disclosure list. These required Iberbanco to provide bank statements and underlying source documents for spreadsheets and account statements in their native electronic format, including IBANs and account numbers. Iberbanco had instead produced the documents only in PDF form.

In response to judicial questioning, Iberbanco’s representative explained that the bank received these documents in PDF from a third-party entity (JNFX) and had simply forwarded them on in that form. The judge rejected this as insufficient, emphasizing that the court order required native-format data and that Iberbanco was obliged to actively obtain those records in the required form. Iberbanco was instructed to contact JNFX forthwith to secure the native documents, expressly invoking the binding nature of the court’s order.

FINTRAC compliance reports and credibility concerns

A second major area of concern related to items 4, 5, and 40, which required Iberbanco to produce various FINTRAC reports filed with the Canadian anti-money laundering regulator. Iberbanco’s explanations for non-production had shifted over time: it said initially that the reports contained other clients’ confidential information; later it suggested the reports were “in progress”; and at another point it claimed the reports existed only as attachments to emails that it could no longer locate, particularly because the employees who sent them had left the bank.

When questioned more closely at the March 6 conference, Iberbanco’s representative admitted she had never actually seen the reports herself. This admission led the judge to comment that the bank’s explanations were implausible and mutually inconsistent: the reports could not simultaneously be confidential documents that exist, unfinished reports “in progress,” and also unrecoverable attachments to missing emails.

The court underlined that, as a regulated entity, Iberbanco should be expected to retain compliance reports in an organized, self-standing manner. Even if, contrary to common practice, the reports existed only as email attachments, the judge found Iberbanco had not demonstrated that it took reasonable measures to retrieve the underlying emails—such as working with its email service provider to restore or search historic accounts, including those of former employees.

Given these deficiencies, the court directed that if Iberbanco intended to maintain its position that it could not produce the FINTRAC reports, it would have to file detailed affidavit evidence. That affidavit would need to describe the bank’s usual practices for preparing, filing, and retaining compliance reports, the specific efforts made to locate the reports and emails, the obstacles encountered, and all steps taken to obtain duplicate copies from the regulator.

Evidence of freezing or restricting a bank account

The court also examined item 14, which required Iberbanco to produce documents showing that it had frozen or otherwise restricted funds in a particular customer account. Iberbanco had asserted in the litigation that it had indeed placed restrictions on that account, but claimed it could not generate or locate documentation to prove it.

Justice Parghi found this position surprising, particularly for a regulated bank, and even more so in light of Iberbanco’s own reliance on the alleged account freeze as part of its litigation narrative. During the conference, Iberbanco’s representative then stated that documents might in fact exist but that she needed to speak with a colleague to confirm. The judge pointedly noted that this was an obvious step that should have been taken months earlier, and that neither Iberbanco nor its counsel could offer a reasonable justification for the delay.

Additional email disclosure and phone number records

Further issues arose under items 24 and 25, which required Iberbanco to produce additional emails relevant to the dispute. As with the FINTRAC reports, compliance depended on Iberbanco working with its email service provider to retrieve messages, including those tied to former employees. The judge expressed concern that Iberbanco had not pursued these retrieval efforts with sufficient vigor and reiterated that much more should be done to locate and produce the emails.

Item 26 related to a particular phone number, requiring Iberbanco to identify and produce the records from which it had obtained that number. Iberbanco had not given a responsive answer. Counsel said at the conference that he would now attempt to find out which records had been reviewed. The judge noted that this basic step should have been taken much earlier in the process.

Contempt motion and case-management concerns

The endorsement stresses that the items discussed are only examples of a larger set of outstanding disclosure obligations that Iberbanco had breached, despite multiple orders. With limited time at the case conference, the judge declined to address every item line by line, explaining that the court should not have to prompt a regulated institution through obvious follow-up tasks. The responsibility lay squarely with Iberbanco, guided by its counsel, to act proactively and diligently.

In light of the ongoing non-compliance, the applicants sought to schedule a contempt motion. The judge directed the parties to agree on a timetable for the steps in such a motion and to submit a proposed schedule by email, indicating that the same judge would remain seized of any future contempt proceedings if needed.

Costs, legal principles, and outcome

A central outcome of this endorsement is the court’s decision on costs stemming from the March 4 and March 6 case conferences. The applicants requested costs of $11,375.15, inclusive of HST, representing the legal expenses incurred specifically to address Iberbanco’s disclosure failures and to prepare for and attend the two conferences. The amount deliberately excluded time that counsel would ordinarily spend reviewing properly produced disclosure, and instead reflected only the additional expense caused by Iberbanco’s non-compliance.

Justice Parghi exercised the court’s discretion to fix costs under section 131 of the Courts of Justice Act, applying the factors in Rule 57.01 of the Rules of Civil Procedure and the overarching principle that costs awards should be fair, reasonable, and within the reasonable expectations of the unsuccessful party. The endorsement also refers to the Ontario Court of Appeal’s guidance in Boucher v. Public Accountants Council, which emphasizes indemnity and reasonableness in costs determinations.

Having considered those principles, the judge found Iberbanco’s positions on the disclosure issues to be without merit and observed that, to the extent there can be a “winner” in case conferences, the applicants were clearly the winners. The court accepted that the amount sought was fair and reasonable and held that, based on the principle of indemnity, the applicants ought to be made whole for the addition­al costs they were forced to incur solely because of Iberbanco’s repeated disregard of court orders.

In the result, the court ordered Iberbanco to pay the applicants costs of $11,375.15, inclusive of HST, within 30 days. The endorsement makes clear that beyond compensating the applicants, this costs award also serves to send an unequivocal message that ongoing failure by a regulated financial institution to comply with court-ordered disclosure obligations is unacceptable and will not be tolerated. Accordingly, in this decision the successful party is the applicants, Labyrinth Partners Ltd. and Athena Advisory Ltd., and the total quantified monetary amount ordered in their favor is $11,375.15 in costs.