CITATION: Metro Zen (Canada) Inc. v. Eisen, 2018 ONSC 6536

COURT FILE NO.: CV-17-572380

DIVISIONAL COURT FILE NO: 154/18

DATE: 20181102

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Metro zen (Canada) Inc.

Plaintiff/ Respondent on Appeal

– and –

MELVYN EISEN, KYLE BUTLER, KAMALJIT (AKA TONY) SANDHU,

JASDEEP SANDHU, 2550816 ONTARIO INC., 2558992 ONTARIO INC., KARL REICHERT, 2565212 ONTARIO INC., JOHN PAUL FLETCHER, MARPOLE 88 (ONTARIO) HOLDINGS LTD, OLYMPIA TRUST COMPANY and WESTERN PACIFIC TRUST COMPANY

Defendants/ Appellants

Kristine Holder, for the Plaintiff/ Respondent on Appeal

Melvyn L. Solomon, for the Defendants/ Appellants Kamaljit (aka Tony) Sandhu, Jasdeep Sandhu, 2550816 Ontario Inc. and 2565212 Ontario Inc.

Rob Winterstein, for the defendant Melvyn Eisen

Matthew Karabus, for the defendants 2558992 Ontario Inc. and Karl Reichert

Jeremy Lum-Danson, for the defendant Kyle Butler

HEARD at Toronto: September 18 and October 30, 2018

C. Horkins J.

introduction

[1] The defendants Kamaljit (aka Tony) Sandhu, Jasdeep Sandhu, 2550816 Ontario Inc. and 2565212 Ontario Inc. (‘the appellants”) appeal the order of Master Short (the “Master”) dated February 13, 2018.

[2] This appeal was brought in Divisional Court but as explained in these reasons, I heard the appeal in my capacity as a Superior Court judge.

[3] The order gave the plaintiff/respondent Metro Zen (Canada) Inc. (“Metro Zen”) another opportunity to comply with the Master’s January 11, 2018 order (the “January last chance order”).

[4] The January last chance order required Metro Zen to post security for costs before the expiration of the deadline in the order. The January last chance order also stated that if Metro Zen failed to post the security for costs, “this action is hereby dismissed as against the Motion Defendants with costs”. The “Motion Defendants” referred to in the January last chance order are the appellants plus the defendants Kyle Butler, Melvyn Eisen, 2558992 Ontario Inc., and Karl Reichert.

[5] The January last chance order was issued and entered.

[6] Metro Zen did not comply with the January last chance order. As a result, the appellants provided the Registrar with the January last chance order and requested that the action be administratively marked as dismissed in the court’s computer system. When the Registrar declined to do so, the appellants brought a motion before the Master on February 13, 2018 asking that his January order be enforced “such that th[e] Action is deemed and recorded as dismissed against the Motion Defendants”.

[7] On February 13, 2018, the Master refused to enforce his January last chance order. Instead he issued the order under appeal (the “February order”). The February order varied the January last chance order. The Master stayed the January last chance order and gave Metro Zen another opportunity to post security for costs. The security amount was increased to $35,000 and Metro Zen was ordered to post this security by March 1, 2018. If Metro Zen failed to comply by March 1, the stay of the January last chance order was to be lifted. Metro Zen complied with this order and posted the security before the expiration of the new deadline.

[8] The issue on this appeal is whether the Master was functus officio when he issued the February order. If the Master was functus officio, then he had no jurisdiction to make the February order.

jurisdiction and The standard of review

[9] The appeal route from a master’s order depends on whether the order was final or interlocutory. The Courts of Justice Act , R.S.O. 1990, c. C.43 provides in s. 19(c) that a final order is appealed to the Divisional Court and under s. 17 (a) an interlocutory order is appealed to the Superior Court.

[10] Metro Zen argues that this is an appeal of an interlocutory order and therefore the appeal is before the wrong court.

[11] The appellants argue that this an appeal of a final order. They argue that this is the correct characterization because the result of the January last chance order had brought the dispute to an end and when the Master issued the February order he did not have jurisdiction.

[12] The January last chance order was an interlocutory order. As the court explained in Inforica Inc. v. CGI Information Systems and Management Consultants Inc., 2009 ONCA 642, at para. 26, a security for costs order is an interlocutory order, even if it results in the action being dismissed:

26 I recognize that failure to satisfy an order for security for costs may lead to a dismissal of the claim, but the sanction for non-compliance with an order cannot alter the nature of the order itself. Many procedural or interlocutory orders - for particulars, for production of documents, for the payment of costs ordered in interlocutory proceedings - may carry the ultimate sanction of dismissal of the non-complying party's claim. But if the claim is dismissed, the dismissal flows from the party's failure to comply with the interlocutory or procedural order, not from the order itself, and does not alter the interlocutory or procedural nature of the order that led to dismissal: see Laurentian Plaza Corp. v. Martin (1992), 1992 7561 (ON CA), 7 O.R. (3d) 111 (C.A.).

[13] In the Houle v. St. Jude Medical Inc., 2018 ONCA 88, the court acknowledged the “seemingly never ending battle over what orders are final and what orders are interlocutory” and adopted the above observation in Inforica.

[14] The February order under appeal is also an interlocutory order because it purports to vary the terms of the January last chance order (the security for costs order). While the appellants argue that the Master had no jurisdiction to make the February order, this does not alter the interlocutory character of the order.

[15] Since the order under appeal is interlocutory, s. 17(a) of the Courts of Justice Act applies and the appeal is to the Superior Court and not the Divisional Court. However, this does not mean that I have no jurisdiction to hear the appeal.

[16] All judges of the Divisional Court are also judges of the Superior Court and “do not lose either jurisdiction wherever they sit” (see McCormick Estate (Trustee of) v. Murphy, [2005] O.J. No. 1204,at para. 22; Anthes Equipment Ltd. v. Wilhelm Layher GmbH, 1986 2755 (ON SC), [1986] O.J. No. 2338, at page 5).

[17] In Anthes, at p. 6, the court stated that “[w]here convenience, and indeed, justice requires it, the practical division of work should be ignored, in my opinion, so that parties are not shuttled back and forth between courts.” The court cautioned that if the appeal had to be adjourned and transferred to the other court, this “would inevitably cause delay and add expense”. In that case the appeal was brought before the Superior Court (what was then weekly motions court), and it should have been brought before a Divisional Court judge. Since the judge had jurisdiction as a Divisional Court judge and a Superior Court judge, he proceeded to hear the appeal as a Divisional Court judge because convenience and justice required that he do so.

[18] In this case, I advised the parties that I would hear that appeal whether the February order was final or interlocutory, because I am a judge of both courts and it is in the interest of justice that the appeal proceed without delay and further expense. Since I have decided that the order under appeal is interlocutory, the appeal, therefore, proceeded before me as a Superior Court judge under s.17 (a) of the Courts of Justice Act.

[19] The standard of review on an appeal from the order of a Master is correctness for an error of law, palpable and overriding error for an error of fact, and correctness or palpable and overriding error for a question of mixed fact and law, depending on whether there is an extricable legal principle: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235.

background facts

The Action

[20] In November 2012, Metro Zen purchased a property in Toronto for approximately $6,440,000.

[21] Three mortgages were registered against the property with an accumulated value of over $12,000,000. The third mortgagee was a group of syndicated investors, on whose behalf John Paul Fletcher, Olympia Trust Company, and Western Pacific Trust held a registered mortgage in trust.

[22] On March 9, 2017, the appellants purchased the first mortgage from Mr. Eisen. The appellant, 2550816 Ontario Inc., sold the property under power of sale. The appellant, 2565212 Ontario Inc., took back a vendor take back mortgage on the sale to Mr. Reichart's company, 2558992 Ontario Inc.

[23] On March 28, 2017, shortly after these events, Metro Zen commenced this action against all of the defendants. The allegations against the defendants included, fraud, conspiracy, improvident sale, breach of fiduciary duty, and breach of the duties of good faith, loyalty, honesty and confidentiality. Metro Zen requested general damages, punitive damages, and a series of declarations. This was not the first action in which Metro Zen had made such allegations against many of the defendants or their agents.

[24] The appellants plead in this action that Metro Zen’s claims are frivolous and vexatious. Metro Zen is a corporation and the appellants believe that Metro Zen has insufficient assets in Ontario to pay the costs of the appellants and the other defendants. As a result, the appellants and the other defendants (the Motion Defendants) brought motions for security for costs.

The Security for Costs Motions/Orders

(a) The October 17, 2017 Motion/Order

[25] Metro Zen was represented by counsel when it was served with the appellants’ Notice of Motion for Security for Costs. On October 10, 2017, with Metro Zen’s consent, that counsel obtained an order removing him as counsel of record.

[26] The appellants' motion for security for costs was set for October 17, 2017. At the hearing, Metro Zen requested an adjournment that was opposed. In an order dated October 17, 2017 (“the October order”) Master Short adjourned the motion on terms, to a date to be scheduled in February or March 2018. The October order included the following terms:

• The return of the appellants’ security for costs motion was peremptory to Metro Zen.

• Metro Zen was required to either serve a Notice of Change of Lawyer or schedule a Rule 15.01 motion by November 30, 2017.

• Metro Zen was required to post interim security for costs in the amount of $20,000 by December 15, 2017.

• The parties were required to comply with a timetable for the exchange of motion material.

[27] When the Master made the October order, he stated in his reasons that he was “mindful…of the interests of the various syndicated lenders now sought to be protected by Metro Zen”.

(b) The December and January Motions/Orders

[28] After the October motion, the other Motion Defendants served motions for security for costs.

[29] Metro Zen did not comply with the terms of the October order. As a result, the appellants and the other motion defendants brought motions to dismiss the action against them. These motions were heard on December 18, 2017 before Master Sugunasiri and she adjourned the motions to January 4, 2018, a date on which Metro Zen had scheduled a Rule 15 motion. Of note, the October order required the rule 15 motion to be heard by November 30, 2017.

[30] Before the January 4, 2018 motion date, Metro Zen retained counsel and abandoned its Rule 15 motion.

[31] On January 4, 2018, the motions to dismiss the action came before Master Short. Motions were brought by the appellants and the other defendants (Kyle Butler, Melvyn Eisen, 2558992 Ontario Inc., and Karl Reichert). The appellants and these defendants are collectively referred to as the “Motion Defendants” in the order that was issued as described below.

[32] The remaining defendants, John Paul Fletcher, Marpole 88 (Ontario) Holdings Ltd., Olympia Trust Company and Western Pacific trust Company, did not bring a motion to dismiss the action against them.

[33] Counsel for Metro Zen, the Motion Defendants and a collection of individuals who had invested into the syndicated third mortgage, appeared on the motions on January 4, 2018.

[34] This was the first time any syndicated investors became involved in the action. These syndicated investors are the beneficiaries of the defendant trustees Paul Fletcher, Olympia Trust Company, and Western Pacific Trust. These defendant trustees jointly held the third mortgage on the property in trust.

[35] Some of the syndicated investors who were present informed the court that they had raised money and retained counsel. In light of this, the Master addressed the court as follows:

THE COURT: . . .I’m now more aware of the plight of the investors in this case, and I don't want to prejudice what appears to be a situation where proper representation needs to be at least possible. Shelvan [the sole director of Metro Zen] indicates that he's now has a lawyer, at least for the time being, and she's here...

What I am going to do is this - those who have an interest in Metro Zen going forward, have an interest in seeing this action carry on, but I - there's previous - an order outstanding for the payment of security for costs which I gave time to pay until December the 15^th. Mr. Shelvan says he's now got a lawyer and he can focus on that. We also have individuals in the courtroom who say they've raised some money.

So to the extent that security for costs needs to be posted with respect to the contemplated motion for security for costs, I'm going to give until… Friday [February] 2^nd at noon, for - for $30,000 to be posted with the court. If it is not posted, an order will go dismissing the action.

[36] Counsel for the appellants and other Motion Defendants expressed their concern that an extension would prejudice their clients. The Master addressed these concerns as follows:

THE COURT: No, he's getting one whole month; failing which, at that point, I'm going to do an order dismissing the action...

THE COURT: I hear you. And as long as appropriate security is posted, whether it's a letter of credit or something, then on - you'll have protection. But if they can't come up with it or don't, they you're going to - then the action's going to disappear...

THE COURT: But the - but the bottom line is, it's to - so that is clear, somehow or other, the plaintiff needs to assemble $30,000 to put into court. That money doesn't go anywhere until the action is resolved or some court makes an order about the money coming out. But there needs to be security available in the event that the action's unsuccessful or the - to be able to cover the costs of these motions...

THE COURT: So thank you all for coming. We're at least trying to make some progress, but you - it's good to hear you [the syndicated investors] have a panel of five. You need to take over or be involved in how the matter gets - moves forward. And there may be some ways - as I say, hopefully, you've got an expert who's going to look after your - your case going forward. But if you don't - if you don't get the $30,000 together, the party is over. So to be clear, this is a last-chance order, and we'll go from there...

[37] On January 29, 2018, the January last chance order was issued and entered by the Registrar pursuant to Rule 59.04.

[38] Paragraph one of the January last chance order sets out the last chance deadline for posting interim security for costs and states that if Metro Zen fails to comply the action is “hereby dismissed against the Motion Defendants”:

THIS COURT ORDERS that the Plaintiff is given a last chance order to post $30,000.00 as security for costs (the "Funds") with the accountants of the Superior Court by February 2, 2018 at 12:00 noon, failing which, this action is hereby dismissed as against the Motion Defendants with costs.

(c) The February 13 2018 Motion/ Order

[39] On February 2, 2018, appellants’ counsel confirmed with the Accountant of the Superior Court that Metro Zen had failed to post the interim security for costs by the deadline in the January last chance order.

[40] Appellants’ counsel presented the Registrar with the January last chance order and requested that the action be administratively marked as dismissed in the court's computer system.

[41] The Registrar would not mark the action as dismissed in the computer system. As a result, on February 13, 2018, the appellants brought a new motion on notice requesting an order enforcing the January last chance order stating “that this Action is deemed and recorded as dismissed against the Motion Defendants”.

[42] At this motion, counsel for Metro Zen and the other Motion Defendants were present. As well, some of the syndicated investors attended.

[43] There was no dispute that Metro Zen had not complied with the January last chance order. The interim security for costs had not been posted.

[44] Mr. Chapman appeared as counsel for John Reid, a proposed intervenor. Mr. Reid is a syndicated investor for whom Olympia Trust Company held a portion of the third mortgage in trust. Mr. Chapman advised the Master that his client, who was present at the January 4, 2018 motions, wished to raise the money on behalf of Metro Zen. Mr. Reid’s motion to seek intervenor status was set for February 21, 2018 (it was later abandoned).

[45] No evidence was given to explain why John Reid, or any of the other syndicated investors, had failed to ensure that Metro Zen posted the interim security for costs, despite the clear wording of the January last chance order.

[46] The Master asked counsel for Metro Zen “do you have any excuse, like explanation”. Counsel responded that Metro Zen “wasn’t able to raise the funds”. Metro Zen did not file an affidavit on this motion.

[47] The appellants advised the Master that they required an order directing the Registrar to administratively mark the case as dismissed on the court record as against the appellants and the other “Motion Defendants”. In submissions, the appellants’ counsel stated the purpose of the motion as follows:

THE COURT: What - what are we here for?

SOLMON: And I'll give you the order that we're requesting. So the - the problem in the system is even though your order at page 12 says

"this court orders that the plaintiff is given a last-chance order to post $30,000 as security for costs (the funds), with the accountants of the Superior Court by February 2' at 12:00 noon; failing which, this action is hereby dismissed as against the motion defendants with costs."

So when we went to get it marked on the computer system that the action was dismissed, they [the registrar] refused to do it over the counter, and they said"you have to bring a motion." So we weren't going to argue with anybody...

…our view is that the action's already been dismissed, and all we need is your direction to the court staff to mark it on the computer that the action is dismissed, and that's all we're asking for.

[48] The Master then proceeded to hear from Mr. Chapman, counsel for John Reid, a person who had no status to intervene and had filed no evidence on the motion. Counsel gave a synopsis of the pending motion to intervene (later abandoned), as well as the arguments the proposed intervenor planned to make in the action. The Master heard these submissions, even though the action had already been dismissed by the January last chance order against the appellants and the other Motion Defendants identified in the January last chance order.

[49] Despite the clear terms of the January last chance order, the Master declined to order that the “action is deemed and recorded as dismissed against the Motion Defendants” as requested. Instead, he decided to give Metro Zen another chance to pay the security for costs that he increased to $35,000. The Master stated as follows:

But I propose, and no particular good reason that I can come up with, but to -- to say on February the 28th, if the money is not paid, I will personally sign the order dismissing it. And -- and I will accept an accountant’s certificate like the one you’ve got that says as of February 27th, there was no payment. So they’ve got ‘til February the 27th to come up $30,000.

[50] After the February order and before the expiry of the new deadline, Metro Zen posted the security for costs of $35,000.

[51] The February order consists of 10 paragraphs. On this appeal, the appellants ask that the order be set aside and that it be “administratively confirmed that the action has been dismissed against the appellants and the other Motion Defendants and that costs of the motion of February 13, 2018 and this appeal be awarded in favour of the appellants”.

[52] The February order provides as follows:

1. THIS COURT ORDERS that by 5:00pm on Tuesday, February 27, 2018, the plaintiff shall provide Master Short with five copies of a reasonable accounting as to all funds received by the plaintiff from the investors and their disposition by the plaintiff.

2. THIS COURT ORDERS that Master Short will deal with the appropriate distribution of the accounting provided to him in accordance with paragraph 1 of the Order, shortly after receipt.

3. THIS COURT ORDERS that security for costs in the sum of $35,000.00 in trust, shall be delivered to the office of, and in the name of Solmon Rothbart Goodman LLP; at 375 University Avenue, Suite 701, Toronto, Ontario, M5G2J5 by 5:00pm on Thursday, March I, 2018. These funds are to be delivered by way of Bank Draft or Certified Funds, and will be held in the trust account of Solmon Rothbart Goodman LLP.

4. THIS COURT ORDERS that the Order of Master Short in this proceeding, issued on January 29, 2018, dismissing the Action as against the "Motion Defendants" with costs, is stayed until March 2, 2018.

5. THIS COURT ORDERS that if no payment is made of the $35,000.00 in accordance with paragraph 3 of this Order, the stay will expire.

6. THIS COURT ORDERS that Solmon Rothbart Goodman LLP be paid costs of $3,500 and if paragraph 3 is complied with, then Solmon Rothbart Goodman LLP is granted Ieave to withdraw this amount from the $35,000.00 in Trust.

7. THIS COURT ORDERS that Danson & Zucker (Symon Zucker Professional Corporation) be paid costs of $2,000.00, and if paragraph 3 is complied with, then Danson & Zucker (Symon Zucker Professional Corporation) is granted leave to withdraw this amount from the $35,0000.00 in Trust.

8. THIS COURT ORDERS that Gardiner Roberts LLP be paid costs of $2,000,00, and if paragraph 3 is complied with, then Gardiner Roberts LLP is granted leave to withdraw this amount from the $35,000.00 in Trust.

9. THIS COURT ORDERS that Gowling WLG (Canada) LLP be paid costs of $2,000 .00, and if paragraph 3 is complied with, then Gowling WLG (Canada) LLP is granted leave to withdraw this amount from the $35,000.00 in Trust.

10. THIS COURT ORDERS that the balance of the $35,000.00 remain in the trust account of Solmon Rothbart Goodman LLP, subject to 'further order of the court.

Law and analysis

[53] The appellants state that the Master erred in law when he varied the January last chance order. The last chance order had been issued and entered, and the Master was functus officio. Therefore, the Master had no jurisdiction to issue the February order.

[54] Metro Zen argues that the doctrine of functus officio does not apply because the Master did not “reopen, revise or vary” his January last chance order. Instead, Metro Zen says that the Master stayed the operation of the order and he had the jurisdiction to do so under s. 106 of the Courts of Justice Act and rule 59.06 (2) (b) of the Rules of Civil Procedure.

[55] Rule 59.06 (2) (b) allows a “party” to bring a motion “to suspend the operation of an order”. Rule 59.06 (2) (b) does not apply because Metro Zen never brought a motion to suspend the operation of the January last chance order.

[56] Section 106 provides:

106. A court, on its own initiative or on motion by any person, whether or not a party, may stay any proceeding in the court on such terms as are considered just.

[57] It is obvious that the Master varied the January last chance order, because the February order increased the amount of the security and set a new deadline for payment. This variation purported to stay the dismissal of the action against the Motion Defendants, which stay would expire if the new security for costs was not paid.

[58] While Metro Zen characterizes this as a stay order under s.106 with terms, the Master did not have the jurisdiction to make this order. That order had been issued and entered and had already resulted in the dismissal of the action against all of the Motion Defendants for non-payment of the security. The Master was functus officio.

[59] Even if one were to accept that the Master was not functus offico, there was nothing on the record before the Master to justify issuing a stay on his own initiative. Metro Zen did not file a notice of motion seeking a stay, nor ask for a stay without having filed a notice of motion. Metro Zen never filed evidence on any of the motions that led to the January last chance order or the February order.

[60] At the February motion, Metro Zen told the Master it “wasn’t able to raise the funds”, but no affidavit was filed to support this submission. Metro Zen had ample opportunity to respond because the appellants’ security for costs motion was first heard in October 2017.

[61] The circumstances under which it is appropriate for a court to stay its own order are rare as stated in Yaiguaje v. Chevron Corp, 2013 ONCA 758, at paras 54-55:

54 While s. 106 of the CJA entitles the court to grant a stay on its own motion, the circumstances under which it may appropriately do so are rare. As stated by Epstein J. in Gruner v. McCormack (2000), 45 C.P.C. (4th) 273 (Ont. S.C.J.), at para. 30,

To justify a stay, the defendant must satisfy the court that a continuance of the action would work as injustice because it would be oppressive or vexatious or an abuse of the process of the court and that the stay would not cause an injustice to the plaintiff.

55 In my view, the onus should be equally high, and should be applied perhaps even more stringently, when, as here, a stay has not been requested. This is particularly true in the context of a recognition and enforcement action: see 1247902 Ontario Inc. v. Carlisle Power Systems Ltd., [2003] O.J. No. 6300. [Emphasis added.]

[62] If the Master was not functus officio (and I say he was), then this was not one of the rare circumstances where it was appropriate for the court to exercise the stay power under s. 106. The Master gave no reasons to show that the stringent test under s. 106 was met. In fact, he stated that for “no particular good reason that I can come up with” he was issuing the February order.

[63] The Master had an obligation to clearly explain the basis for the change to the January last chance order and he gave no reasons. This is an error (see 1711811 Ontario Ltd. v. Buckley Insurance Brokers Ltd., 2014 ONCA 125, at para. 73).

[64] Based on the doctrine of functus officio, it is clear that the Master did not have the jurisdiction to vary the January last chance order. In so doing, he erred in law.

[65] The essential elements of the doctrine of functus officio and the rationale for this doctrine are set out in Beard Winter LLP v. Shekhdar, 2015 ONSC 4517, at para 29. I agree with the following:

29 The essential elements of the doctrine of functus officio as well as its exceptions were set out by Sopinka J. in the Supreme Court of Canada's decision in the case of Chandler v. Alberta Association of Architects, 1989 41 (SCC), [1989] 2 S.C.R. 848 at page 860 as follows:

The general rule that a final decision of a court cannot be reopened derives from the decision of the English Court of Appeal in In re St. Nazaire Co. (1879), 12 Ch. D. 88. The basis for it was that the power to rehear was transferred by the Judicature Acts to the appellate division. The rule applied only after the formal judgment had been drawn up, issued and entered, and was subject to two exceptions:

1. where there had been a slip in drawing it up, and

2. where there was an error in expressing the manifest intention of the court. See Paper Machinery Ltd. v. J.O. Ross Engineering Corp., 1934 1 (SCC), [1934] S.C.R. 186.

30 The fundamental policy rationale behind the functus officio doctrine is that for the due and proper administration of justice, there must be finality to a proceeding to ensure procedural fairness and the integrity of the judicial system. As was noted by the Supreme Court of Canada in the case of Doucet-Boudreau v. Nova Scotia (Minister of Education), 2003 SCC 62, [2003] 3 S.C.R. 3, at para 79:

It is clear that the principle of functus officio exists to allow finality of judgments from courts which are subject to appeal (see also Reekie v. Messervey, 1990 158 (SCC), [1990] 1 S.C.R. 219, at pp. 222-23). This makes sense: if the court could continually hear applications to vary its decisions, it would assume the function of an appellate court and deny litigants a stable base from which to launch an appeal.

31 If a court is permitted to continually revisit or reconsider final orders simply because it has changed its mind or wishes to continue exercising jurisdiction over a matter, there would never be finality to a proceeding.

32 The principle of functus officio ensures that subject to an appeal, parties are secure in their reliance on the finality of superior court decisions.

[66] In summary, this is a case where Metro Zen repeatedly failed to comply with the Master’s orders. Metro Zen never provided the Master with any evidence to explain its default and never brought a motion to seek any relief. The orders that were made against Metro Zen were always clear and ample time was given to Metro Zen to comply.

[67] Paragraph 1 of the January last chance order clearly stated that Metro Zen was to pay the security for costs by February 2, 2018 “failing which the action is hereby dismissed as against the motion Defendants”. When Metro Zen did not pay the security, the action was dismissed. As a result, the Master was functus officio and had no jurisdiction to issue the February order.

[68] The appellants ask that the February order be set aside and “that it be administratively confirmed that the action has been dismissed against the appellants and the Other Defendants” (collectively called the Motion Defendants).

[69] I now turn to the question of whether all or only part of the Master’s February order was made without jurisdiction. This question is relevant because not every paragraph in the February order appears to deal with the security for costs issue. The parties were given an opportunity to file written submissions addressing this question and attend for further brief submissions on October 30, 2018. On this occasion, counsel for all of the Motion Defendants attended.

[70] As a result of the further submissions, the following is not disputed. The $35,000 payment ordered in para. 3 of the February order remains in trust with appellants’ counsel. The costs that the Master ordered in paras 6 to 9 have not been paid out of the $35,000.

[71] Paras. 1 and 2 of the February order deal with an accounting that Metro Zen was ordered to provide to the Master. It is not possible to explain these paragraphs in the absence of reasons. However, it is agreed that the orders in paras. 1 and 2 are not affected by the finding of functus officio. These orders stand as against the defendants who remain in the action: John Paul Fletcher, Marpole 88 (Ontario) Holdings Limited, Olympia Trust Company and Western Pacific Trust Company. These defendants did not move to have the action dismissed against them.

[72] Dealing with paras. 3, 4, 5, and 10, the Master was functus officio and had no jurisdiction to make these orders. The orders in these paragraphs deal with the $35,000 security for costs.

[73] Paras. 6 to 9 award costs to the Motion Defendants and order that the costs be paid from the $35,000. It is agreed that the Motion Defendants were entitled to a costs order in their favour. The Motion Defendants appeared on the motion and expected the Master to grant the relief requested: an order enforcing the January last chance order stating “that this Action is deemed and recorded as dismissed against the Motion Defendants”. Therefore it is agreed that the Master had the jurisdiction to order costs and that part of paras. 6 to 9 stands. However, there was no jurisdiction to order that the costs be paid from the $35,000.

conclusion

[74] In summary, the appeal is allowed and the following orders are made:

1. Paragraphs 1 and 2 of the order dated February 13, 2018 are not set aside.

2. Paragraphs 3, 4, 5 and 10 of the order dated February 13, 2018 are set aside.

3. In paragraph 6 of the February 13, 2018 order, the order that “Solmon Rothbart Goodman LLP be paid costs of $3,500” is not set aside. The rest of the order in this paragraph is set aside.

4. In paragraph 7 of the February 13, 2018 order, the order “that Danson & Zucker (Symon Zucker Professional Corporation) be paid costs of $2,000.00” is not set aside. The rest of the order in that paragraph is set aside.

5. In paragraph 8 of the February 13, 2018 order, the order “that Gardiner Roberts LLP be paid costs of $2,000,00” is not set aside. The rest of the order in that paragraph is set aside.

6. In paragraph 9 of the February 13, 2018 order, the order “that Gowling WLG (Canada) LLP be paid costs of $2,000.00” is not set aside. The rest of the order in that paragraph is set aside.

7. The amount of $35,000 that is being held in trust by Solmon Rothbart Goodman LLP shall be returned to Metro Zen.

8. It is administratively confirmed that the action has been dismissed against the defendants Kamaljit (aka Tony) Sandhu, Jasdeep Sandhu, 2550816 Ontario Inc. and 2565212 Ontario Inc. Kyle Butler, Melvyn Eisen, 2558992 Ontario Inc., and Karl Reichert.

costs of the appeal

[75] The appellants Kamaljit (aka Tony) Sandhu, Jasdeep Sandhu, 2550816 Ontario Inc. and 2565212 Ontario Inc seek costs from Metro Zen. The defendants Kyle Butler, Melvyn Eisen, 2558992 Ontario Inc., and Karl Reichert do not seek costs.

[76] The parties agree that costs for the attendance on October 30, 2018 should be set at $1,200, but cannot agree on costs for the rest of the work relating to the appeal.

[77] The appellants’ full indemnity costs are $36,302.96, substantial indemnity are $32,454.96 and partial indemnity are $23,870.96. The appellants have agreed to reduce their costs and seek $20,000 all inclusive. Metro Zen submits that a cost order of $15,000 all-inclusive is fair and reasonable.

[78] Metro Zen’s Bill of Costs reveals a much lower amount ($3,380 for substantial indemnity). It is not a measure of what is reasonable, since counsel for the appellants did most of the work. The fact that Metro Zen submits that $15,000 is reasonable, reinforces this point.

[79] The court must be guided by the overriding principle of reasonableness as stated in Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2634 (C.A.). I find that $15,000 as proposed by Metro Zen is a fair and reasonable amount for costs.

[80] I order that Metro Zen shall pay the defendants Kamaljit (aka Tony) Sandhu, Jasdeep Sandhu, 2550816 Ontario Inc. and 2565212 Ontario Inc. their costs fixed at $15,000 all inclusive.

___________________________ C. Horkins J.

Released: November 2, 2018

CITATION: Metro Zen (Canada) Inc. v. Eisen, 2018 ONSC 6536

COURT FILE NO.: CV-17-572380

DIVISIONAL COURT FILE NO: 154/18

DATE: 20181102

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Metro zen (Canada) Inc.

Plaintiff/ Respondent

– and –

MELVYN EISEN, KYLE BUTLER, KAMALJIT (AKA TONY) SANDHU,

JASDEEP SANDHU, 2550816 ONTARIO INC., 2558992 ONTARIO INC., KARL REICHERT, 2565212 ONTARIO INC., JOHN PAUL FLETCHER, MARPOLE 88 (ONTARIO) HOLDINGS LTD, OLYMPIA TRUST COMPANY and WESTERN PACIFIC TRUST COMPANY

Defendants/ Respondents

REASONS FOR JUDGMENT

C. Horkins J.

Released: November 2, 2018

CITATION: Metro Zen (Canada) Inc. v. Eisen, 2018 ONSC 6536

COURT FILE NO.: CV-17-572380

DIVISIONAL COURT FILE NO: 154/18

DATE: 20181128

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Metro zen (Canada) Inc.

Plaintiff/ Respondent on Appeal

– and –

MELVYN EISEN, KYLE BUTLER, KAMALJIT (AKA TONY) SANDHU,

JASDEEP SANDHU, 2550816 ONTARIO INC., 2558992 ONTARIO INC., KARL REICHERT, 2565212 ONTARIO INC., JOHN PAUL FLETCHER, MARPOLE 88 (ONTARIO) HOLDINGS LTD, OLYMPIA TRUST COMPANY and WESTERN PACIFIC TRUST COMPANY

Defendants/ Appellants

Kristine Holder, for the Plaintiff/ Respondent on Appeal

Melvyn L. Solmon, for the Defendants/ Appellants Kamaljit (aka Tony) Sandhu, Jasdeep Sandhu, 2550816 Ontario Inc. and 2565212 Ontario Inc.

Rob Winterstein, for the defendant Melvyn Eisen

Matthew Karabus, for the defendants 2558992 Ontario Inc. and Karl Reichert

Jeremy Lum-Danson, for the defendant Kyle Butler

HEARD at Toronto: September 18 and October 30, 2018

ERRATUM OF Reasons for judgment RELEASED NOVEMBER 2, 2018

C. hORKINS J.

[81] The name of counsel "Melvyn L. Solomon" which appears on the right hand column beside the style of cause in the first page of the original reasons released on November 2, 2018 has been changed to:

Melvyn L. Solmon

[82] All other contents in the reasons remain unchanged

___________________________ C. Horkins J.

Released: November 28, 2018

CITATION: Metro Zen (Canada) Inc. v. Eisen, 2018 ONSC 6536

COURT FILE NO.: CV-17-572380

DIVISIONAL COURT FILE NO: 154/18

DATE: 20181128

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Metro zen (Canada) Inc.

Plaintiff/ Respondent on Appeal

– and –

MELVYN EISEN, KYLE BUTLER, KAMALJIT (AKA TONY) SANDHU,

JASDEEP SANDHU, 2550816 ONTARIO INC., 2558992 ONTARIO INC., KARL REICHERT, 2565212 ONTARIO INC., JOHN PAUL FLETCHER, MARPOLE 88 (ONTARIO) HOLDINGS LTD, OLYMPIA TRUST COMPANY and WESTERN PACIFIC TRUST COMPANY

Defendants/ Appellants

ERRATUM OF REASONS FOR JUDGMENT RELEASED NOVEMBER 2, 2018

C. Horkins J.

Released: November 28, 2018