Court File and Parties

Court File No.: CV-18-00596486-00A1 Motion Heard: February 21, 2019 Superior Court of Justice - Ontario

Re: Anne Gloria Odette Kaye and Andrea Margaret Federer in their capacities as Estate Trustees of the Estate of Edmond G. Odette Plaintiffs/Responding Parties

AND:

Fogler Rubinoff LLP and William Thomas Perks Defendants/Moving Parties

AND:

Edmette Holdings Ltd., Anne Gloria Odette Kaye, Andrea Margaret Federer, Norton McMullen LLP and Rodney J. Russell Third Parties/Responding Parties

Before: Master J. Josefo

Counsel: D. Dochylo & Z. Yehia, Counsel for the Moving Party Defendants on the Motion Email: ddochylo@blg.com & zyehia@blg.com J. Renihan, Counsel for the Responding Party Plaintiffs on the Motion Email: jrenihan@lolg.ca C. Shorey, Counsel for the Third Parties Email: cshorey@lerners.com

Reasons for Decision and Order

February 22, 2019

Overview of the Issue

[1] Should this action be stayed, temporarily, pursuant to sections 106 and 138 of the Courts of Justice Act? That is what I must decide.

[2] The facts which underpin the question before me are well summarized by, in particular, Mr. Renihan, in his factum. In essence, the within action involves the plaintiff (Estate) suing its former law firm and lawyer whom, it is asserted, negligently proposed a particular method or structure for transferring shares from the Estate to a charitable foundation. Subsequent to the transfer, the Canada Revenue Agency (“CRA”) disallowed a donation credit claimed by the Estate. This 2012 income tax year reassessment of the Estate led to a tax liability to the Estate of over nine million dollars.

[3] In addition to commencing the within action, the plaintiffs also have appealed that reassessment to the Tax Court of Canada (the “tax appeal”). The defendants in this within action seek to stay this action pending final disposition of the tax appeal.

Procedure Followed at the Hearing; My Approach to these Reasons

[4] In addition to the voluminous materials filed by the moving and responding parties, Mr. Dochylo and Mr. Renihan each made cogent oral submissions. Mr. Shorey, for the Third Parties Norton McMullen LLP and Rodney J. Russell, was also present. Yet he stated that he would not add anything, other than indicating that his clients supported the defendant’s motion for a stay.

[5] Contemplating the question before me, I have reviewed all the various records filed, as well as the compellingly written factums. I also have considered the thorough oral arguments which counsel made. Yet in these reasons I will not review all the points made in the submissions. I will also not address herein all the decisions to which counsel referred me, although I have read them. To reiterate all that was written or said would, in my view, unduly elongate these reasons without any real benefit to the parties.

[6] In my view, the standard for determining whether a decision is reasonable does not require that everything submitted or filed be minutely sifted or commented upon. If that was what was required, even straight-forward cases would require pages of reasons for decision. Complex legal issues such as this arguably is would consume entire forests.

[7] Thus, what I will provide in these reasons is my contextual assessment of how the law and what I find are the relevant facts (summarized above and herein) in this particular case intertwine, with what I conclude is a just result for the parties, and systemically. My goal is that the parties and, if applicable, a superior reviewing body, can clearly understand the basis for my decision.

What is the Test for a Stay? Is There One Test?

[8] Section 106 of the Courts of Justice Act (“COJ”) provides that, “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 just”. Section 138 of the COJ Act provides that, “As far as possible, multiplicity of legal proceedings should be avoided”.

[9] In this case, the defendants are not, to be clear, seeking an indefinite stay of this within action. They are not, I find, trying to forever avoid their potential liability (if the plaintiff establishes their negligence). Rather, they seek to temporarily stay this within action pending final disposition of the Estate’s tax appeal. Until then, which the plaintiff believes could take “a year or more”, this within action would be dormant. Once the tax appeal is disposed of, this action could revive, subject to each party then taking whatever steps are, at that time, appropriate pursuant to the case as it then exists, pursuant to the Rules, etc.

[10] When discussing the case-law and the various tests, both counsel acknowledged that the case-law and the different tests articulated for a stay were difficult to reconcile, and that there was some seeming “confusion”. Counsel for the defendants submitted that, in any event, the test is discretionary. Counsel for the plaintiff reiterated that the standard for a stay, even a temporary one as is sought in this case, is very high.

[11] Relying on Royal Bank of Canada v. Richards, 2018 ONSC 1136 (“Royal Bank”), Mr. Renihan references the Justice citing with approval a different case which held that, “continuance of the action would work an injustice because it would be oppressive or vexatious to him, or would be an abuse of process of the court…”. The point counsel for the plaintiff makes is that, in the within case, while two proceedings carry on, such is not oppressive to the defendants; nor is it vexatious or an abuse of process of the court in some fashion. While arguably an inconvenience, or perhaps not a process which leads to cost savings and efficiency, he submitted that this case does not rise to that articulated high standard required for a stay.

[12] The Royal Bank case involved a party trying to postpone a summary judgment motion because claimed mental health issues rendered him purportedly unable to, at that particular time, withstand cross-examination. Yet, as the Motions Judge well observed, the moving party did not appoint a substitute decision-maker. It was also observed that there was a lack of authority for a stay being granted solely on medical grounds, which was seemingly the basis which underpinned the request in that case.

[13] The Motions Judge in Royal Bank observed that Section 106 of the COJ Act “is directed to circumstances in the legal process that will create an injustice or unfairness to the moving party”, rather than to the “personal effect proceeding could have on him [ my emphasis ]”. Moreover, seeking a stay as a remedy of first resort was also found not appropriate.

[14] The facts in Royal Bank are, I find, quite different from those before me. In this within matter, the focus is indeed not the personal effect, but “circumstances in the legal process”. This within case is framed in negligence. Thus, is it not prudent that the issue of whether the Estate actually has the tax liability which CRA, at first instance, asserted exists, be determined after a full airing, before proceeding with a negligence action? After all, if the CRA decision is reversed on appeal, it is hard to fathom a viable argument for negligence. Would not delay in this case thus reflect judicial and legal resources used wisely? I discuss those factors ahead in these reasons.

[15] Moreover, in this case, the remedy of a stay is I find the only possible resort, not just a first resort as it was in Royal Bank. In this case, resorting to a stay will avoid potentially duplicative matters proceeding and potentially different results possibly emerging from two different courts. I was not referenced to any other possible step or remedy, other than a stay, that would make sense in these circumstances, and which could be a first resort.

[16] Justice Lederman in the March 24, 2004 decision of Farris v. Staubach Ontario Inc., held that a stay should only be granted in “the clearest of cases”…and “not merely inconvenience and expense”. The Motions Judge, who denied a stay to an employer in that case who sought to postpone a civil action pending the then Human Rights Commission investigating and adjudicating a complaint, engaged in considerable fact-finding leading up to his decision. That included a finding that there was no evidence that the human rights complaint and civil action would proceed in tandem. It was also found that the human rights complaint was “in its infancy”. The “quasi-constitutional nature of the rights protected by the [Human Rights] Code” were also noted.

[17] Yet again, those facts are quite different from the facts before me. In this within matter, for example, there are no specific “quasi-constitutional rights” of the plaintiff, other than the right of all parties to have access to justice. Moreover, the plaintiffs have commenced and are still able to advance their tax appeal, which indeed provides them access to justice. For whatever reasons (the parties are not in agreement why), pursuant to the “Chronology of Key Dates” supplied by the defendant, the tax appeal has progressed slowly—too slowly. As is well detailed in the defendant’s factum, the plaintiffs have, I find, not pursued this appeal with the alacrity which it deserves. Because of that delay, the parties to the tax appeal are compelled to attend a status hearing in Tax Court on March 6, 2019. Yet such a step could have been avoided if the matter had been advanced far earlier, and with greater alacrity. That delay I find was at least tolerated by the plaintiffs, if not actually fostered by them, despite such delay being potentially prejudicial to the plaintiff in the tax appeal.

[18] Despite the submission of Mr. Renihan, moreover, I do not find, as also discussed ahead in these reasons, that a temporary stay in this within action would impede in any meaningful way the plaintiff’s access to justice.

[19] Why is the tax appeal in this case so important? Despite the able arguments of the plaintiff, what I find telling is that, in both his factum and in his oral submissions, Mr. Renihan made considerable effort to argue, in effect, the merits of the tax appeal. His position is that the tax appeal is not particularly meritorious. Yet that very argument in my view demonstrates just how intertwined factually and legally are these two proceedings.

[20] Theoretically, if the tax appeal succeeds the within action will still exist. Yet, much of the air will likely have been let out of the balloon. If negligence can still be argued, such will in at least some part depend on the reasons for decision of the ultimate fact-finder in the tax appeal. Whether the plaintiffs will be able to pursue the defendants for all costs incurred for a reversal of the CRA disallowance decision is not which I need decide herein. In that respect, given a successful outcome in the tax appeal, this within action will still exist, and can be revived, with the parties each then taking steps as they deem then to be appropriate.

[21] If the tax appeal fails, of course this action will be available—and the plaintiff’s case in negligence will, I suggest, then likely become much easier to make, again, depending upon the actual outcome of and reasons in the tax case. Thus, resolution of the tax appeal first will thus be quite informative for the then ongoing conduct of this litigation. Truly, in my view, much will depend on the outcome of the tax appeal. Again, this is because of the heavily intertwined facts involved in this within action and the tax appeal.

[22] Returning to the appropriate legal test, I acknowledge that a stay should be granted cautiously, and only in clear and appropriate cases. Yet sections 106 and 138 of the COJ Act must not be so elevated to a position which results in these sections of the Act never or only very rarely being used, because no case or only very few cases come high enough up on the pedestal. Rather, the Legislature has provided these sections of the Act to be used in appropriate cases, on appropriate facts, where, after consideration of the competing claims, the decision-maker, cautiously applying discretion, comes to what he or she finds is the best decision in the circumstances. The “best” decision, however, will not be one which pleases all. Such is usually impossible as what pleases one party displeases the other party. Finding a balance, on all the facts and law, is however what is important, and what is required.

[23] What more closely resembles the facts of this within matter is found in the decision of Justice Lococo in Grand River Enterprises Six Nations Ltd. v. Canada, 2010 ONSC 2911. In that case, the plaintiffs brought an action for damages against Canada for, inter alia, the return of excise taxes and duties wrongfully assessed since 1997 because of allegedly forced incorporations (amongst other issues). Grand River also filed appeals with the Tax Court of Canada of 23 assessments, however only those from 2005 through 2007. Thus, I observe that the period of overlap was not hardly complete, as it is in this within matter. The defendant Attorney General of Canada nevertheless sought a stay of the civil action in Grand River.

[24] Justice Lococo, in granting the stay, observed that “section 106…gives the court a broad discretion to stay proceedings, unfettered by any specific test”. In that regard, the Justice was quoting with approval a Divisional Court decision identified as Hester v. Canada. In granting the stay, the Motions Justice found that the plaintiffs and tax appellants would suffer “no injustice or other significant prejudice…” [emphasis added]. Thus, the Justice recognized that there may be some prejudice which the plaintiff will experience yet, after weighing the matter, a temporary stay was nevertheless ultimately found appropriate in the circumstances.

[25] Leave to appeal the Grand River decision was denied by Justice A.C.R. Whitten in an August 6, 2010 decision. Justice Whitten specifically referenced the degree of overlap in the civil action with the Tax Court decision, and how the ultimate tax court decision would influence the civil action. That is again very factual apt to this matter. In this matter, the ultimate decision of the Tax Court on the propriety of the method or structure for transferring shares recommended by the law firm and lawyer to the Estate will, in my view, very much influence if not be determinative of much if not all of this within negligence action.

[26] As was summarized in the Grand River decision, when there are, as there is here:

• “substantial overlap of issues in the two proceedings,
• two proceedings [which] share the same factual background,
• unnecessary and costly duplication of judicial and legal resources”, which a stay can avoid, one must then turn to the issue of prejudice. Accepting the plaintiff’s view that a temporary stay of this action could mean a delay of a year or more, I do not find this one factor determinative, or one which outweighs the importance of the other factors noted. Nor do I find it shocking in the context of a complex civil action.

[27] Of course, any delay is unfortunate. Yet again, in this case, recalling the factual context, there has already been undue and avoidable delay in the tax appeal. Moreover, the evidence demonstrates that the Estate has still been able to carry on its charitable good works notwithstanding these two litigation matters. I do not accordingly find significant prejudice arising out of the delay which will result from a stay of the civil action, and which prejudice outweighs the necessity for a temporary stay.

[28] My final observations regarding the tests to be applied is to again emphasize, as have others in the decisions which I have relied upon, that such cases are very fact-specific and contextual. In this case, and on these facts, I conclude that a temporary stay pursuant to the COJ ought be granted. Doing so is more beneficial than harmful given the many parties involved in this litigation, and being aware of the many costly steps still to come (documentary and oral discovery is only the beginning—and I also doubt that this would be the last motion). In addition to the cost to all the litigants, I also take into account the systemic costs, in particular the court resources used by these two cases when only one case needs first to proceed.

[29] When the stay is for a relatively finite period, if the facts and context favour it, a stay should issue. While still a relatively rare remedy, if a stay is used to avoid injustice, it remains an appropriate remedy that is intended to be used, not left reverentially “on the shelf”, never or only very rarely to be applied. In making that observation, I differentiate between a permanent stay of proceedings, which arguably should issue far more sparingly and rarely given the far higher likelihood for injustice arising from forever denying someone’s “day in court”. In my view, the more onerous tests could thus be considered reserved for those circumstances, which I find are distinguishable from a temporary stay of proceedings.

[30] Accordingly, the motion for a stay of the within action is granted, pending the decision of the tax appeal before the Tax Court of Canada, Court File No. 2018-2410 (IT) G, and any appeals therefrom. I also stay the third party claim and the fourth party claim.

Costs

[31] Turning to costs, as briefly discussed at the conclusion of oral argument, it is usual that the Bill of Costs of the unsuccessful party forms the basis of what that party pays in costs. If not yet done the parties should exchange their Bills of Costs. Absent offers to settle the motion or other unusual circumstances, if the costs are relatively equal, the plaintiff could agree to pay what it proposed that it would receive if successful, or close to that quantum. After all, it trite that if the unsuccessful party expected to receive a certain quantum for costs if successful, then such is the amount which it should pay to the successful party.

[32] Hopefully the parties agree on costs. If, however, the parties cannot agree, they may book a tele-conference with me through my Assistant Trial Coordinator. A few days in advance of that call they may file written submissions of no more than three pages, along with their respective Bills of Costs.

Master J. Josefo Date: February 22, 2019