COURT FILE NO.: CV-16-3908-00 DATE: 2020 07 14
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Yellow Cedar Investments Limited, 2440733 Ontario Inc. and 2441296 Ontario Inc., Plaintiffs
AND:
Egidio Di Toro, Rosanna Di Toro and Stonebrooke Homes Ltd., Defendants
AND:
Parnes Rothman LLP, Shayle Frederick Rothman and Seth David Freedman, Moving Proposed Third Parties
BEFORE: Doi J.
COUNSEL: K. Mahaisuria, for the Plaintiffs J. Lo Faso, for the Defendants D. Konomi and A. Speigel, for the Moving Proposed Third Parties, Parnes Rothman LLP, Shayle Frederick Rothman and Seth David Freedman
HEARD: July 9, 2020
ENDORSEMENT
Overview
1This is a motion to consolidate two actions. The within action (the “Main Action”) is a claim by mortgagees to collect amounts allegedly owing on two mortgages. The second (the “Lawyer Action”) involves a claim by mortgagors for contribution and indemnity from their lawyers for any amounts they are found to owe in the Main Action.
2The parties recognize that both actions have questions of law and fact in common. The real dispute is whether the actions should be consolidated or tried one after the other.
3For the reasons that follow, I find that the actions should be consolidated.
Background
4The litigation history of the actions is briefly stated as follows.
5On September 1, 2016, Yellow Cedar Investments Limited, 2440733 Ontario Inc., and 2441296 Ontario Inc. (collectively, the “Mortgagees”) commenced the Main Action (CV-16-3908-00) against Egidio Di Toro, Rosanna Di Toro and Stonebrooke Homes Ltd. (collectively, the “Mortgagors”) to recover damages that arose when the Mortgagors defaulted on two mortgages. The Mortgagors are defending the Main Action on the basis that their mortgage debts were extinguished when they transferred two properties to the Mortgagees. The Mortgagees deny that the debts were extinguished by the property transfers, and in the Main Action claim the shortfall between the amount of the debts and the amount recovered from the sale of the two properties.
6The Mortgagors commenced the Lawyers Action (CV-18-3701-00) by bringing a notice of action on August 31, 2018 and a statement of claim on September 4, 2018. In this separate action, the Mortgagors claimed contribution and indemnity from Parnes Rothman LLP, Shayle Frederick Rothman and Seth David Freedman (collectively, the “Lawyers”) for any amounts that the Mortgagors are found to owe the Mortgagees in the Main Action. The Mortgagors claim that they instructed the Lawyers to affect both property transfers in full and final satisfaction of their mortgage debts, and further claim that the Lawyers negligently failed to obtain the necessary releases for the transfers. The Lawyers are defending this second action by taking the position that they were not retained to act for the Mortgagors on the property transfers, and that the Mortgagees’ claim in the Main Action lacks merit as both properties were transferred to them by the Mortgagors in full and final satisfaction of all debts secured by the mortgages.
7In their statement of claim in the Lawyers Action, the Mortgagors advised of their intention to seek to consolidate both actions.
8Shortly after the Lawyers Action was brought, Allison Speigel, counsel for the Lawyers, contacted Mortgagees’ lead counsel, Jim Smith, and Mortgagors’ counsel, John Lo Faso and David Morawetz in or around October 2018 to discuss consolidating the actions. In November or December 2018, Mr. Lo Faso advised Ms. Speigel that the Mortgagors intended to bring an omnibus motion: a) to remove Mr. Smith as counsel of record in the Main Action; and b) to consolidate the actions.
9On January 29, 2019, Mr. Morawetz emailed Mr. Smith and Ms. Speigel to canvass their availability for the Mortgagors’ omnibus motion. Ms. Speigel responded that the Lawyers would likely not take a position on the removal motion, and were consenting to the consolidation motion. Discussions continued into May 2019 in an unsuccessful effort by the parties to resolve the consolidation motion.
10On June 17, 2019, Mr. Morawetz advised that the Mortgagors’ omnibus motion would not be proceeding as the removal and consolidation matters could not be argued together as a short motion. Instead, the Mortgagors scheduled their removal motion for July 30, 2019, and advised of their intention to bring a motion to consolidate thereafter.
11On July 25, 2019, Mr. Morawetz advised that the Mortgagor’s removal motion likely would need to be adjourned to a long motion due to the substantial materials delivered by the Mortgagees in response to the motion. On July 30, 2019, the removal motion was adjourned to May 20, 2020, which was the next available long motion date.
12On August 3, 2019, the Mortgagees served their trial record in the Main Action. The Mortgagors initially objected to the Main Action being scheduled for trial before the consolidation motion was heard, and before examinations for discovery were completed.
13Following a later inquiry by Ms. Speigel, Mr. Smith advised in an October 22, 2019 email that the Mortgagees agreed that a consolidation motion brought by the Lawyers could proceed after the Mortgagors’ removal motion, and that the Mortgagees would not argue that any delay up to the return of the consolidation motion was prejudicial.
14On November 22, 2019, Mr. Lo Faso advised Ms. Speigel that the Mortgagors had received a notice to attend Assignment Court on December 16, 2019 in the Main Action.
15On December 12, 2019, the Lawyers served notice of their motion to consolidate that was returnable on February 27, 2020, which was the first available date for all counsel.
16At Assignment Court on December 16, 2019, the Main Action parties agreed to set a pre-trial conference on July 14, 2020 and to set the trial for the week of November 23, 2020. The Main Action parties did not exchange affidavits of documents or conduct examinations for discovery before setting the trial date. In an email dated December 11, 2019, Mr. Smith confirmed the following with Mr. Lo Faso:
I confirm … that I will attend on consent at the Assignment Court on [December 16, 2019] and set a trial date for the week of Nov 23, 2020, and will appear as your agent. I confirm that after the removal motion in May, that I will make my client readily available for examinations to accommodate that step, if I am removed then of course you will deal with new counsel, if the motion judge reserves in May for too long of a period, then I am aware that you may need to seek an adjournment if the scheduled cannot be accommodated.
17On February 11, 2020, Mr. Smith advised that Bob Winn, the sole director, officer and shareholder of the Mortgagees, had passed away. On consent, the consolidation motion was adjourned from February 27, 2020 to April 9, 2020, and the Mortgagees agreed to not rely on the adjournment (i.e., knowing that it could lead to an adjournment of the November 2020 trial date in the Main Action) to oppose the consolidation motion.
18Due to the disruption to court operations from the ongoing COVID-19 pandemic, the consolidation motion was adjourned from April 9, 2020 to July 9, 2020.
19On April 14, 2020, Mr. Smith advised that the Mortgagors’ removal motion had been rescheduled from May 20, 2020 to November 30, 2020. Due to the rescheduling of motion dates and the disruption to court operations from the COVID-19 pandemic, he further advised that the Main Action trial would not proceed in November 2020.
20The Lawyers Action has not progressed beyond the pleadings stage.
Position of the Parties
21The Lawyers seek to consolidate both actions. In the alternative, they ask for the actions to be tried together or heard one after another, and they seek to participate in the Main Action as if they were parties to that action.
22The Mortgagors consent to the consolidation motion. The Mortgagees oppose the motion by primarily claiming that a consolidation would unduly complicate the proceedings, and instead propose having the Main Action and the Lawyers Action tried one after the other. The Mortgagees also claim that this motion to consolidate is an abuse of process.
The Law
23Section 138 ( Multiplicity of proceedings ) of the Courts of Justice Act, RSO 1990, c. C.43, provides:
As far as possible, multiplicity of legal proceedings shall be avoided.
24Rule 6 ( Consolidation or hearing together) addresses the consolidation or hearing together of multiple pending proceedings. Rules 6.01 and 6.02 provide:
6.01(1) Where two or more proceedings are pending in the court and it appears to the court that,
(a) they have a question of law or fact in common;
(b) the relief claimed in them arises out of the same transaction or occurrence or series of transactions or occurrences; or
(c) for any other reason an order ought to be made under this rule the court may order that,
(d) the proceedings be consolidated, or heard at the same time or one immediately after the other; or
(e) any of the proceedings be,
(i) stayed until after the determination of any other of them, or
(ii) asserted by way of counterclaim in any other of them.
(2) In the order, the court may give such directions as are just to avoid unnecessary costs or delay and, for that purpose, the court may dispense with service of a notice of listing for trial and abridge the time for placing an action on the trial list.
6.02 Where the court has made an order that proceedings be heard either at the same time or one immediately after the other, the judge presiding at the hearing nevertheless has discretion to order otherwise.
25In applying Rule 6.01 on this motion, I have considered the factors set out by Master Dash in his often-quoted decision of 1014864 Ontario Ltd. v. 1721789 Ontario Inc., 2010 ONSC 3306. In that decision, Master Dash states (at para 17):
In my view, the proper approach on a motion for consolidation or trial together is to first ascertain whether the moving party has satisfied one or more of the three “gateway” criteria set out in rule 6.01 (1) (a), (b) or (c) and then consider all relevant factors as well as section 138 of the Courts of Justice Act which directs the court to avoid a multiplicity of proceedings whenever possible, in order to exercise the court’s discretion and make such order as is just…
26Master Dash then outlines (at para 18) a list of non-exhaustive factors to consider:
(a) the extent to which the issues in each action are interwoven;
(b) whether the same damages are sought in both actions, in whole or in part;
(c) whether damages overlap and whether a global assessment of damages is required;
(d) whether there is expected to be a significant overlap of evidence or of witnesses among the various actions;
(e) whether the parties are the same;
(f) whether the lawyers are the same;
(g) whether there is a risk of inconsistent findings or judgment if the actions are not joined;
(h) whether the issues in one action are relatively straight forward compared to the complexity of the other actions;
(i) whether a decision in one action if kept separate and tried first would likely put an end to the other actions or significantly narrow the issues for the other actions or significantly increase the likelihood of settlement;
(j) the litigation status of each action;
(k) whether there is a jury notice in one or more but not all of the actions;
(l) whether, if the actions are combined, certain interlocutory steps not yet taken in some of the actions, such as examinations for discovery, may be avoided by relying on transcripts from the more advanced action;
(m) the timing of the motion and the possibility of delay;
(n) whether any of the parties will save costs or alternatively have their costs increased if the actions are tried together;
(o) any advantage or prejudice the parties are likely to experience if the actions are kept separate or if they are to be tried together;
(p) whether trial together of all of the actions would result in undue procedural complexities that cannot easily be dealt with by the trial judge;
(q) whether the motion is brought on consent or over the objection of one or more parties.
See also Fountain Asset Corp. v. First Global Data, 2017 ONSC 4780 at para 16, Gouthro v. Intact Insurance Company, 2018 ONSC 4060 at paras 12-14, and 2252230 Ontario v. Argeris, 2019 ONSC 1927 at para 13.
Analysis
27The parties all accept that both actions should be heard together in some manner. The claim for damages in the Main Action and the claim for contribution and indemnity in the Lawyer Action are clearly interwoven matters. The key defence in both actions is that the Mortgagees’ damages claim in the Main Action is without merit because the property transfers extinguished the mortgage debts owed by the Mortgagors. Whether the transfers extinguished the mortgage debts is squarely at issue in both actions that have overlapping legal and factual in common. The “gateway” criteria under Rule 6.01(1)(a) and (b) are clearly met in this case.
28The Lawyers and the Mortgagors submit that a consolidation of the actions would be most efficient and effective. In contrast, the Mortgagees submit that it would be best to have the actions tried one after the other.
29In Wood v. Farr Ford Ltd., 2008 ONSC 53848, Quinn J. helpfully summarized (at paras 24-27) the distinction between consolidating proceedings and having them tried together:
[24] Where two actions are consolidated, they become, and proceed as, one action. Thus, there is “one set of pleadings, one set of discoveries, one judgment, and one bill of costs”: see The Civil Litigation Process, supra, p. 420.
[25] If two actions are ordered to be tried together, “the actions maintain their separate identity and there are separate pleadings, discoveries, judgments and bills of costs. But the actions are set down on the list one after the other to be ‘tried in such manner as the court directs.’ Usually, the trial judge will order that the evidence in one action is to be taken as evidence in the other action or actions. In this way both or all of the actions are tried together by the same judge or jury”: see The Civil Litigation Process, ibid.
[26] Although it has been said that “[t]he difference between consolidation and an order directing the trial of actions together is more technical than real” (see The Civil Litigation Process, ibid. ), I think the difference can be quite real if the matter is addressed promptly. Actions ordered tried together largely offer a savings of time and money, and enhanced convenience, at the trial stage. However, consolidation provides those features from an earlier stage in the proceedings, including: one set of pleadings, affidavits of documents, discoveries and pre-trial memoranda and one pre-trial.
[27] The existence of a second action also creates a risk that the two will proceed at different speeds, thereby leading to delay while the parties wait for the slower action to catch up.
30The Lawyers claim that proceeding with separate actions will run the risk of inconsistent findings because they will not be strictly bound in the Lawyers Action by any findings made in the Main Action: Renaissance Leisure Group Inc. v. Frazer, 2001 SCJ 28229 at paras 28-29; Kenderry-Esprit (Receiver of) v. Burgess, MacDonald, Martin & Younger, 2001 ON SC 28042 at paras 32 and 35. Should the Mortgagees succeed with their claims in the Main Action, the Lawyers submit that many of the same legal and factual determinations related to the mortgage debts and the property transfers would need to be re-litigated in the Lawyer Action. I accept that consolidation would remove the risk of inconsistent findings. That said, when actions are ordered to be tried together, the trial judge will generally order that the evidence in one action will be taken as evidence in the other action or actions: Wood at para 25. The trial judge may also give directions for parties to participate and address matters affecting their interests. Accordingly, in my view, the risk of inconsistent findings may also be removed by having both actions tried together before the same judge.
31In my view, a consolidation of both actions would not overly prolong or complicate the proceedings. Both actions feature relatively straight-forward issues that are fairly simple, discrete, and not particularly complex. Neither action will have a jury. Importantly, the Mortgagors already intend to call the Lawyers as witnesses in the Main Action. The Lawyers claim that they had no real involvement in the property transfers, and are expected to have little evidence to give as witnesses. They also claim to have few relevant documents. According to counsel for the Mortgagors and the Lawyers, most of the trial time in the Lawyer Action likely will be spent disputing the merits of the Mortgagees’ claim in the Main Action. In the circumstances, I am persuaded that the time needed at trial to deal with the claim in the Lawyer Action will be relatively modest. I am advised that the Main Action currently is scheduled for a 3 to 4-day trial. Counsel for the Mortgagors and the Lawyers both expect that the Lawyer Action likely would add about an extra half-day to the Main Action trial if both actions were consolidated, which seems to be a reasonable and proportional estimate given the intertwined nature of the actions and the amounts at stake in the claims.
32The Mortgagees submit that having the Main Action tried first could fully or largely resolve the Lawyer Action if the court were to find that the property transfers extinguished the mortgage debts. Although I agree with this point in principle, I conclude that this is not an overly compelling factor on this particular motion given the relatively modest amount of time that would be saved if findings made in the Main Action ultimately dispensed with the claim in the Lawyer Action.
33An important advantage to consolidating actions is having common discoveries: Pentad Construction Inc. v. 2022988 Ontario Inc., 2020 ONSC 1227 at para 33. In this case, having separate discoveries would deprive the Lawyers of an opportunity to conduct examinations for discovery of the Mortgagees which could reveal important information related to the property transfers and narrow the issues. Without this information, the Lawyers may well end up pursuing defences that they otherwise would have abandoned if they had better knowledge from discoveries, which could lead to increased costs and the unnecessary use of court time.
34Currently, both actions are essentially at the pleadings stage. Although affidavits of documents were not formally exchanged in the Main Action, I am told that the parties informally exchanged affidavits of documents and productions which were shared with the Lawyers. Counsel also advised that there are only a handful of further productions arising from the Lawyer Action, as the documentary record in that action is limited. The parties to the Main Action previously had arranged for some limited examinations for discovery, but this has not proceeded yet. As discoveries have not yet taken place, common discoveries would be timely.
35In submissions, the Mortgagees took the position that consolidation would compromise their current trial date for the Main Action which is set for the week of November 23, 2020. But since the Mortgagors’ removal motion is now returnable on November 30, 2020 (i.e., after the Main Action trial date), it seems that the trial of the Main Action in November 2020 may already be potentially compromised, as Mr. Smith acknowledged to the parties on April 14, 2020. Even if the Mortgagors were to obtain an earlier return date for their removal motion, the question of whether the Main Action trial could proceed in November 2020 would still have some measure of uncertainty as a decision to grant the removal motion would clearly necessitate an adjournment to permit the Mortgagees to retain new counsel. Accordingly, I am not persuaded that the current trial date for the Main Action should weigh heavily in deciding this consolidation motion.
36Respectfully, I do not agree with the Mortgagees’ position that this motion by the Lawyers to consolidate the actions is an abuse of process because the Mortgagors circumvented the requirement under Rule 29.02(1.2) for leave to issue a third-party claim and instead brought a duplicative action. Counsel for the Mortgagors, Mr. Lo Faso candidly conceded that the Mortgagors brought their action for contribution and indemnity against the Lawyers (i.e., by delivering their notice of action on August 31, 2020 and their statement of claim on September 4, 2018) due to the imminent expiry of a limitation period. Instead of bringing the Lawyer Action, I accept that the Mortgagors could and likely should have brought an urgent motion for leave (i.e., if the Mortgagees did not consent) for a third-party claim to be issued against the Lawyers under Rule 29.02(1.2), which specifically contemplates this scenario. But I also recognize that it was theoretically open for the Mortgagors to commence a new action for contribution and indemnity against the Lawyers within two years of being served with the statement of claim in the Main Action, as they did in this case: Waterloo Region District School Board v. CRD Construction Ltd., 2010 ONCA 838 at para 28. Regardless, I see no basis for this consolidation motion by the Lawyers to be an abuse of process. The Lawyers have not circumvented any procedure to trigger an abuse of process: Attayee v. Pickering (City), 2015 ONSC 7701 at paras 50-55, citing Maynes v. Allen-Vanguard Technologies Inc. (Med-Eng Systems Inc.), 2011 ONCA 125. They effectively seek third-party status in the Main Action, which likely would have resulted if the Mortgagors had brought a Rule 29.02(1.2) leave motion to issue their claim. Moreover, principles of economy and efficiency generally call for contribution and indemnity actions to be joined with a main action: Waterloo Region at para 28. Whether a consolidation motion by the Mortgagors would have constituted an abuse of process by circumventing the leave requirement under Rule 29.02(1.2) is not before the court on this motion, and is a different issue for another day.
37Having regard to the procedural history in this matter, as set out earlier, I accept that the moving Lawyers acted with reasonable diligence to bring this motion to consolidate the actions. I recognize that various delays arose when the Mortgagors sought to bring the consolidation motion, which the Mortgagees now regard in hindsight with some suspicion. But from the record on this motion, I am persuaded that the Lawyers should not be faulted for any delay in returning this consolidation motion, which initially was set for February 11, 2020. I accept that the disruption to court operations due to the ongoing COVID-19 pandemic may have affected the parties’ expectations earlier this year as to when the consolidation and removal motions could be heard. Regrettably, the serious health implications of the global pandemic led to the implementation of necessary public health quarantine measures that were unavoidable.
38Based on the foregoing, I am persuaded that both actions should be consolidated.
Outcome
39Accordingly, the motion is granted and I make the following orders:
a. the Main Action (CV-16-3908-00) shall be consolidated with the Lawyer Action (CV-18-3701-00) into a single consolidated action;
b. the consolidated action shall proceed under Court File Number CV-16-3908-00 and the title of proceedings shall be as set out in paragraph 1(c) of the notice of motion dated July 3, 2020;
c. the statement of claim in the Lawyer Action (CV-18-3701-00) shall be deemed to be a third-party claim in the consolidated action;
d. the statement of defence in the Lawyer Action (CV-18-3701-00) shall be deemed to be a third-party defence in the consolidated action, and the Lawyers have leave to deliver a defence to the Mortgagee’s claim in the consolidated action within 20 days from the release of this Endorsement; and
e. In the circumstances of the COVID-19 pandemic, this Endorsement is deemed to be an Order of the court that operative and enforceable from its date of release without further formality. [1]
40My judicial assistant will contact counsel shortly to schedule a video conference call to discuss a schedule for conducting discoveries and the removal motion.
41If the parties are unable resolve the issue of costs for this motion, the Lawyers may deliver costs submissions of up to 2 pages (excluding any costs outline or offer to settle) within 15 days, and the Mortgagees and Mortgagors may deliver responding submissions on the same terms within a further 15 days. Reply submissions shall not be delivered without leave.
Doi J.
Date: July 14, 2020
1Given the serious health risks posed by the ongoing COVID-19 global pandemic, the regular operations of the Superior Court of Justice have been disrupted with only urgent and certain other matters being heard: Notice to the Profession – Central West Region (Effective July 6, 2020) issued by RSJ Ricchetti dated June 25, 2020. Should they wish, any party may file a formal order for signature and entry once regular court operations resume, but this Endorsement remains an effective and binding order from its date of release.