Court File and Parties

COURT FILE NO: CV-20-00635078-0000 DATE: 20220404 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: MEHRZAD ZAREI, personally and on behalf of the Estate of ARAD ZAREI, deceased, or as Personal Representative of ARAD ZAREI, deceased; and SHAHIN MOGHADDAM, personally and on behalf of the Estate of SHAKIBA FEGHAHATI, deceased, or as Personal Representative of SHAKIBA FEGHAHATI, deceased and on behalf of the Estate of ROSSTIN MOGHADDAM, deceased, or as Personal Representative of ROSSTIN MOGHADDAM, deceased; and ALI GORJI, personally and on behalf of the Estate of POUNEH GORJI, deceased, or as Personal Representative of POUNEH GORJI, deceased, and on behalf of the Estate of ARASH POURZARRADI, deceased, or as Personal Representative of ARASH POURZARRADI, deceased; and JOHN DOE, JANE DOE, BILL DOE and SAM DOE

AND:

ISLAMIC REPUBLIC OF IRAN, ISLAMIC REVOLUTIONARY GUARD CORPS, also known as ARMY OF THE GUARDIANS OF THE ISLAMIC REVOLUTION, also known as IRANIAN REVOLUTIONARY GUARD CORPS, IRANIAN ARMED FORCES, also known as ARMED FORCES OF THE ISLAMIC REPUBLIC OF IRAN, ALI KHAMENEI, also known as SUPREME LEADER OF IRAN, MOHAMMAD BAGHERI, also known as MOHAMMAD-HOSSEIN AFSHORDI, HOSSEIN SALAMI, SEYYED ABDOLRAHIM MOUSAVI and AMIR ALI HAJIZADEH

AND RE: JOHN SMITH, BILL SMITH, SAM SMITH, JANE SMITH, MARY SMITH, SALLY SMITH, personally and on behalf of the Estates of their deceased family members or as Personal Representatives of their deceased family members

AND:

ISLAMIC REPUBLIC OF IRAN, ISLAMIC REVOLUTIONARY GUARD CORPS, also known as ARMY OF THE GUARDIANS OF THE ISLAMIC REVOLUTION, also known as IRANIAN REVOLUTIONARY GUARD CORPS, IRANIAN ARMED FORCES, also known as ARMED FORCES OF THE ISLAMIC REPUBLIC OF IRAN, ALI KHAMENEI, also known as SUPREME LEADER OF IRAN, MOHAMMAD BAGHERI, also known as MOHAMMAD-HOSSEIN AFSHORDI, HOSSEIN SALAMI, SEYYED ABDOLRAHIM MOUSAVI and AMIR ALI HAJIZADEH

BEFORE: VERMETTE J.

COUNSEL: Mark H. Arnold and Jonah Arnold, for the Plaintiffs Jacqueline M. Dais-Visca, for the Attorney General of Canada

HEARD: April 1, 2022

Endorsement

[1] The Plaintiffs bring a motion for:

a. an order amending, varying and extending the Default Judgment of Justice Belobaba dated December 31, 2021 (“Default Judgment”) in court file no. CV-20-00635078-0000 (“Zarei Action”) to include the claims made by the Plaintiffs in court file no. CV-22-00674774-0000 (“Smith Action”); and

b. a declaration that the Plaintiffs are entitled to an order that a Writ of Seizure and Sale be issued to them by the Registrar of the Court permitting them to enforce the Default Judgment against certain land and bank accounts, and an order directing the Registrar to issue such a Writ of Seizure and Sale.

[2] Both the Zarei Action and the Smith Action relate to the shooting down of Ukraine International Airline Flight PS 752 on January 8, 2020.

[3] In the Default Judgment in the Zarei Action, Justice Belobaba:

a. found that the Defendants intentionally shot down Ukraine International Airlines Flight 752 on January 8, 2020 departing from Tehran, Iran, causing the death of all persons on board the flight;

b. found that the shooting down of Ukraine International Airlines Flight 752 on January 8, 2020 was a terrorist activity under a number of statutes, including the State Immunity Act, R.S.C. 1985, c. S-18 (“SIA”); and

c. ordered the Defendants to pay a total of $107 million to five Plaintiffs representing the estates of six passengers. The damages include damages under section 61 of the Family Law Act, R.S.O. 1990, c. F.3 for the loss of guidance, care and companionship (total of $1 million); damages for pain and suffering under section 38 of the Trustee Act, R.S.O. 1990, c. T.23 (total of $6 million); and punitive damages (total of $100 million).

[4] Justice Belobaba released his decision on the liability issue on May 20, 2021, and his decision on damages on December 31, 2021. A formal Judgment was electronically issued on February 17, 2022.

[5] At the hearing of the motion, I made a number of brief rulings regarding the standing of the Attorney General of Canada on this motion, the adjournment of the part of the motion dealing with enforcement issues, and the request for a sealing order with respect to the unredacted evidence of the Plaintiffs in the Smith Action. My reasons for these rulings are set out in more detail below. I took the issue of the requested amendment/variation of the Default Judgment under reserve. After considering the issue, I decline to grant the relief sought, as set out below.

A. Standing of the Attorney General of Canada

[6] A preliminary issue arose at the hearing regarding the standing of the Attorney General of Canada to participate in and make submissions on this motion. After hearing submissions from counsel, I held that the Attorney General of Canada had standing to participate in the motion and that, if necessary, I would invite him and grant him leave to intervene on the motion pursuant to Rule 13.02 of the Rules of Civil Procedure.

1. Factual background

[7] Counsel for the Plaintiffs served the Plaintiffs’ Notice of Motion on the Minister of Foreign Affairs and Justice Canada on February 9, 2022. According to counsel for the Plaintiffs, service was made on the Minister as a potentially affected person pursuant to Rule 37.07(1) of the Rules of Civil Procedure.

[8] On Friday, March 25, 2022, counsel for the Attorney General of Canada sent a letter to counsel for the Plaintiffs discussing, among other things, the issues of the transmission of the Statement of Claim in the Smith Action and the transmission of the Default Judgment to the Islamic Republic of Iran (“Iran”) pursuant to sections 9 and 10 of the SIA. Counsel indicated that she did not as yet have instructions on whether to appear on the Plaintiffs’ motion, but asked whether the Plaintiffs would consider adjourning the motion sine die to be brought back on after the expiration of 60 days after certification of transmission of the Default Judgment. Later on March 25, counsel for the Plaintiffs acknowledged receipt of the letter, but did not provide a substantive response.

[9] On Monday, March 28, 2022, counsel for the Attorney General sent an e-mail to counsel for the Plaintiffs noting that she had not received a copy of the Motion Record in support of the Plaintiffs’ motion and asking for a copy. Later that day, counsel for the Plaintiffs sent a “courtesy copy” of the Motion Record by e-mail. The Attorney General of Canada subsequently filed a short affidavit attaching correspondence and a Factum.

2. Plaintiffs’ position and ruling

[10] Counsel for the Plaintiffs took the position that the Attorney General of Canada could not participate in the motion as he did not seek leave to intervene after receiving a copy of the Notice of Motion as an “affected person”. In my view, leave to intervene under Rule 13 is not required as Rule 13 does not apply to a motion. An affected person under Rule 37.07 of the Rules of Civil Procedure has a right to file material and respond to the motion: see St. Lewis v. Rancourt, 2012 ONSC 3320 at para. 10. I agree with the following comments of Associate Justice Jolley in Innvest Master Properties GP X Ltd. v. 1271519 Ontario Limited, 2017 ONSC 5961 at para: 24:

As a preliminary position, counsel for the plaintiff argues that even if Lloyd’s had been given notice of the motion as an affected party, Lloyd’s would be required to bring a motion for leave to intervene in order to be heard at the return of the motion. I disagree. This requirement is not set out in the Rules and would represent an unnecessary and cumbersome step. The purpose of requiring that parties who are affected by an order sought on a motion be given notice of the motion must be to allow them the opportunity to address the court on the hearing of the motion. Where it is found that a party is affected by the order sought, I see no need for a further leave motion to be brought.

[11] Given the prerogative power over foreign affairs, the role of the Minister of Foreign Affairs under the SIA, and the issues raised on this motion regarding a certificate issued by the Minister of Foreign Affairs (“Certificate”) pursuant to section 11 of Foreign Missions and International Organizations Act, S.C. 1991, c. 41 (which certifies that the land and bank accounts against which the Plaintiffs are seeking to enforce the Default Judgment are diplomatic property of Iran), the Attorney General of Canadas (representing the Minister of Foreign Affairs) is an affected person with respect to the issue of enforcement and, to a more limited extent, regarding the issue of the service of the originating process in the Smith Action. Accordingly, counsel for the Attorney General of Canada had standing and was allowed to participate in the motion and make submissions with respect to these two issues.

B. Adjournment of the part of the motion dealing with enforcement

[12] Sections 9 and 10 of the SIA deal with the issues of service on a foreign state and default judgment, respectively. They provide as follows:

Service on a foreign state

9(1) Service of an originating document on a foreign state, other than on an agency of the foreign state, may be made

(a) in any manner agreed on by the state;

(b) in accordance with any international Convention to which the state is a party; or

(c) in the manner provided in subsection (2).

Idem

(2) For the purposes of paragraph (1)(c), anyone wishing to serve an originating document on a foreign state may deliver a copy of the document, in person or by registered mail, to the Deputy Minister of Foreign Affairs or a person designated by him for the purpose, who shall transmit it to the foreign state.

Date of service

(5) Where service of an originating document is made in the manner provided in subsection (2), service of the document shall be deemed to have been made on the day that the Deputy Minister of Foreign Affairs or a person designated by him pursuant to subsection (2) certifies to the relevant court that the copy of the document has been transmitted to the foreign state.

Default judgment

10 (1) Where, in any proceedings in a court, service of an originating document has been made on a foreign state in accordance with subsection 9(1), (3) or (4) and the state has failed to take, within the time limited therefor by the rules of the court or otherwise by law, the initial step required of a defendant or respondent in those proceedings in that court, no further step toward judgment may be taken in the proceedings except after the expiration of at least sixty days following the date of service of the originating document.

Idem

(2) Where judgment is signed against a foreign state in any proceedings in which the state has failed to take the initial step referred to in subsection (1), a certified copy of the judgment shall be served on the foreign state

(a) where service of the document that originated the proceedings was made on an agency of the foreign state, in such manner as is ordered by the court; or

(b) in any other case, in the manner specified in paragraph 9(1)(c) as though the judgment were an originating document.

Idem

(3) Where, by reason of subsection (2), a certified copy of a judgment is required to be served in the manner specified in paragraph 9(1)(c), subsections 9(2) and (5) apply with such modifications as the circumstances require.

Application to set aside or revoke default judgment

(4) A foreign state may, within sixty days after service on it of a certified copy of a judgment under subsection (2), apply to have the judgment set aside or revoked.

[13] The position of the Attorney General of Canada is that pursuant to section 10 of the SIA, enforcement of the Default Judgment is not permitted because the Plaintiffs in the Zarei Action have not yet transmitted a certified copy of the Default Judgment to Iran. Therefore, the Attorney General submits, the motion is premature and should be adjourned sine die until a date not less than 60 days after certification of transmission of the Default Judgment to Iran.

[14] While the Plaintiffs acknowledge the requirements of section 10 of the SIA, they argued at the hearing that the Court should nevertheless determine at this stage whether, after the transmission of the Default Judgment to Iran in accordance with section 10, the Plaintiffs will be able to enforce the Default Judgment against certain land and bank accounts listed both in the Notice of Motion and in the Certificate.

[15] After hearing the submissions of counsel, I granted the adjournment requested by the Attorney General of Canada.

[16] In my view, enforcement and determination of enforcement-related issues cannot take place until after the transmission of a certified copy of the Default Judgment to Iran in accordance with section 10(2) of the SIA and the expiry of a 60-day period thereafter during which Iran has the right to apply to have the Default Judgment set aside or revoked pursuant to section 10(4) of the SIA. [1] Until these conditions are complied with, Iran is immune from the jurisdiction of any Canadian court under section 3(1) of the SIA, and this Court is required to give effect to that immunity pursuant to section 3(2): [2] see Estate of Marla Bennett v. Islamic Republic of Iran, 2013 ONSC 6832 at paras. 24-25 and Bouzari v. Islamic Republic of Iran, 71 O.R. (3d) 675 (C.A.) at paras. 39-42, 56-59.

[17] Further, determining enforcement-related issues in the absence of Iran would deprive it from the opportunity to make submissions on such issues. Iran may wish to make submissions regarding enforcement and the issue of what property enjoys diplomatic immunity from execution. It did so, for instance, in Tracy v. The Iranian Ministry of Information and Security, 2016 ONSC 3759 (“Tracy”), where Iran moved to set aside a number of default judgments. In Tracy, Iran took certain positions that were different from Canada’s and, therefore, I cannot assume that Iran’s submissions on the issues before me would be the same as Canada’s submissions. I conclude that it would not be appropriate to determine issues related to enforcement prior to Iran receiving formal notice of the Default Judgment and deciding whether it wishes to make submissions to this Court.

[18] Finally, it is premature for this Court to determine the diplomatic status of the land and bank accounts in issue. In Tracy v. Iran (Information and Security), 2017 ONCA 549 at para. 116, the Court of Appeal held that:

the time for determination of the diplomatic status of property is the time of the attempted execution on that property. As all parties agree, the diplomatic status of property may change over time. If the question is whether the property is exigible, logically the status of the property must be examined as at the date of the attempted execution.

Thus, the diplomatic status of the land and bank accounts in issue should only be determined when the Plaintiffs are in a position to execute on Iran’s property, i.e. after they have complied with section 10 of the SIA. As was acknowledged during the hearing, the process of serving a foreign state can take some time.

C. Sealing order

[19] The Plaintiffs in the Smith Action commenced the action under pseudonyms and filed redacted affidavits and victim impact statements. An unredacted version of the materials was provided to me before the hearing, on the understanding that the Plaintiffs would seek an order allowing the redaction of the motion materials at the hearing to protect the Plaintiffs’ identities.

[20] In the Zarei Action, Justice Belobaba granted an order sealing the confidential affidavit of Jane Doe and allowing her to use this name in the proceeding as he found that she had a genuine and credible fear of reprisal against herself here in Canada and her family still in Iran: see Appendix to Zarei v. Iran, 2021 ONSC 3377.

[21] As set out by the Supreme Court of Canada in Sherman Estate v. Donovan, 2021 SCC 25 at para. 38, a person asking a court to exercise discretion in a way that limits the open court presumption must establish that:

a. court openness poses a serious risk to an important public interest;

b. the order sought is necessary to prevent this serious risk to the identified interest because reasonably alternative measures will not prevent this risk; and

c. as a matter of proportionality, the benefits of the order outweigh its negative effects.

[22] I find that this test is met in this case. Like Justice Belobaba in the Zarei Action, and based on the materials before me, I find that the Plaintiffs and affiants in the Smith Action have a genuine and credible fear of reprisal which is not speculative. The order requested is necessary to prevent the serious risk identified by the Plaintiffs, and the order sought is proportional as it does not completely seal the court file and allows access to redacted materials.

[23] Accordingly, I order that the unredacted motion materials provided to me for the purpose of this motion be sealed, and that only the redacted version of the motion materials be part of the public record.

D. Request to amend, vary and extend the Default Judgment

1. Factual background

[24] On January 3, 2022, a few days after Justice Belobaba released his decision on damages in the Zarei Action, counsel for the Plaintiffs sent an e-mail to Justice Belobaba which read, in part:

Your Honour we were contacted during the holiday break through intermediaries by two or three other family victims for inclusion in the case. We are trying to complete their retainer agreements and victim impact statements. They have been fearful to the point of paralysis but now seek compensation via our proceeding. We do have place holdings in the claim for “John/Jill Doe” plaintiffs.

Preferably and if you deem it appropriate, I could submit their evidence to you seeking an extension of damages to them.

Alternatively, the 2 year limitation period expires on January 7, 2022. I am within time to issue another claim thereby protecting their interests but that would mean engaging the government to serve the claim under the State Immunity Act which will create delay as it did in the past. […]

[25] Justice Belobaba responded on the same day. He stated that “the suggested post-decision amendments and revisions are very complicating factors to say the least”, and that he would need to be referred to authorities to consider time extensions, amendments to pleadings, etc.

[26] On January 10, 2022, counsel for the Plaintiffs sent another e-mail to Justice Belobaba:

I apologize for any confusion about the request I have made to you about additional families wishing to join this proceeding.

Rule 59.06 (1) provides that if an order, “requires amendment in any particular on which the Court did not adjudicate (it) may be amended on a motion in the proceeding. [sic] Rule 59.06 (2) (d) provides the Court with authority to provide “other relief then [sic] that originally awarded.”

It is under those rules that we seek an amendment to your December 31, 2021 judgment to include late joining family members based upon subsequent victim impact statements. We do not seek to amend or to appeal any material portion of your decision.

You are not functus as a judgment has not yet been issued by the court.

Out of an abundance of caution we did issue within the two-year limitation period a “Bill Smith” claim virtually identical to the amended claim made in Zarei v Iran. If we are required to proceed under that action I fear that we will again face substantial service delay of the Statement of Claim that falls entirely within the jurisdiction of the office of the Minister of Foreign Affairs who historically have created substantial delay in taking that step. In my submission the most efficient way to proceed in light of Rule 1.04 is for us to prepare and deliver a supplementary brief containing victim impact statements of those new family victims for your consideration and review. We will submit that the damages award be extended without change to those additional family victims. […]

[27] Justice Belobaba responded as follows on January 10, 2022:

Counsel – as you know R. 59.06 applies to Orders, but no Order has yet been issued – and if an Order is issued herein, I don’t see how this court can amend the order to add completely new parties, new evidence etc.

It would probably be best if you moved before another judge to decide if I indeed have the jurisdiction under the Rules to do what you suggest.

I would also write again to Justice Myers – the judge he appoints to hear your enforcement motions can also deal with this more immediate issue re adding new parties and new evidence. Thanks.

[28] On January 25, 2022, Justice Myers ordered that the Smith Action be consolidated with the Zarei Action and continued under the Zarei Action’s court file number (“Consolidation Order”). No other directions were given with respect to the consolidated proceeding. The Consolidation Order was signed following a case conference held with counsel for the Plaintiffs on January 17, 2022. Justice Myers’ endorsement dated January 17, 2022 does not refer to the issue of the service of the Statement of Claim in the Smith Action. Iran did not participate in the case conference.

[29] The Plaintiffs have requested that the Minister of Foreign Affairs transmit the Statement of Claim in the Smith Action in accordance with section 9 of the SIA. By letter to counsel for the Plaintiffs dated March 25, 2022, counsel for the Attorney General of Canada advised as follows:

We are advised that transmission of the Smith statement of claim is well underway. We will provide you with a certificate of transmissions pursuant to s. 9(2) of the State Immunity Act as soon as it becomes available. As you are aware from your experience In [sic] Doe v. Iran et al., it is not a simple matter to transmit a claim to Iran given the suspension of diplomatic relations between Canada and Iran.

2. Rule 59.06

[30] Rule 59.06 of the Rules of Civil Procedure provides as follows:

Amending, Setting Aside or Varying Order

Amending

59.06 (1) An order that contains an error arising from an accidental slip or omission or requires amendment in any particular on which the court did not adjudicate may be amended on a motion in the proceeding.

Setting Aside or Varying

(2) A party who seeks to,

(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made;

(b) suspend the operation of an order;

(c) carry an order into operation; or

(d) obtain other relief than that originally awarded,

may make a motion in the proceeding for the relief claimed.

[31] Rule 59.06 should only be used sparingly, in exceptional circumstances and with the greatest of care: see Hordo v. Zweig, 2021 ONSC 1116 at para. 128.

[32] In Massiah v. Justices of the Peace Review Council, 2018 ONSC 2179 at para. 10 (“Massiah”), the Divisional Court stated the following with respect to Rule 59.06(1):

Subrule 59.06(1) deals with correcting an order that contains an accidental error or needs correction on a point that was not adjudicated upon. It applies where the court order contains a typo or perhaps where the judge forgot to rule on a point that was raised at the hearing. It is not a basis to raise new grounds not raised before or to complain about former counsel’s handling of a proceeding.

[33] In light of the foregoing, Rule 59.06(1) does not apply in this case. The Plaintiffs do not argue that the Default Judgment contains an error or that Justice Belobaba forgot to rule on a point that was raised at the hearing. The issue of the inclusion of the Plaintiffs in the Smith Action in the Default Judgment was not raised at the hearing before Justice Belobaba or before he released his decisions.

[34] With respect to Rule 59.06(2), the only subparagraphs that could apply in this case are (a) (facts arising or discovered after the order was made) and (d) (obtain other relief than that originally awarded).

[35] Courts have stated that Rule 59.06(2) provides a mechanism for re-opening a hearing under very strict conditions. It is not an invitation to reargue cases endlessly or raise new issues after a decision has been rendered, and it is not a “do-over”. See Tiago v. Tinimint Housing, 2021 ONSC 2232 at para. 37 and Berge v. College of Audiologists and Speech Language Pathologists of Ontario, 2019 ONSC 3351 at para. 34.

[36] Rule 59.06(2) does not permit variations or amendments that pertain to new causes of action or matters that were not pleaded. This was made clear by the Court of Appeal in Royal Bank of Canada v. Korman, 2010 ONCA 63. Justice Rouleau stated the following at paras. 19-24:

[19] The motion judge appears to have accepted the proposition that the normal course would be for the bank to amend its pleading in order to seek a judgment in fraud. However, he ultimately rejected the appellant’s submission finding that “post-judgment, the notice of motion contents are allegations in this matter that effectively amount to new pleadings – they assert fraud clearly on their face. … I have no doubt that it was open to the bank to obtain the order that it did and it was open to Miller J. to grant that order, turning the default into a judgment in fraud under r. 59.06 based on the after-discovered facts. That is exactly one of the reasons why the rule is there.” Thus, in the view of the motion judge, a motion under r. 59.06 pertaining to a fresh cause of action obviates the need to have pleaded the cause of action.

[20] In my view, the motion judge erred in rejecting the appellant’s submission in this regard. Rule 59.06(2) (a) allows for the amendment, setting aside or varying of orders “on the ground of fraud or of facts arising or discovered after it was made.” There are, therefore, two separate and distinct bases for applying r. 59.06(2) (a). The first is fraud. Read in the context of the rule as a whole, it is clear that the reference to fraud is a fraud perpetrated in the way the judgment or order was obtained. There is no suggestion that this occurred in the present case.

[21] The second basis is broader. It provides that a judgment or order may be amended, set aside or varied because of facts that arose or were discovered after the order or judgment was obtained.

[22] In the present case, the respondent argues that the facts it relies on to prove the alleged fraudulent misrepresentations were discovered by it after the judgment was obtained. Assuming that the statements in the appellant’s personal statement of affairs were indeed fraudulent, the bank submits that this places it within the rule.

[23] I disagree. The difficulty with the respondent’s position is that it had never claimed fraud in the statement of claim. The claim was simply for recovery of a debt based on the guarantee. The claim contained no allegation of fraud nor was declaratory relief of the nature ordered by Miller J. sought. In my view, this placed the relief requested by the bank beyond the scope of that available under r. 59.06.

[24] The rule does not contemplate altering a judgment or order to provide for relief never sought in the moving party’s pleading. In order to come within the rule, the motion must be one brought “in the proceeding”. As a general rule, pleadings lay out the four corners of the dispute and parties are bound by their pleadings: See Kalkinis (Litigation Guardian of) v. Allstate Insurance Co. of Canada (1998), 41 O.R. (3d) 528 (C.A.); leave to appeal refused, [1999] SCCA No. 253 (S.C.C.). The proceeding continues to be defined by the pleadings even after judgment is obtained. For the motion to be “in the proceeding”, therefore, it must be a motion that, even before judgment, was available to the moving party to bring. In this case, even on a generous reading, a motion for judgment declaring the sums to be owing in fraud could not have been brought or succeeded before judgment based on the pleadings as they stand. Rather, the respondent’s pleading would have to have been amended to request such relief. [Emphasis added.]

[37] The pleading in the Zarei Action did not refer to the Plaintiffs in the Smith Action and did not seek relief on their behalf. Therefore, the relief sought on this motion – the “extension” of the Default Judgment so as to grant damages to the Plaintiffs in the Smith action – was not available at the time the Default Judgment was made. As a result, it is not available on this motion either, and the requested amendment/variation of the Default Judgment is not available under Rule 59.06(2). This confirms the concerns raised by Justice Belobaba in his e-mails sent to counsel for the Plaintiffs in January 2022.

3. Service of Statement of Claim in Smith Action

[38] While my conclusion on the applicability of Rule 59.06 is sufficient to dispose of this motion, it is my view that it is not open to the Plaintiffs in the Smith Action to obtain default judgment until service of the Statement of Claim in the Smith Action has been made in accordance with subsections 9(1), (2) and (5) of the SIA and the conditions set out in subsection 10(1) of the SIA have been complied with. I agree with the position of the Attorney General of Canada that it is premature for the Plaintiffs in the Smith Action to seek default judgment on a claim that has yet to be served on the Defendants.

[39] The Smith Action was commenced as a separate proceeding. While it was subsequently consolidated with the Zarei Action, I am of the view that the Consolidation Order does not retroactively dispense with the requirement to serve the Statement of Claim in accordance with the SIA. Rule 6.01(2) of the Rules of Civil Procedure provides that in an order for consolidation or hearing together, “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.” This Rule does not provide for dispensing with service of the originating process and, in any event, no directions were given in the Consolidation Order in this regard.

[40] Since the Zarei Action has already been determined, the Zarei Action and the Smith Action will not be heard together (unless the Default Judgment is set aside). Thus, practically speaking, the Smith Action is proceeding separately and not as a consolidated proceeding. Allowing the Smith Action to proceed in this way without service of the Statement of Claim on Iran would, in my view, be contrary to both the letter and the spirit of section 10(1) of the SIA. The Plaintiffs in the Smith Action have issued an originating document which they never served on Iran in accordance with section 9 of the SIA. As a result, pursuant to section 10(1), they are prohibited from taking steps toward judgment with respect to the allegations in the Smith Action.

[41] While I understand the Plaintiffs’ desire to proceed expeditiously and obtain closure on a painful matter, I note that the Smith Action was commenced only three months ago, approximately two years after the relevant events. If one considers the typical timelines in a civil action in which millions of dollars in damages are sought, it would be unusually fast to obtain judgment (even default judgment) within three months of issuance of the Statement of Claim, especially against a defendant served outside Canada and the United States as such a defendant has sixty days to deliver a statement of defence (Rule 18.01). Further, this is not a typical civil action: the Plaintiffs are suing a foreign state and it is a reality that litigating against such a defendant is procedurally more cumbersome and time-consuming. There is no discretion under the SIA to ignore these procedural requirements. Ultimately, if and when the Plaintiffs in the Smith Action move for default judgment after the requirements in section 10 of the SIA have been complied with, such motion will likely proceed faster than in the Zarei Action given, among other things, all the evidence that has already been gathered in the Zarei Action and the persuasive value of the decisions of Justice Belobaba. Additional legal arguments may also be available to the Plaintiffs.

E. Conclusion

[42] In light of the foregoing:

a. the Plaintiffs’ motion to amend, vary and extend the Default Judgment to include the Plaintiffs in the Smith Action is dismissed;

b. the Plaintiffs’ motion for a declaration that the Plaintiffs are entitled to an order that a Writ of Seizure and Sale be issued to them by the Registrar of the Court permitting them to enforce the Default Judgment against certain land and bank accounts, and an order directing the Registrar to issue such a Writ of Seizure and Sale is adjourned sine die until a date not less than 60 days after certification of transmission of the Default Judgment to Iran; and

c. the unredacted motion materials provided to me for the purpose of this motion are ordered to be sealed, with only the redacted version of the motion materials being part of the public record.

[43] The Attorney General of Canada did not seek costs. The Plaintiffs sought costs against the Attorney General of Canada, but I decline to order any costs as the Plaintiffs were unsuccessful on this motion with respect to the issues on which the Attorney General of Canada took a position. The Plaintiffs were advised of the position of the Attorney General of Canada prior to the hearing of the motion, did not agree to an adjournment and took an unnecessarily antagonistic position regarding the participation of the Attorney General of Canada in this motion. Therefore, there will be no costs of this motion.

Vermette J.

Date: April 4, 2022

[1] I note that, at the end of his decision on damages, Justice Belobaba referred to these subsections and the possibility that Iran could move to have the Default Judgment set aside or revoked: Zarei v. Iran, 2021 ONSC 8569 at para. 72.

[2] Section 3 of the SIA provides as follows:

State immunity

3 (1) Except as provided by this Act, a foreign state is immune from the jurisdiction of any court in Canada.

Court to give effect to immunity

(2) In any proceedings before a court, the court shall give effect to the immunity conferred on a foreign state by subsection (1) notwithstanding that the state has failed to take any step in the proceedings.