COURT OF APPEAL FOR ONTARIO DATE: 20210831 DOCKET: C68121, C68122 & C68123

Feldman, Lauwers and Trotter JJ.A.

DOCKET: C68121

BETWEEN

Heliotrope Investment Corporation Plaintiff (Respondent)

and

1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary Beach and 1073650 Ontario Inc. Defendants (Appellants)

and

1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary Beach and 1073650 Ontario Inc. Plaintiffs by Counterclaim (Appellants)

and

Canadian Western Trust Company (In Trust for RRSP Plan Number #10084752 and Plan #10084190), Heliotrope Investment Corporation, Magenta Capital Corporation and Magenta Mortgage Investment Corporation Defendants by Counterclaim (Respondents)

DOCKET: C68122

AND BETWEEN

Canadian Western Trust Company (In Trust for RRSP Plan Number #10084752 and Plan #10084190) Plaintiff (Respondent)

and

1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary Beach and 1073650 Ontario Inc. Defendants (Appellants)

and

1324789 Ontario Inc., Martha Lorraine Beach, Johnathan Gary Beach and 1073650 Ontario Inc. Plaintiffs by Counterclaim (Appellants)

and

Canadian Western Trust Company (In Trust for RRSP Plan #10084752 and Plan #10084190), Heliotrope Investment Corporation, Magenta Capital Corporation and Magenta Mortgage Investment Corporation Defendants by Counterclaim (Respondents)

DOCKET: C68123

AND BETWEEN

Canadian Western Trust Company (Incorporation No. A46845), In Trust for RRSP Plan Number #10084189 and Plan #10084190 Plaintiff (Respondent)

and

1324789 Ontario Inc., 1073650 Ontario Inc., Johnathan Gary Beach and Martha Lorraine Beach Defendants (Appellants)

Counsel: Bruce Marks, for the appellants Charles L. Merovitz, Denise Sayer and Eric Lay, for the respondents

Heard: February 18, 2021 by video conference

On appeal from the judgment of Justice Patrick Hurley of the Superior Court of Justice, dated February 5, 2020, with reasons reported at 2020 ONSC 810.

Lauwers J.A.:

I. Introduction

[1] The appellants are Johnathan Gary Beach, Martha Lorraine Beach, and companies under Mr. Beach’s control, collectively, “the Beach parties”. The respondents are companies under the control of Gavin Marshall, collectively, “the Magenta parties”. The appellants and the respondents were involved in real estate developments. In the course of their collaboration, the Magenta parties loaned money to the Beach parties, secured by mortgages on properties owned by the Beach parties. The relationship deteriorated, and in the litigation that followed, the Magenta parties sought to enforce the mortgages by way of motions for summary judgment in three different mortgage enforcement actions. Those motions were heard together by the motion judge, who granted summary judgment in all three actions in a single set of reasons. He refused to stay the enforcement of those judgments under r. 20.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, pending the resolution of the Beach parties’ claims against the Magenta parties.

[2] Although the appellants raise many issues, they can be distilled into two:

1. Did the motion judge err in granting the summary judgments?

2. Did the motion judge err in declining to stay the enforcement of the summary judgments?

[3] I address these issues after setting out the facts and the motion judge’s decision. For the reasons that follow, I would dismiss the appeals.

II. Facts

(1) The Parties’ Relationship

[4] Mr. Beach first approached Mr. Marshall in 2013 for a loan. He had been developing two waterfront properties on Loughborough Lake, north of Kingston, with another individual whom he wished to buy out. Mr. Marshall first loaned money to Mr. Beach secured by a number of mortgages and later invested in the venture. They entered into two “Joint Venture Agreements” (“the JVAs”) in February and July 2014, and collaborated on four residential land development projects, specifically Applewood Lane and Johnson Point, both on Loughborough Lake, Pine Point, and Cranberry Cove. However, one project, Cranberry Cove, was not included in either JVA, though Mr. Beach claims that the parties had intended the same arrangement to apply to it.

[5] Under the JVAs, Mr. Marshall was primarily responsible for financing the projects, and Mr. Beach was the project manager. Each JVA provided for each party’s “Proportionate Share” of that JVA, and both contemplated that each party would contribute to development costs according to their proportionate share.

[6] The Beach parties borrowed money from the Magenta parties in order to make their financial contributions to the projects. The loans were secured by various mortgages on properties owned by the Beach parties, including some unrelated to the projects. The mortgages listed below secured the loans. The 2013 mortgages preceded the JVAs.

(2) The Mortgages

[7] In April 2013, Mr. Marshall and his spouse loaned funds through RRSPs they held with Canadian Western to the Beach parties, secured by two mortgages, collateral to one another. The advances were made on April 4, 2013 for $801,443, and on October 17, 2014 for $8,847. The Beaches used the funds to discharge the mortgages on their principal residence and to repay other debts. The maturity date was April 3, 2014. The amount due and owing under these mortgages, as of September 4, 2019, was $780,853.74.

[8] In December 2013, Heliotrope, a company owned by Mr. Marshall, loaned funds to the Beach parties, secured by a mortgage. The advance was made on December 31 for $300,000. The funds were used to pay down an existing mortgage on one of the development properties. The maturity date was January 20, 2014, which was extended to October 31, 2015. The amount due and owing, as of September 4, 2019, was $488,359.80.

[9] In February 2014, through Canadian Western, the Magenta parties loaned funds to the Beach parties secured by two mortgages. The advances were made on February 14, 2014 for $1,087,616, and on October 17, 2014 for $240,779. The funds were used to discharge two previous mortgages on the development properties, totaling $1 million. The balance of funds went to the Beaches’ personal debts, to some joint venture expenses, and a previous mortgage on a development property. The amount due as of July 9, 2019 was $2,171,265.71.

(3) The Litigation

[10] After cost overruns and delays on the projects, the relationship between Mr. Beach and Mr. Marshall soured and a flurry of litigation commenced. [1] Mr. Beach was the first to threaten litigation [2] but the Magenta parties sued first on May 11, 2018, for the enforcement of promissory notes totaling over $1.1 million (“the Promissory Notes action”). On May 22, 2018, the Beach parties sued the Magenta parties, pleading breach of contract, breach of fiduciary duties, bad faith, and constructive trust claims over Cranberry Cove (“the JVA action”).

[11] Between June 22, 2018 and July 4, 2019, the Magenta parties started five mortgage enforcement actions, including the three decided in the summary judgment motions under appeal.

[12] On September 25, 2020, Mr. Beach sued the Magenta parties claiming wrongful termination and breach of human rights, as well as breach of contract and breach of fiduciary duties (“the Wrongful Termination action”). Counterclaims have been made in many of these actions, as described in more detail below. The parties have also issued crossclaims in other actions: in an action started by the Magenta parties against Above All Builders, the homebuilder engaged in building homes on some of the lots on the JVA properties; and in an action brought by the prospective buyers of a home on one of the JVA properties, where the buyers sued Above All Builders, 1324789 Ontario Inc. (“132 Ontario”), and the Magenta parties for the return of deposits after the home was not completed by the outside occupancy date.

[13] Many interlocutory motions have been argued in the litigation, including for the appointment of a receiver-manager, certificates of pending litigation, contempt orders, and injunctions. Decisions and costs orders have been issued on many of these motions. Most, but not all, were decided by the motion judge, who has been case managing this morass of litigation.

III. The Motion Judge’s Decision

[14] The Beach parties did not dispute that the Magenta parties had advanced the monies secured by the mortgages or that the mortgages were in default. The motion judge found the three mortgages to be enforceable and granted summary judgment.

[15] The Beach parties made four arguments before the motion judge. First, they defended on the basis of an alleged forbearance agreement, relying on emails from Mr. Marshall in which he suspended the obligation to make payments and advised the Beach parties that he would forbear enforcement in anticipation of the sale of lots. However, the motion judge pointed out that the legal effect of these emails was considered by Ryan Bell J. in Canadian Western Trust Company v. 1324789 Ontario Inc., 2019 ONSC 4789, at paras. 26-27, who found that the emails did not satisfy the requirements of the Statute of Frauds, R.S.O. 1990, c. S.19, and as a result, the alleged forbearance agreement was unenforceable. Her decision was not appealed, and the motion judge agreed with her conclusion. The motion judge quoted Archibald J., who said in SK Properties & Development Inc. v. The Equitable Trust Co, [2003] O.J. No. 2234 (S.C.), at para. 18:

[T]he principle of equitable estoppel cannot be invoked in these circumstances to modify the principle that a variation of a mortgage must be in writing. In my view, the public policy behind that principle is obvious. Parties must be able to conduct their business on an orderly basis. Mortgage agreements such as the one before the court must be reduced to writing so that there can be clarity and certainty in business negotiations. Any extensions or renewals must also be in writing for that sound policy reason.

[16] The motion judge found that there had been no part performance of the alleged verbal forbearance agreement. Mr. Beach’s actions in becoming project manager, doing extra work, and incurring debt, did not fall within the doctrine of part performance, and he could show no relevant detrimental reliance.

[17] The Beach parties’ second argument was that the Magenta parties had wrongly allocated revenue from the sale of lots to pay down the Beach parties’ other debts rather than the debts secured by the three mortgages. The motion judge found that the parties had agreed in the JVAs that debt incurred in relation to the projects would be repaid before revenue from the sale of the lots would be shared between them. Further, he found that Mr. Marshall was entitled to use proceeds from lot sales to pay down other loans instead of those at issue on the summary judgment motions, and to apply those proceeds in priority to unsecured loans made to the Beach parties.

[18] The Beach parties’ third argument was that summary judgment on the mortgages would constitute impermissible partial summary judgment in the overall context of the lawsuits among the parties. The motion judge found that while these mortgage actions are related to the lawsuits brought by the Beach parties, the legal issues are distinct. In his view, granting judgment would advance the litigation as a whole. There was no risk of inconsistent findings of fact, and no risk of substantive injustice because the Beach parties would not be prevented from pursuing their claims for damages.

[19] The Beach parties’ fourth argument was that enforcement of the judgments should be stayed under r. 20.08 of the Rules of Civil Procedure pending the determination of other litigation between the parties. The motion judge declined to stay the enforcement of the summary judgments, finding little merit in the Beach parties’ claims, insufficient evidence of prejudice to the Beach parties in the enforcement of the summary judgments, and prejudice to the Magenta parties if a stay were to be granted.

IV. Fresh Evidence

[20] Before turning to the issues, I address the Beach parties’ fresh evidence motion. The test for admitting fresh evidence is well established. The party seeking to introduce it must show that the proposed evidence is credible, could not have been obtained by reasonable diligence before trial or application, and if admitted, would likely be conclusive of an issue in the appeal. The admission of the fresh evidence must be in the interests of justice: St. Amand v. Tisi, 2018 ONCA 106, 89 R.P.R. (5th) 1, at para. 8.

[21] The Beach parties wish to introduce:

• Final appraisal reports on the sale prices of properties sold by the Magenta parties under the power of sale since the motion judge decided the enforcement motion, to demonstrate that the Magenta parties sold these properties at below-market values;
• A “Recommended Report” to Frontenac Council, prepared by Joe Gallivan, Director, Planning & Economic Development, in which he recommended extending the approval for one of the JVA projects for six months, to demonstrate that the Magenta parties were motivated to delay the project to accrue further interest on the mortgages;
• A September 2019 affidavit of Mr. Beach, with exhibits, and a May 2017 email authored by Mr. Marshall, to demonstrate that Mr. Marshall breached the principle of good faith and the duty of honest performance in relation to Cranberry Cove.

[22] The Cranberry Cove documents were available to the Beach parties when the motion judge heard the summary judgment motions and are not properly fresh evidence. The other fresh evidence purportedly strengthens the claims of the Beach parties in the counterclaims and the other actions, but is of marginal relevance on this appeal. The final appraisals are arguably indicative of reduced prejudice to the Magenta parties if a stay were granted under r. 20.08, because the property values are higher. However, with reasonable diligence, the appraisals could have been obtained before the motions were heard.

[23] I would therefore not admit the fresh evidence on appeal.

V. Analysis

[24] As noted, there are two primary issues on appeal: did the motion judge err in granting the summary judgments and in refusing to stay the judgments. The Beach parties raised only the second issue in their initial appeals, asserting that the motion judge applied the wrong test in refusing to grant a stay of enforcement under r. 20.08. The Beach parties moved successfully for leave to appeal the entire judgment and amended their notices of appeal to raise more issues.

[25] The Beach parties add the claim that the motion judge erred in allowing Mr. Marshall to allocate sale proceeds contrary to the JVAs. However, the Magenta parties point to clear evidence that the Beach parties did not object to these allocations at the time they were made. The motion judge did not find any misallocation, but found that Mr. Marshall was entitled to allocate the funds as he did under the JVAs. The Beach parties do not challenge this finding or the motion judge’s interpretation of the JVAs by which he reached it.

[26] The Beach parties argue that the claims they advance in their counterclaims, in the JVA action and in the Wrongful Termination action (which was started after the date of the judgments under appeal), warrant reversal of the summary judgments. They assert that the motion judge failed: to apply doctrines of good faith, fiduciary duty, and unconscionability, to determine whether the JVAs created a fiduciary duty, to review the evidence of Mr. Marshall’s bad faith conduct, to consider whether the bad faith terminations provide grounds to reverse the summary judgments, and to determine whether the JVAs are unconscionable.

[27] With respect, these are not properly constituted issues on this appeal. The motion judge considered whether the Beach parties’ counterclaims could render the mortgages unenforceable and found they could not. That finding is not directly challenged.

[28] I now turn to the two issues.

VI. Issue One: DID THE MOTION JUDGE ERR IN GRANTING The SUMMARY JUDGMENTs?

[29] The Beach parties argued below that summary judgment should be denied because it would, in effect, constitute partial summary judgment in the context of all the litigation in which the parties are involved. [3] On appeal, the Beach parties assert that their counterclaims make summary judgment inappropriate.

(1) Standard of Review

[30] The standard of review for a decision to grant summary judgment is deferential, except if there are extricable errors: Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at para. 30; Service Mold + Aerospace Inc. v. Khalaf, 2019 ONCA 369, 146 O.R. (3d) 135, at paras. 14-15.

(2) Partial Summary Judgment

[31] The motion judge summarized the Beach parties’ arguments that granting the motion “would, in effect, constitute partial summary judgment” and that “these three motions would be akin to partial summary judgment because the issues are significantly intertwined with those raised in the lawsuit commenced by 132 Ontario”. [4] The motion judge did not expressly agree with the Beach parties that these were effectively motions for partial summary judgment but he addressed their argument.

[32] Summary judgment might not be in the interest of justice where there is a “risk of duplicative proceedings or inconsistent findings of fact”: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 60. See also Baywood Homes, at para. 34; Canadian Imperial Bank of Commerce v. Deloitte & Touche, 2016 ONCA 922, 133 O.R. (3d) 561, at paras. 36-38, leave to appeal requested but appeal discontinued, [2017] S.C.C.A. No. 58; Butera v. Chown, Cairns LLP, 2017 ONCA 783, 137 O.R. (3d) 561, at para. 25; and Service Mold, at paras. 14, 17-18. However, in some cases, “the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost-effective approach”: Hryniak, at para. 60.

[33] The motion judge was alive to these requirements, citing the following passage from para. 34 of Butera:

A motion for partial summary judgment should be considered to be a rare procedure that is reserved for an issue or issues that may be readily bifurcated from those in the main action and that may be dealt with expeditiously and in a cost effective manner. Such an approach is consistent with the objectives described by the Supreme Court in Hryniak and with the direction that the Rules be liberally construed to secure the just, most expeditious, and least expensive determination of every civil proceeding on its merits.

[34] The motion judge’s analysis of the appropriateness of summary judgment in this case was brief. He stated, at para. 54:

Although the debt enforcement actions are connected to the lawsuit because they involve the same parties and relate to loans made to the Beaches, the legal issues are distinct. There is no serious dispute that the mortgages and promissory notes are valid, that the money was loaned and the defendants have defaulted in payment of all the loans. They are claims that can be easily determined. The litigation as a whole will be advanced by dealing with them separately as the factual and legal issues can be summarily determined without the need to make any credibility findings. There is no risk of inconsistent findings of fact. There would also be no substantive injustice because 132 Ontario can still pursue its claim for damages based on Mr. Marshall’s alleged wrongful conduct.

[35] The motion judge clearly adverted to – and found absent – the reasons why partial summary judgment would not be advisable. His reasons should be read in the context of the litigation between these parties as a whole, including his own decisions on related motions. His decision not to consolidate the two other Magenta debt enforcement actions with the JVA action is particularly helpful in this regard. [5] There (i.e., in Heliotrope v. 1324789 Ontario Inc., 2020 ONSC 808), the motion judge stated, at para. 15:

If the pleadings were the sole consideration, I would agree that there appear to be common factual and legal issues which would tend to support a consolidation order. But this motion comes more than 18 months after the litigation was commenced and the evidentiary record demonstrates that the most expeditious and inexpensive determination of the disputes between the parties is to order that the debt enforcement actions proceed separately from the action commenced by 132 Ontario. I am also satisfied that there is no risk of inconsistent judicial findings in doing so.

[36] He continued, at para. 18:

If 132 Ontario is successful in its action, it would be entitled to an award of damages. None of the claims made by it would have to be re-litigated in the debt enforcement actions. The counterclaims in each of those actions, because they duplicate the ones made in 132 Ontario’s lawsuit, would not have to be tried. Rather, the trial in 132 Ontario’s action would proceed first and the result of that trial would dictate the outcome for each of the counterclaims.

[37] Although there appeared to be common factual and legal issues between the Beach parties’ counterclaims in the Magenta debt enforcement actions and their own claims in the JVA action that would ordinarily favour consolidation, the motion judge found no risk of inconsistent findings of fact if he refused the Beach parties’ motion. That conclusion was supported by his careful consideration of whether the Beach parties’ claims could undermine either the enforceability of the mortgages or the amounts owing. The Beach parties received the money advanced under the mortgages and are in default.

[38] The motion judge was deeply familiar with the lawsuits, the issues, the facts, and the parties, and has made several rulings in the litigation. He was clearly of the opinion that the most efficient route to resolving the disputes between the parties would be for the substantive counterclaims in the mortgage enforcement actions to be heard in the trial of the JVA action. He found that ordering summary judgment would not duplicate proceedings or judicial efforts, and would mitigate rather than cause delay. As the motion judge noted in his 2020 ONSC 808 decision, at para. 8, apart from the three motions on which he granted summary judgment, “the litigation remains at the pleadings stage.” In these circumstances, the orders for summary judgment advanced the Hryniak objectives of proportionality, efficiency, and cost-effectiveness.

[39] I would defer to the motion judge’s assessment in light of his grasp of the state of play in the obscuring blizzard of litigation and dismiss the Beach parties’ appeal of the summary judgments.

VII. Issue Two: DID THE MOTION JUDGE ERR IN DECLINING TO GRANT A STAY OF EXECUTION?

[40] The Beach parties argue that the motion judge should have stayed the summary judgments under r. 20.08 of the Rules of Civil Procedure pending the determination of other issues in the parties’ litigation. Rule 20.08 provides:

Where it appears that the enforcement of a summary judgment ought to be stayed pending the determination of any other issue in the action or a counterclaim, crossclaim or third party claim, the court may so order on such terms as are just.

[41] The Beach parties argue that the motion judge erred by applying the wrong standard. They submit that a stay should be granted under r. 20.08 unless the counterclaim is without merit. As Epstein J.A. stated in Hinke v. Thermal Energy International Inc., 2012 ONCA 635, at para. 29:

The law is clear that a stay should be granted unless the counterclaim is without merit: Freedom International Brokerage Company v. Anastakis (2006), 2006 31911 (ON SC), 21 B.L.R. (4th) 246 (Ont. S.C.). It is significant that Hinke did not, in the relief sought in his motion for summary judgment, seek dismissal of the counterclaim. By inference, Hinke must consider the counterclaim as having sufficient merit so as to raise a genuine issue requiring a trial.

Hinke reflects a line of jurisprudence spanning several versions of the rules governing civil procedure in Ontario.

[42] However, the motion judge relied on the approach to r. 20.08 described in Zucchetti Rubinetteria S.P.A. v. Natphil Inc., 2011 ONSC 2275, at para. 15, per Perell J., aff’d 2011 ONCA 726:

The jurisdiction to grant a stay is discretionary and depends on the facts of the case. In exercising its discretion, the court will consider such factors as: (a) whether the plaintiff resides out of the jurisdiction or is impecunious and potentially unable to satisfy a judgment on the defendant's counterclaim; (b) whether factually the claim and the counterclaim are closely connected; (c) whether the counterclaim appears to be meritorious; (d) whether the counterclaim was tardy or appears to be an afterthought to the plaintiff’s claim; and (e) whether the counterclaim appears to have been brought for delay or for tactical reasons. [Citations omitted.]

[43] The motion judge’s discretionary, multi-factorial approach to r. 20.08 is also well-supported by the jurisprudence. [6]

(1) The Governing Principles Concerning Stays Under r. 20.08

[44] Two distinct and somewhat inconsistent approaches to r. 20.08 have emerged. The first might be called the merits test, which arose in the jurisprudence under the old Rules of Practice. The second is the multi-factorial test, which has emerged since 1985 under the Rules of Civil Procedure. I explain the origin of each test and then consider how they should be reconciled.

(a) The Merits Test

[45] The merits test is reflected in Hurwitz v. Baz, [1955] O.J. No. 352 (C.A.), an oral endorsement of this court under the old Rules of Practice. The court said:

Rule 56, which has been called to our attention, provides a counter claim shall be deemed to be a defence within the meaning of the rule. The affidavit of merits does set up a counter claim and there is nothing in the record to show that that counter claim is without [merit]. We are, therefore, of the opinion that the learned Judge erred in directing judgment to be entered for the plaintiff in these circumstances without staying proceedings on the claim of the plaintiff until the counter claim was disposed of. [7]

[46] To explain the terminology at play, I note that the old Rules of Practice allowed the plaintiff to issue a specially endorsed writ of summons where the claim was “to recover a debt or liquidated demand in money” arising in certain prescribed circumstances, such as recovery on a cheque, promissory note, or bill of exchange, or recovery on a mortgage. [8] To defend against a specially endorsed writ, the defendant was required to serve and file an affidavit of merits setting out a defence to the action within 15 days. [9] If the defendant did not do so, the plaintiff was entitled to sign default judgment and proceed to execution. Under r. 42(4), a counterclaim was deemed to be a defence to a specially endorsed writ. The plaintiff could cross-examine the defendant on the affidavit of merits, and either move for judgment or convert the action into one destined for trial. [10]

[47] Rule 118 of the Rules of Practice applied where the defendant had a counterclaim. It provided: “Where a defendant does not dispute the plaintiff’s claim but sets up a counter-claim, the court may stay proceedings respecting the claim until the counterclaim is disposed of.” This court invoked r. 118 in General Printers Ltd. v. Algonquin Publishing Co., [1970] O.J. No. 1534 (C.A.), and found, at para. 5, the appropriate question to be whether the counterclaim could “give rise to a triable issue” or whether “the defendants would necessarily fail to gain success”. [11]

[48] As can be seen by this court’s decision in Hinke in 2012, the merits test survived the adoption of the Rules of Civil Procedure in 1985. [12]

[49] The gist of the jurisprudence on the merits test for a stay can be distilled. First, the court may stay the judgment if the defendant alleges a legal set-off, as Strathy J. (as he was then) noted in Univar Canada Ltd. v. Pax-All Manufacturing Inc., 2008 44741 (Ont. S.C.), at para. 12:

There are two requirements of legal set-off. First, both obligations – the plaintiff's claim and the defendant's claim for which set-off is asserted – must be debts. Second, the debts must be mutual cross-obligations. A mutual cross-obligation is a debt due from each party to the other for liquidated sums, or money demands which can be ascertained with certainty at the time of pleading: see Telford v. Holt (1987), 1987 18 (SCC), 41 D.L.R. (4th) 385 at 393.

[50] Second, the court may stay the judgment if the counterclaim constitutes an equitable set-off, as Strathy J. noted in Univar. He set out the elements of equitable set-off, at para. 15, summarizing this court’s test in Algoma Steel Inc. v. Union Gas Ltd., 2003 30833 (ON CA), [2003] O.J. No. 71 (C.A.), at para. 26:

1. The party relying on a set-off must show some equitable ground for being protected against the adversary's demands.
2. The equitable ground must go to the very root of the plaintiff's claim.
3. A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim.
4. The plaintiff's claim and the cross-claim need not arise out of the same contract.
5. Unliquidated claims are on the same footing as liquidated claims.

[51] Third, the court will consider the strengths and weaknesses, or the merits of the counterclaim. As noted in Hinke, a stay will be issued where the counterclaim has some merit. If the counterclaim is without merit or a sham, a stay will not be issued.

[52] The underlying purpose of the merits test for a stay is to ensure that the defendant’s claims against the plaintiff are fully determined on their merits before the plaintiff can enforce judgment.

(b) The Multi-Factorial Test

[53] The multi-factorial test emerged from the policy orientation of the Rules of Civil Procedure. Walter Williston was tasked with proposing a modernization of the Rules of Civil Procedure and released his proposal in June 1980. The terms of reference provided to him included the need to balance “expense… against convenience, efficiency and social purpose” and the “consideration of alternative, more expeditious and less formal adjudicative procedures”. [13] In describing the proposed changes to summary judgment, he described how plaintiffs had seldom been able to obtain judgment on contested specially endorsed writs: “No matter how shadowy or unlikely a defence is disclosed by the Affidavit, the Court has been exceedingly reluctant to allow the plaintiff to obtain judgment without giving the defendant the right to go to trial.” [14] Mr. Williston’s proposal included the current wording of r. 20.08. [15]

[54] Morden J.A. was tasked with the revision of the Rules of Civil Procedure after Mr. Williston’s death. He noted that the goal presented in r. 1.04(1), being “the just, most expeditious and least expensive determination of every civil proceeding on its merits,” must be balanced against the competing demands of “the desire to provide a mechanism that will assist in ascertaining the truth, on the one hand and, on the other, the concern not to make litigation too cumbersome or expensive.” [16] Balancing is necessary because “it is not possible to achieve perfection in the solution to all problems.” [17]

[55] The discretionary, multi-factorial approach allows for a stay to be refused where its imposition would lead to prejudice, or disproportionate delay or expense to the plaintiff. It seeks to achieve the effective summary judgment procedure sought by Mr. Williston and the balance sought by Morden J.A.

(c) A Restated Multi-Factorial Approach to r. 20.08

[56] In 35 years of experience with r. 20.08, judges have developed several factors to be taken into account in considering whether to exercise discretion to grant a stay under r. 20.08. [18] The principle of fundamental fairness is the basis for equitable set-off, which underpins the rule and requires an assessment of the equities between the parties. [19] The multi-factorial test can now be restated.

[57] The first factor is the merits of the counterclaim. On balance, the stronger the merits, the more likely the stay. If there is little or no merit to the counterclaim, a stay is not warranted. But if there is some merit, a stay might be warranted because it might be impossible to know before the trial of the counterclaim who will be the net winner and it would be unjust to compel the defendant to pay the judgment in advance. A court is therefore required to undertake a more robust assessment of the merits rather than making a simple finding that the counterclaim is not without merit. [20] Other factors must also be considered and balanced. For example, a legal set-off is a complete defence to the extent of the set-off and might warrant a partial, if not a complete, stay of the plaintiff’s judgment. [21] The analysis of the impact of an equitable set-off is more nuanced, as the next factors show.

[58] The second factor is the relationship between the judgment and the counterclaim. On balance, the closer the relationship, the more likely the stay. [22] If the relationship is very close, for example, in the context of the same or a closely connected transaction, then the argument is stronger that it would be unfair or unjust to allow the plaintiff to enforce a judgment before the disposition of the counterclaim. If the parties are the same but the disputes are not factually related, then the fairness argument is weaker.

[59] The third factor is the conduct of the defendant, including whether the counterclaim was launched late, or for strategic purposes, or for the purpose of delay. Questionable litigation strategy is part of this factor, including the failure to diligently pursue the counterclaim. [23]

[60] The fourth factor is the balance of prejudice to the parties. As examples, a court might need to balance the plaintiff’s need for the funds as against a weak counterclaim, [24] assess whether the defendant is able to pay the judgment now but possibly unable to do so in the future, or consider if the plaintiff is impecunious or resides out of the jurisdiction, which puts in doubt the defendant’s recovery on a counterclaim that has some merit. [25]

[61] The fifth factor is whether the terms of a stay can sufficiently mitigate the negative effects on the plaintiff. Rule 20.08 provides that where it appears a judgment ought to be stayed, “the court may do so on such terms as are just.” In describing the phraseology and syntax adopted in drafting the Rules of Civil Procedure, Morden J.A. commented that the phrase, “as are just” or “as is just”, confers the power described in objective rather than subjective terms (as may be expressed by “as are considered just”). [26] As examples, the court could make an order requiring the payment of the judgment into court, [27] requiring the judgment to be paid on a net basis where the judgment exceeds the counterclaim, [28] or requiring the trial of the counterclaim to be expedited where that has a realistic prospect of success. [29]

[62] The factors set out above are interrelated but not exhaustive. More than one can apply in any given situation.

[63] This restated multi-factorial approach has substantial support in the cases, and, in my view, best achieves both the purposes of r. 20.08 and the summary judgment procedure as well as the goals of the Rules of Civil Procedure more broadly in securing the just, most expeditious and least expensive determination of every civil proceeding on its merits.

(2) Application to the Appeals

[64] Recall that there are many actions between the Magenta parties and the Beach parties with many counterclaims and crossclaims. These are summarized in the Appendix. The motion judge appears to have been case managing them.

[65] The business relationship between the parties is irretrievably broken. This litigation is, in short, a recovery exercise in which it is in the interests of both parties to maximize the values of the properties subject to the JVAs and to sell them, with the proceeds used to pay off the loans. Under the JVAs, this is the responsibility of Mr. Marshall. The motion judge noted, at para. 62:

The parties had the good sense to retain lawyers at the outset and negotiate agreements that governed their rights and obligations. There is nothing unfair in holding them to the bargain they made. This is especially the case where, as here, the debtors greatly benefited from the loans when they were made.

[66] There is potential unfairness to the Beach parties in enforcing the summary judgments before their counterclaims are determined. In assessing whether they were entitled to a stay, the motion judge used the multi-factorial test and relied on the factors set out by Perell J. in Zucchetti. He did not err in doing so.

(a) The Merits of the Counterclaims

[67] The merits of the counterclaim is the first factor in the restated test. The motion judge assessed the merits of the counterclaims, at paras. 60-61:

The counterclaims in these three actions mirror those made in the lawsuit commenced by 132 Ontario. As I noted at the outset of these reasons, I concluded in my earlier decision that the claims made in that lawsuit were not strong ones. The defendants did not adduce any evidence in these motions that would cause me to change my opinion. Despite the passage of almost two years, the defendants have still not provided any evidence that there was third party financing available at lower interest rates. Nor have they even attempted to do so – for example, by identifying financial institutions or other lenders that might have provided such financing but were not solicited by Mr. Marshall. The lawsuit rests on alleged breaches of fiduciary duty which, as I noted before, is a steep road to climb in this type of commercial dispute and an amorphous bad faith allegation.

There is also no evidence that Mr. Marshall engaged in a “fraudulent scheme” aimed at depriving the defendants of their potential profit from the joint venture. Although not labelled as fraudulent, 132 Ontario made, in substance, the same allegation in the statement of claim and the motion for an interlocutory injunction. I made a finding on this issue in my previous decision, stating that it was an unsupportable grievance. There were voluminous affidavits filed in these motions and the other ones I heard in December of last year and also extensive cross-examinations. The defendants did not present any new evidence in the motions that would change my conclusion.

[68] The “earlier decision” referred to in para. 60 of the motion judge’s reasons was his decision in 1324789 Ontario Inc. v. Marshall, 2019 ONSC 517, where he dismissed a Beach motion for the appointment of a receiver-manager, or for an interlocutory injunction restraining Mr. Marshall from taking steps to remove Mr. Beach as the manager, or from taking steps to compel the payment of Mr. Beach’s debt. The motion judge addressed the merit of Mr. Beach’s claims in his earlier decision, at paras. 33-37, which he then invoked in para. 60 of the judgments under appeal:

The plaintiff’s claim arising from MWDC’s [Magenta Waterfront Development Corporation’s] failure to obtain third party financing at lower interest rates, on the basis of the record before me, is weak. The Joint Venture Agreements required reasonable efforts by MWDC to obtain this funding and it has provided detailed evidence of the efforts made by it. The plaintiff did not submit any countervailing evidence that such funding was available but maintains that this is a “triable issue”. It complains that Mr. Marshall did not offer his personal guarantee in order to secure a loan when he said that he would do so. At its highest, this was a pre-contractual representation which is not likely legally enforceable. The Joint Venture Agreements specifically imposed this obligation on Mr. Beach and his wife, not Mr. Marshall. Finally, when the plaintiff and the Beaches borrowed the money, it was at their request and they signed documents which clearly identified the interest rates. The argument that they had no choice but to borrow the money is without merit.

Although it is disputed by MWDC, I am prepared to find, for the purposes of this motion, that the work performed by Mr. Beach as project manager was more extensive than originally contemplated by the parties. However, the Joint Venture Agreements did not impose an obligation on MWDC to increase his remuneration. Therefore, it did not breach the Agreements by declining to do so.

The plaintiff will have an uphill battle in establishing that MWDC owed it a fiduciary duty that superseded, or was in addition to, the terms of the Joint Venture Agreements.…

Even if the plaintiff is able to establish a fiduciary duty, I have difficulty in ascertaining what that fiduciary duty is and how it was breached by MWDC. In the statement of claim, the plaintiff alleges that MWDC’s failure to obtain the third party financing was a breach of fiduciary duty but this cannot be because its obligation was specifically set out in the Joint Venture Agreements. The other alleged breach was MWDC’s refusal to renegotiate Mr. Beach’s remuneration. The plaintiff pleads, in the alternative, that this was a breach of “the reciprocal obligations of good faith and loyalty”. Again, the parties’ rights and obligations in this regard are covered by the Agreements.

I conclude that there are serious issues to be tried because I cannot say the claims are frivolous or vexatious but I would not find that the plaintiff has made out a strong prima facie case. [Emphasis added.]

[69] While the motion judge found that the claims were not frivolous or vexatious, he did not find them to be without potential merit. However, he was clearly of the well-considered opinion that the claims have only minimal potential merit and a small chance of success. This was not an unreasonable assessment.

(b) The Connection Between the Claims and Counterclaims

[70] There is a clear connection between the Magenta claims and the Beach counterclaims in the mortgage enforcement actions. While some of the mortgages were granted before the JVAs were signed, advances on two of the three mortgages were used to pay down other debt on the joint venture properties. The mortgages arose out of a single course of dealings between the Beach parties and the Magenta parties, and their collaboration in bringing the development projects to completion. Considered on their own, these facts would favour a stay.

(c) The Conduct of the Defendants

[71] The motion judge considered, at para. 57, the more narrowly framed factors from Zucchetti of “whether the counterclaim was tardy or appears to be an afterthought” and “whether the counterclaim appears to have been brought for delay or for tactical reasons”. Here, while the Beach parties’ claims were not the first claims brought, the Beach parties were the ones who raised the prospect of litigation, and they brought their claims shortly after the Magenta parties launched the Promissory Notes action. The Beach parties also brought the JVA action before any of the mortgage enforcement actions were commenced.

[72] However, despite their initial eagerness, some of the Beach parties’ conduct during the litigation could be seen as a failure to diligently pursue their claims. At the same time that the motion judge heard the motions for summary judgment, he heard a Beach motion for the consolidation of various actions involving the parties. He noted, at para. 8 of the latter decision (Heliotrope v. 1324789 Ontario Inc., 2020 ONSC 808), that both sides have focused their efforts on bringing interlocutory motions rather than advancing the litigation in the usual manner. Although the motion judge, at para. 20, did not blame either side for the delay in moving beyond the pleadings stage, such litigation conduct does not elicit patience and indulgence from this court.

[73] The motion judge also specifically referenced Ryan Bell J.’s criticism of the Beach parties’ “reprehensible litigation conduct” in footnote six to para. 63 of his reasons for summary judgment. The Beach parties had brought motions for certificates of pending litigation over the lands on which the Magenta parties sought to enforce mortgages. In Canadian Western Trust Company v. 1324789 Ontario Inc., 2019 ONSC 5948, Ryan Bell J. stated, at paras. 8-9:

The Beach parties’ motion was an ill-conceived effort to stop power of sale proceedings in the absence of any evidence of fraud or any pleading of fraud in relation to the mortgages. They relied on the alleged “fraudulent scheme” set out in paragraph 27 of their statement of defence and counterclaim even though on its face, this allegation of fraud had nothing to do with the validity of the mortgages or the Beach parties’ ability to redeem the mortgages.

If the Beach parties had any basis to allege deliberate wrongdoing by the Marshall parties in relation to the mortgages, they ought to have tried to prove their allegation. They did not. This was not the tenacious pursuit of a certificate of pending litigation founded on a serious claim of fraud in relation to the mortgages. In my view, the pursuit of the motion was reprehensible litigation conduct that justifies punitive cost sanctions. [Emphasis added.]

[74] Ryan Bell J.’s comments, taken together with the motion judge’s concerns about the Beach parties’ contribution to the delay in moving the litigation forward, suggest that the Beach parties’ conduct does not weigh in favour of granting the stay.

[75] Since the release of the decision under appeal, the parties have continued with their litigation. The motion judge’s findings in subsequent judgments confirm that the Beach parties’ litigation conduct does not weigh in favour of granting the stay. In July 2020, the motion judge allowed a motion from the Magenta parties requesting security for costs in the JVA action, based on two costs awards that the Beach parties had not yet paid: 1324789 Ontario Inc. v. Marshall et al., 2020 ONSC 4651. The motion judge determined, at para. 6(g), that:

[Mr. Beach] has been dilatory in advancing the litigation as a whole. The lawsuit was started in May 2018 and remains at the pleadings stage. The plaintiff has not delivered an affidavit of documents nor proposed or agreed to a discovery plan.

[76] In December 2020, the motion judge heard a Magenta motion seeking a variety of relief essentially allowing Mr. Marshall to secure the completion of the JVA projects without Mr. Beach, and restraining Mr. Beach from interfering. [30] In his decision, 1324789 Ontario Inc. v. Marshall et al., 2021 ONSC 86, the motion judge referred back to his decision in 2020 ONSC 7592, and observed, at para. 10:

My guarded optimism that the parties could work together, to their mutual benefit, was misplaced. Mr. Beach has continued to act, particularly towards third parties, as if he has the legal authority under the JVAs to dispute the decisions of Mr. Marshall if he believes that they are not in his best interests. He has refused to execute documents that government authorities require in order to approve the further development of the lands and has taken the position that he will not do so unless and until certain information is provided to him. In addition to not cooperating with Mr. Marshall, he has communicated with third parties, including the municipality, its legal counsel and the real estate broker handling the sale of lots, objecting to what Mr. Marshall has done or is planning to do.

[77] The motion judge proceeded to note, at para. 11, that Mr. Beach had commenced another action (i.e., the Wrongful Termination action), and that while the wrongful termination claim in that lawsuit seemed to have merit, “many of [the claims] are duplicative of the first action”. He found, at para. 16, that Mr. Beach’s conduct “evinces a determination to obstruct Mr. Marshall’s efforts to complete the development of the lands”, and accordingly granted an interlocutory injunction against the Beach parties. The motion judge commented, at para. 24: “This action must move forward. It can no longer remain at the pleadings stage, mired in costly interlocutory skirmishing.” He directed the parties to agree on a discovery plan within 60 days.

[78] The Beach parties have not pursued their claims with any diligence or dispatch. They have pursued ill-conceived motions, failed to pay costs awards against them in a timely way, initiated new actions with duplicative claims, and obstructed efforts to bring the JVA projects – and hopefully with them the litigation – to a close. These facts seriously undermine any unfairness to the Beach parties by refusing to grant them a stay of enforcement. Given their own actions, the Beach parties can no longer expect patience and indulgence from the court.

(d) The Balance of Prejudice

[79] The context for assessing prejudice was set by the argument of the Beach parties, as noted at para. 58 of the motion judge’s decision: “[T]he mortgages are also on properties not included in the joint venture and a judgment at this stage would be a ‘substantial windfall’ for the plaintiffs; and there would be no prejudice to the plaintiffs because the value of the properties exceeds the debt owed to the plaintiffs.” It is worth noting that the interest rates in the mortgages are high so that the earlier payment of the mortgages might well result in lower total interest costs.

[80] While the Beach parties asserted on the motion that the enforcement of the judgments would leave them unable to continue their litigation, the motion judge found that they had not provided any evidence to substantiate this assertion. He noted, at para. 63, “they have not made comprehensive disclosure of their financial position and to date have been able to fully engage in costly litigation.” This factor therefore did not bear on the motion judge’s decision to deny a stay.

[81] The motion judge considered the prejudice to the Magenta parties. He observed, at para. 63: “[T]he prejudice to the plaintiffs is certain: if a stay is granted, they will not be repaid the millions of dollars they loaned to the defendants until years down the road.” Another potential prejudice was whether the value of the property would exceed the debt. The motion judge was of the view, based on the inadequate evidence put forward by the Beach parties, that the value of the secured property was speculative.

[82] From the perspective of the Beach parties, the motion judge observed that the Magenta parties are not impecunious, noting in para. 63:

There is no risk that the defendants, if they succeed on their counterclaims, would not recover any award of damages made against the plaintiffs. The same is true in 132 Ontario's lawsuit.

[83] This morass of litigation seems likely to continue for a good while longer. While the Magenta parties might be able to recoup the debt from the proceeds of the sales of lots on the JVA properties, Mr. Beach has acted to delay that process. There is prejudice to the plaintiffs in being out of pocket during the time it takes for either of these events to occur.

[84] A term of the stay could be imposed to require the Beach parties to pay the amount of the judgments into the court, but they appear unlikely to be able to satisfy such a term. It does not appear possible to impose terms that would render a stay order just in the circumstances. While there is disadvantage to the Beach parties by refusing to grant a stay of the summary judgments, any perceived unfairness is outweighed by their conduct and the potential prejudice to the Magenta parties of granting a stay.

[85] In the circumstances, I agree with the motion judge’s conclusion that a stay under r. 20.08 should not be granted. I would defer to the exercise of the motion judge’s discretion in refusing a stay. He was fully conversant with the relevant factors and applied the correct principles. He made no error in principle that warrants this court’s intervention.

VIII. CONCLUSION

[86] In my view, the motion judge considered the relevant law and the applicable factors in light of the complex facts with which he was deeply familiar, both in respect of granting the summary judgments and refusing the stay. This court should not intervene absent an error of law or principle, or a palpable and overriding error of fact. The Beach parties have not established any of these. The orders for summary judgment, even if they functionally operate as orders for partial summary judgment, were appropriate in the circumstances, and stays under r. 20.08 would not be. I would dismiss the appeals with costs to the Magenta parties.

[87] If the parties are unable to resolve costs, then the Magenta parties may file written submissions no more than 3 pages in length within 14 days of the date of the release of these reasons; the Beach parties may file written submissions no more than 3 pages in length within 10 days of the date the Magenta submissions are due; and the Magenta parties may file reply submissions no more than 1 page in length within 5 days of the date the Beach submissions are due.

Released: August 31, 2021 “K.F.” “P. Lauwers J.A.” “I agree. K. Feldman J.A.” “I agree. Gary Trotter J.A.”

APPENDIX

I. OVERVIEW

[1] The Beach parties’ counterclaims in the mortgage enforcement actions allege the following facts:

• The Beach parties and the Magenta parties agreed to purchase Cranberry Cove together.
• While no JVA was executed in relation to Cranberry Cove, the parties treated it like the other JVA properties. Promissory notes were executed for the Beach parties’ share of the development costs in the same way as for the other joint venture properties.
• The Magenta parties alone purchased Cranberry Cove, but Mr. Marshall represented that this was to reduce taxes and that he would transfer title to be jointly held by the Magenta parties and the Beach parties, but later failed or refused to do so.
• For the JVA properties, the Beach parties were to fund their proportional share of development costs under the JVA through promissory notes or by registering mortgages in favour of the Magenta parties.
• Both parties understood that these debts would be cured with the proceeds generated by the sale of lots upon completion of the JVs.
• The Magenta parties knew that the Beach parties would not be able to satisfy these debts other than through the JV proceeds, and the parties carried on under this understanding for four and a half years, with no demands for payment made in that time.
• Mr. Marshall only demanded payment under the mortgages after Mr. Beach sought a restructuring of the interest on the debt because it was eroding his equity in the projects.
• This erosion was due to Mr. Marshall’s failure or refusal to obtain third party financing of these loans at lower interest rates, despite being responsible for doing so under the JVAs.
• Mr. Marshall’s position allowed him to fund the JVs and enjoy the proceeds, while saddling Mr. Beach with the risk.
• By demanding payment on the mortgages before completion of the JV work, Mr. Marshall ensured that Mr. Beach’s interest in the JV would be eroded and that Mr. Beach would not be able to share in the proceeds of the JVs.

[2] On these facts, the Beach parties argue that Mr. Marshall’s conduct is high-handed and constitutes bad faith in contractual performance because:

• Mr. Marshall knew or ought to have known that the defendants were reliant on the proceeds from the completion of the JVA projects to satisfy their indebtedness on the mortgages;
• Mr. Marshall knew that demanding payment prior to completion would “price out” the Beach parties from their interest in the JVs; and
• There was no reason for Mr. Marshall to demand payment on the dates that he did.

[3] The Beach parties purport to plead and rely on all of the allegations in their Statement of Claim in CV-18-178. They seek: (a) A declaration that Mr. Marshall breached the contract between them, breached fiduciary duties created in that contract, and acted in bad faith or in a heavy-handed manner; (b) $2 million in damages for bad faith; (c) In the alternative, $2 million in damages for breach of contract; (d) In the further alternative, $2 million in damages for breach of fiduciary duty; and (e) Costs on a substantial indemnity basis.

II. Comparison to Counterclaims in Other Actions

[4] The Beach parties’ counterclaims in the actions at issue are almost identical to their counterclaims in the two other mortgage enforcement actions (CV-19-090 and CV-19-115), and in the Promissory Notes action (CV-18-167). In each of the other counterclaims, the Beach parties repeat the same or very similar factual allegations with regard to the structure of the JVAs and the intention that the Beach parties’ debts would be repaid through the proceeds of the completed JVA projects. On the basis of those facts, the Beach parties make the same claims (bad faith, breach of contract, or breach of fiduciary duty) and seek the same quantum of damages ($2 million).

III. Comparison to Claims in the Beach Parties’ Actions

[5] The counterclaims also mirror some of the claims made in the Beach parties’ own actions: the JVA action (CV-18-178) and the Wrongful Termination action (CV-20-84558).

(1) Claims in the JVA Action

[6] The JVA action seeks relief including: (a) A declaration that the Magenta parties breached the contract and their fiduciary duties, and acted in bad faith or in a high-handed manner; (b) $5 million in damages based on those breaches; (c) A detailed interlocutory injunction related to the completion of the JVA projects; and (d) A declaration that the Beach parties have a beneficial and constructive interest in Cranberry Cove.

[7] The constructive trust claim is based on a breach of fiduciary duty, unjust enrichment, or on a quantum meruit basis. The Beach parties allege that Cranberry Cove was considered a JVA property and was being developed on the same terms as the JVAs. Mr. Beach states that he did not wish to borrow further from Mr. Marshall to purchase a share of the Cranberry Cove development and that he preferred instead to be recognized for his “sweat equity” in locating the opportunity. He expected this to be reflected in the ownership of Cranberry Cove upon purchase, with himself and Mr. Marshall each owning 50 percent as tenants in common. He later discovered that this had not occurred.

[8] The Beach parties also allege that:

• Mr. Beach carried out management duties for four projects based on compensation that was predicated on two contemplated projects.
• Mr. Marshall failed to discharge his responsibility under the JVAs to undertake reasonable efforts to secure third-party financing, resulting in an inequitable situation and irreparable financial harm to the Beach parties.
• While the Magenta parties provided some evidence of efforts to secure financing, these efforts were insufficient as they only targeted larger lending institutions and did not seek modestly lower interest rates (focusing only on “prime plus one” rates).
• Mr. Beach’s personal funds were required to fund the projects at the high interest rates, which diminished his equity and return, while the Magenta parties earned the interest and the increased value of the properties due to Mr. Beach’s work.
• Mr. Marshall refused to negotiate compensation as required by the JVAs, despite the changes in the scope of Mr. Beach’s work. Mr. Marshall had not engaged in the good faith efforts expected to genuinely restructure the JVAs to compensate for his failure to secure better financing and to reflect the increase in Mr. Beach’s work.
• The Magenta parties have full financial control, but have not disclosed any financial statements or accounting. There has been no accounting of how the proceeds from the lots already sold have been applied to the Beach parties’ debts, other than an insufficient annual report of proceeds. Mr. Marshall has dictated the application of proceeds.
• The initiation of the Promissory Notes action comprises high-handed, reprehensible conduct that warrants sanction.

[9] Many of these factual allegations, and the pursuit of damages for bad faith, breach of contract, or breach of fiduciary duty, are similar to the claims made in the counterclaims.

(2) Claims in the Wrongful Termination Action

[10] There are some similarities between the claims in the Wrongful Termination action and the counterclaims at issue. In the Wrongful Termination action, Mr. Beach claims for breach of contract, breach of fiduciary duties, and unjust enrichment, and seeks a rectification of the JVAs declaring that the loans are only to be paid through the sale of lots. Other claims in the action include wrongful termination, and breach of the obligation of good faith and fair dealing in the manner of dismissal. Damages are claimed under a number of heads.

[1] The actions, and the crossclaims and counterclaims within the actions, are summarized in the Appendix. [2] See 1324789 Ontario Inc. v. Marshall, 2019 ONSC 517, at para. 21. [3] 2020 ONSC 810, at para. 34. [4] Ibid, at paras. 34, 53. [5] This decision does not appear to have been appealed. [6] See, for example, Perdue v. Myers, 2005 30860 (Ont. S.C.), at para. 34; Univar Canada Ltd. v. Pax-All Manufacturing Inc., 2008 44741 (Ont. S.C.), at para. 30, aff’d 2009 ONCA 341, 56 B.L.R. (4th) 175; Canaccord Genuity Corp. v. Sammy, 2014 ONSC 3691, at para. 84; and Waverly Corporate Financial Services Inc. v. Kanwal Inc., 2018 ONSC 1469, at para. 11. [7] In the last version of the Rules of Practice before their replacement in 1985 by the current Rules of Civil Procedure, r. 56 had become r. 42. See Walter B. Williston & R.J. Rolls, The Law of Civil Procedure, vol. 2 (Toronto: Butterworths, 1970), regarding the practice, in c. 7 regarding writs, and c. 9 regarding defences. See also George Holmested & George Alexander Gale, Holmested and Gale on the Judicature Act of Ontario and Rules of Practice (Scarborough: Carswell, 1983), for all the historical referents. [8] Rule 33 in the last version of the Rules of Practice. [9] Rule 35. [10] The process under r. 58 has no equivalent in the Rules of Civil Procedure but has been superseded by the summary judgment process. [11] See also Pomocon Ltd. et al. v. Golias et al. (1974), 1974 736 (ON SC), 4 O.R. (2d) 310 (Div. Ct.). Rule 118 became r. 58(5) in the final version of the Rules of Practice. [12] Hinke was applied most recently in Janeric Engineering Inc. v. 2496110 Ontario Inc., 2020 ONSC 220. [13] Ontario, Ministry of the Attorney General, Civil Procedure Revision Committee, “Letter to Hon. R. Roy McMurtry, Q.C., from Walter B. Williston” in Report of the Civil Procedure Revision Committee (Toronto: Ministry of the Attorney General, 1980) (Chair: Walter B. Williston), at p. 2. [14] Ibid, at p. 19. [15] Ontario, Ministry of the Attorney General, Civil Procedure Revision Committee, “Proposed Rules of Civil Procedure” in Report of the Civil Procedure Revision Committee (Toronto: Ministry of the Attorney General, 1980) (Chair: Walter B. Williston), at p. 67. [16] Ontario, Ministry of the Attorney General, Special Sub-Committee on the Proposed Rules of Civil Procedure, Final Report to the Rules Committee from the Special Sub-Committee on the Proposed Rules of Civil Procedure (Toronto: MAG, 1984) (Chair: Morden J.A.), at p. 92 [“Morden Report”]. [17] Ibid., at p. 93. [18] The Superior Court has applied the discretionary, multi-factorial approach on many occasions. See, for example, Inveresk PLC v. Precision Fine Papers Inc., 2008 28054 (Ont. S.C.); Hino Truck Centre (Toronto) Ltd. v. Hino Motors Canada Ltd., 2009 58979 (Ont. S.C.); Goldberg v. Desrochers, 2009 46444 (Ont. S.C.); TD Waterhouse Canada Inc. (TD Waterhouse Private Investment Advice) v. Little, 2009 43663 (Ont. S.C.), aff’d 2010 ONCA 145; King v. McHugh, 2009 41361 (Ont. S.C.); Faithshire Leasing Corp. v. 1589630 Ontario Inc., 2009 55123 (Ont. S.C.); Tubacex & Cotubes Canada Inc. v. Scan Tube & Steel Services Ltd., 2009 14052 (Ont. S.C.), appeal abandoned, 2009 ONCA 809; 1578838 Ontario Inc. v. Bank of Nova Scotia, 2011 ONSC 3482, 6 R.P.R. (5th) 332; Jarmain v. Canadian Imperial Bank of Commerce, 2012 ONSC 1625; 1445369 Ontario Inc. v. Bandkohal, 2013 ONSC 5481, 18 B.L.R. (5th) 326, rev’d in part, 2014 ONCA 346; Montel Inc. v. Kipawa Sales & Services Inc., 2014 ONSC 83; Distributions Katrina Inc. v. Enroute Imports Inc., 2018 ONSC 5644, aff’d 2019 ONCA 441; and Waverly. See also Garry D. Watson & Derek McKay, Holmested and Watson: Ontario Civil Procedure (Scarborough: Carswell, 2020) at § 36:15 - Stay of Execution: Rule 20.08. [19] Comtract Air Compressors Inc. v. A.W. Service Industries Inc., 2000 22763 (Ont. S.C.), at para. 28; Liu v. Wong, 2010 ONSC 5896, at para. 36. Comtract Air Compressors has since been followed on many occasions. See, for example, Elgrichi v. Hornstein, [2003] O.J. No. 1308 (S.C.), at para. 10, aff’d [2004] O.J. No. 484 (Div. Ct.); Brantford Engineering and Construction Ltd. v. 1562772 Ontario Inc., [2007] O.J. No. 1636 (S.C.), at para. 38; Parmalat Canada Inc. v. 703558 Ontario Ltd., 2008 51775 (Ont. S.C.), at para. 68; King, at para. 12; CBC v. iSport Media and Kevin Albrecht, 2014 ONSC 1905, 119 O.R. (3d) 211, at para. 45; and Jones Collombin Investment Counsel Inc. v. Fickel, 2016 ONSC 6536, at para. 59. I note that while the motion judge stated that this court, in 1652620 Ontario Inc. v. Cornerstone Builders Ltd., 2018 ONCA 973, cited Jones Collombin “with approval”, the court, in fact, went no further than saying, at para. 9, that “[i]t would seem in those circumstances that a stay ought to have been granted, as was done in Jones”. [20] Liu, at para. 36. [21] Univar, at para. 12. [22] Iraco Ltd. et al. v. Staiman Steel Ltd., 1987 CarswellOnt 2398 (C.A.), at para. 2; Cuddy Food Products v. Puddy Bros. Ltd., [2002] O.J. No. 3181 (S.C.), at paras. 29-32. [23] Kilderkin Investments Ltd. v. Mastin, 1991 CarswellOnt 413 (Gen. Div.), at paras. 16-17. Kilderkin has been cited often. See, for example, Crown Life Insurance Co. v. Medipac International Inc., [1996] O.J. No. 1633 (Gen. Div.), at para. 22; Cheng v. Cheng, [1996] O.J. No. 3751 (C.A.), at para. 9; Comtract, at para. 28; Stiles v. W.H. Stuart Mutuals Ltd., [2000] O.J. No. 5001 (S.C.), at para. 11; Outset Media Corp. v. Stewart House Publishing Inc., [2002] O.J. No. 5304 (S.C.), at paras. 49-51, rev’d but not on this point, [2003] O.J. No. 2558 (C.A.); Perdue, at para. 34; and King, at para. 10. [24] Kilderkin, at paras. 14-15, citing Polar Hardware Manufacturing Co. v. Zafir et al., [1983] O.J. No. 3065 (Div. Ct.). See also Crown Life Insurance, at paras. 24-25. [25] Univar, at para. 30(1), citing Iraco Ltd.; Fasco Motors Ltd. v. General Refrigeration Inc., [1998] O.J. No. 151 (Gen. Div.). [26] Morden Report, at p. 118. [27] American Agronomics Corporation v. International Citrus of Canada Inc., 1982 3233 (Ont. H.C.), at paras. 10, 12; Polar Hardware, at para. 16; Iraco Ltd., at para. 4; Abrasive Engineering & Manufacturing, Inc. v. Cowan & Stevens Machinery Sales, Ltd., 2003 8979 (Ont. S.C.), at para. 29; Luxus Pack Packaging Industrial Co. v. Conros Corporation, 2006 909 (Ont. C.A.), at para. 9; and Spitzer v. Spitzer, 2008 50801 (Ont. S.C.), at para. 29. [28] Smov Industrie Ceramiche S.P.A. v. Sole Ceramic Importing Ltd., [1983] O.J. No. 197 (H.C.), aff’d [1984] O.J. No. 3478 (Div. Ct.). [29] Bank of Nova Scotia v. Elby Health Foods Co., [1982] O.J. No. 290 (H.C.), at para. 23; Perdue, at para. 38. [30] The Divisional Court dismissed the motion for leave to appeal the decision in this motion: 132789 Ontario Inc. v. Marshall, 2021 ONSC 5444.