ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
NADI INC. and NADI INTERNATIONAL LTD.
Plaintiffs
– and –
DARIUSH MONTAZEMI-SAFARI A.K.A. DARYOOSH MONTAZAMI SAFARI, SEYED HOSSEIN MONTEZAMI SAFARI A.K.A. HUSSIEN SAFARI A.KA. SEYED HOSSEIN MOONTAZEMI SAFARI, HASSAN TEHRANCHI A.K.A. HARRY TEHRANCHI, ABOUTALEB SHOKROLLAH TALEBI, SAEED YAHYAVI, CHERAGH SAHAR SOHEILA and 2179548 ONTARIO INC.
Defendants
David Taub and Dominique Michaud, for the Plaintiffs
Igor Ellyn, QC, CS and Evelyn Perez Youssoufian, for the Defendants
HEARD: March 30 and June 12, 2012
B. P. O’Marra J.
reasons for decision
1The Defendants seek a stay of this claim based on a lack of jurisdiction and abuse of process. On the latter issue the Defendants made extensive and detailed submissions as to the merits of the claim. That tactical decision has significant implications on the jurisdictional argument.
I. the facts
2217 Ontario is an Ontario Corporation whose sole asset is a parcel of land in Ontario (“the Lands”).
3Catalia Development is an Ontario Corporation whose directors and shareholders are Syed, Talebi, Yahyavi and Tehranchi.
4Nadi claims there was fraud flowing from a series of transactions arising from the sale of Nadi’s interest in the Lands to Catalia. ‘
5By an agreement in July of 2007, Nadi was to purchase most of the Lands in trust for Nadi and Catalia. By a further Agreement in June of 2008, Nadi was to purchase another adjacent parcel that comprised the Lands.
6In July of 2008, Nadi agreed to sell its interest in the Lands to Catalia. This agreement was signed in Dubai (the “Dubai Agreement”). It referred to an agreement of purchase and sale of real property to be “formalized, notarized and regularized in Canada.” Payments by instalment were required in 2008.
7By an Assignment Agreement in September of 2008, Nadi assigned its interest in the Lands to 217 Ontario. Payments were due on execution of the Agreement and on later dates in 2008.
8There were repeated defaults in payment obligations owing to Nadi. Further agreements were entered to settle the defaults.
9The purchase of the Lands closed in October of 2008. Title was taken by 217 Ontario.
10On closing 217, Catalia and other individual Defendants were unable to pay the amount required under the Assignment Agreement. In October of 2008, Nadi, 217 Ontario and the named Defendants entered a Pledge Agreement. This Agreement recited that it superseded the Dubai Agreement and the Assignment Agreement. It provided that Nadi release its shares in 217 Ontario in consideration of payments in 2008 and 2009.
11The Pledge Agreement provided that Nadi receive a collateral mortgage on the Lands as additional security. This collateral mortgage was to be held in escrow. It would not be registered until defaults occurred.
12Defaults occurred on the Pledge Agreement and the Collateral mortgage was registered on December 4, 2008.
13An Amended Pledge Agreement was entered in May 2009. It recited that it would be governed and construed in accord with the laws of Ontario.
14The Amended Pledge Agreement included the following terms for payment of the amount owing to Nadi:
Part of the debt would be satisfied by the transfer of two commercial condominium units in a project being developed in Dubai.
Nadi was advised that the named Defendants owned and developed the Dubai project through an investment company.
As of the date of the Amended Pledge Agreement construction on the project had not commenced.
The purchase price had been fully paid into an escrow account in Dubai.
The purchase price was fully available to be paid to the developer on closing.
If there was no closing or the project did not proceed the escrow funds would be returned to the purchaser.
15Nadi understood that it would receive the units once built or would receive a refund of the purchase price if the project did not proceed.
16Nadi believed that the Amended Pledge Agreement had been satisfied. In April of 2010, as directed, Nadi assigned its mortgage and provided releases to the individual named Defendants. The mortgage was later discharged.
17The Dubai Project did not close and Nadi was unsuccessful in seeking information from some of the named Defendants.
18In 2011, Nadi commenced an action in Dubai to investigate the status of the project. The Safari Defendants did not participate in or defend the Dubai action.
19Nadi learned the following:
The two units that were to be sold to them had been sold to another party in 2007.
There were no funds held for the units in the escrow account.
The individual named Defendants have no connection to the project.
The project may not be completed.
20Nadi’s lawyers registered a caution on title to the Lands and commenced the action. By an Interim Agreement the Plaintiffs removed the caution on the Lands in exchange for alternate security pending the Certificate of Pending Litigation.
21The Plaintiffs have undertaken to discontinue the Dubai proceedings.
II. the law
A. Jurisdiction
22The characterization of the action is an important step in assessing jurisdiction.
Precious Metal Capital Corp. v. Smith, 2008 ONCA 577 at paras. 9 and 10.
23The Court can assume jurisdiction over an action where there is a reasonable and substantial connection between Ontario and the claim. This is referred to as the “real and substantial connection test.”
Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), 1990 CarswellBC 283 (SCC) at para. 51.
24The core of the real and substantial test is the connection between the Plaintiff’s claim to the forum and the connection of the Defendants to the forum.
VanBreda v. Village Resorts Ltd., 2010 ONCA 84, 2010 CarswellOnt. 549 (OCA) at para. 84.
25The determination as to whether there is a reasonable and substantial connection requires an analysis of the general types of relationships in the case.
Muscutt v. Courcelles, 2002 44957 (ON CA), 2002 CarswellOnt. 1756 (OCA) at para. 43.
26Where an extra-provincial defendant is present in the jurisdiction the court can assume jurisdiction.
Peng v. Zhu, 2009 CarswellOnt. 4512 (S.C.J.) at para. 22.
27Attempting to strike out the statement of claim as disclosing no reasonable cause of action is engagement in the merits of the action. That constitutes attornment to the jurisdiction of the court. A foreign defendant is precluded from contemporaneously disputing jursidiction while at the same time engaging jurisdiction by seeking a ruling in its favour on the merits.
Sauer v. Canada (Attorney General), 2006 CarwellOnt 20 at paras. 86-88, (Ont. Superior Court per Winkler R.S.J.)
National Utility Service (Canada) Ltd. v. Toseki Holding Ltd., 2006 CarswellOnt 8283 at paras. 9-12 (O.S.C.)
B. Forum Non Conveniens
28The test to stay an action on the basis of forum non conveniens is whether there is a clearly more appropriate forum than the one chosen by the Plaintiff in which the case should be tried. The onus is on the Defendant to satisfy this test.
Dundee Precious Metal Inc. v. Marsland, 2011 CarswellOnt. 9475 (O.C.A.) at paras. 13 and 14.
29This doctrine is different from the real and substantial connection test. It is discretionary and only arises after the court determines Ontario can assume jurisdiction.
Muscutt (supra) at para. 43.
C. Abuse of Process
30The court may stay any proceeding as an abuse of process on such terms as are considered just.
Courts of Justice Act ss 106, 140(5).
31The dismissal or staying of an action as frivolous, vexatious or abusive of the Court’s process must be reserved for the clearest of cases. It must be plain and obvious on the face of the action and circumstances that the case cannot succeed.
Sussman v. Ottawa Sun, 1997 CarswellOnt 210 (Gen. Div.) at para. 21.
III. analysis
A. Characterization of the Action
32A critical aspect of the Defendants’ position is that the claim is really about title to real estate in Dubai. They claim that the Plaintiffs voluntarily relinquished their rights to property and interests in Ontario. They point to the action started by the Plaintiffs in Dubai in support.
33The Plaintiffs submit the Dubai action was commenced as a necessary fact finding process. They were otherwise unable to gain information from certain of the Defendants as to the status of the Dubai project and the funds held in escrow. They have undertaken to discontinue that action.
34The essence of the Plaintiffs’ claim is that they released their interest in the Ontario Lands based on fraudulent misrepresentation by the Defendants. The real estate and escrow funds in Dubai were the consideration for the release of their interests in Ontario. It is inaccurate to characterize the claim as entirely about title to real estate or funds in Dubai.
35The Defendants submit that the Plaintiffs voluntarily released their interests and entitlement in Ontario. That is so. However, the Plaintiff submits the releases were premised on satisfaction of debts by way of security in Dubai. Contrary to the Defendants’ position, the Ontario matter is not fully spent.
B. Real and Substantial Connection
36There is a real and substantial connection between the claim and Ontario, including the following:
(a) Nadi is an Ontario corporation.
(b) The alleged fraud was perpetrated in Ontario and resulted in an alleged breach of an Ontario contract.
(c) The Amended Pledge Agreement provided that it shall be governed and construed in accord with the laws of Ontario
(d) As a result of the alleged fraud Nadi executed an assignment and release of the collateral mortgage. The latter was registered on the Lands in Ontario.
(e) Nadi seeks reinstatement and registration of the collateral mortgage on the Land in Ontario.
(f) Nadi alleges damages in Ontario as a result of the fraud and subsequent breach of the Amended Pledge Agreement.
(g) Tehranchi and Yahyavi reside in Ontario.
(h) Seyed is a Canadian citizen who spends considerable time in Ontario. His wife resides in Toronto.
(i) 217 Ontario is an Ontario corporation whose only asset is the lands (which are located in Ontario).
(j) The Safari Defendants conduct business in Ontario.
(k) The Safari Defendants were parties to the Amended Pledge Agreement.
(l) The Safari Defendants are alleged to have made fraudulent misrepresentations in Ontario.
(m) The Safari Defendants are alleged to have breached the Amended Pledge Agreement.
C. Attornment
37The Defendants submit that the Plaintiffs attorned to jurisdiction in Dubai by starting an action there. The Plaintiffs characterize that action as a “fact finder”. They undertake to discontinue that action.
38The Defendants made extensive and detailed submissions in asserting there is no reasonable cause of action. That is engagement in the merits and constitutes attornment to an Ontario court.
D. Forum non conveniens
39The majority of the parties are located in Ontario.
40The Defendants submit that most of the key witnesses are in Dubai. That is premised on their position that the claim is in essence about title to property in Dubai. However, the Plaintiffs’ claim is based on an alleged fraud in Ontario. Based on material filed by both parties it seems clear that the project in Dubai had not been completed and there are no funds held in escrow.
41The Amended Pledge Agreement recites that it will be governed and construed in accord with the laws of Ontario.
42The Plaintiffs seek reinstatement of the collateral mortgage on the Lands in Ontario as well as damages.
43There is no potential for multiplicity of proceedings since the Plaintiffs undertake to withdraw the Dubai action.
E. Abuse of Process
44The Defendants submit the claims are “patently ridiculous and incapable of proof”.
45The events and transactions that led Nadi to release its interest in the Lands in Ontario are complex. A trial court will have to determine whether Nadi released its interests based on fraudulent misrepresentations in Ontario and elsewhere as to the existence of security in Dubai. There are significant issues of fact and law to be determined.
46This is not the “clearest of cases” where it is plain and obvious that the case cannot succeed.
IV. result
47All applications dismissed. I will consider brief cost submissions (no more than 3 pages) excluding costs outlines to be received at Judicial Administration by September 17, 2012
B. P. O’Marra J.
Released: August 28, 2012
Nadi Inc. v. Montazemi-Safari, 2012 ONSC 4723
COURT FILE NO.: CV-11-437640
DATE: 20120828
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
NADI INC. and NADI INTERNATIONAL LTD.
Plaintiffs
– and –
DARIUSH MONTAZEMI-SAFARI A.K.A. DARYOOSH MONTAZAMI SAFARI, SEYED HOSSEIN MONTEZAMI SAFARI A.K.A. HUSSIEN SAFARI A.KA. SEYED HOSSEIN MOONTAZEMI SAFARI, HASSAN TEHRANCHI A.K.A. HARRY TEHRANCHI, ABOUTALEB SHOKROLLAH TALEBI, SAEED YAHYAVI, CHERAGH SAHAR SOHEILA and 2179548 ONTARIO INC.
Defendants
REASONS FOR DECISION
B. P. O’Marra J.
Released: August 28, 2012