ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-09-371844-0000
DATE: 20121115

BETWEEN:

2130685 ONTARIO INC.

Ray Thapar , for the Plaintiff, Respondent

Plaintiff

• and -

1722034 ONTARIO INC., BAHRAM YADOLLAHI, HOMELIFE PLUS REAL ESTATE INC. and RON NAMAN Defendants

Aaron Postelnik and Joseph Juda , for the Defendants, Homelife Plus Real Estate Inc. and Ron Naman, Moving Parties
William G. Scott , for the Intervenor, Wayne Novak

HEARD: November 6, 2012

LEDERMAN J.

REASONS FOR DECISION

[ 1 ] This is a motion by the defendants, Homelife Plus Real Estate Inc. and Ron Naman (collectively “the realtor defendants”) to dismiss or stay the action as against them as an abuse of process.

[ 2 ] The plaintiff’s former solicitor, Wayne Novak (“Novak”), sought to intervene on this motion and, as it was not opposed, intervention was permitted. Counsel for Novak filed a written factum but did not make oral argument.

Background Facts

[ 3 ] This action arises out of the purchase of a commercial rental property. The plaintiff alleges that the defendants, 1722034 Ontario Inc., and Bahram Yadollahi (collectively “the vendor defendants”) and the realtor defendants misrepresented the rental income and falsified leases in connection with the plaintiff’s purchase of a strip plaza in the City of Toronto. There is also a related action commenced by the vendor against the plaintiff for payment of the vendor take back mortage.

[ 4 ] After the exchange of pleadings, Novak, the plaintiff’s then counsel, failed to deliver his affidavit of documents in a timely way. The vendor defendants brought a motion to strike the plaintiff’s action for failing to deliver the affidavit of documents. Novak consented to an order that he would deliver the plaintiff’s affidavit of documents to the vendor defendants by May 7, 2009 at 4:00 pm. The consent order issued by Master Glustein stated that the affidavit of documents was to be delivered “no later than 4:00pm on May 7, 2009, failing which its pleading in this matter shall be struck.”

[ 5 ] Novak served the plaintiff’s affidavit of documents on the vendor defendants at 4:28pm on May 7, 2009 (approximately 28 minutes late). Schedules “B” and “C” were inadvertently not included in the affidavit.

[ 6 ] By letter dated May 7, 2009, the vendor defendants advised Novak that “we are proceeding pursuant to the Order to have your proceedings struck”.

[ 7 ] On May 11, 2009, Novak delivered to counsel for the vendor defendants the plaintiff’s corrected affidavit of documents which now included Schedules “B” and “C”.

[ 8 ] On May 26, 2009, the vendor defendants advised Novak of the non-compliance with Master Glustein’s order and that the plaintiff’s statement of claim had been struck.

[ 9 ] On June 8, 2009, Novak wrote to the vendor defendants requesting their consent to set aside the striking of the statement of claim and any dismissal of the action.

[ 10 ] In August 2009, the vendor defendants consented to the action as against them being restored.

[ 11 ] Novak also wanted to restore the action against the realtor defendants but took no further steps to accomplish this. Although it was his intention to bring a motion to restore the action as against the realtor defendants, he stated that it was his belief that the action would settle as between the plaintiff and the vendor defendants and that the motion would be unnecessary.

[ 12 ] On August 7, 2009, Pollak J. restored the pleadings only as against the vendor defendants.

[ 13 ] The action proceeded only as against the vendor defendants. Discoveries, mediation and a pre-trial were held. Counsel for the realtor defendants was notified of all of these proceedings, but chose not to participate.

[ 14 ] As it turns out, counsel for the vendor defendants never did obtain any court order to strike out the statement of claim and dismiss the action.

[ 15 ] In an exchange of correspondence on May 15, 2009, counsel for the vendor defendants advised counsel for the realtor defendants that:

Please be advised that we attended on May 8, 2009 before the Registrar and he automatically struck the plaintiff’s pleading. There is no order by which the plaintiff’s pleading has been struck.

[ 16 ] Because of the representation of counsel for the vendor defendants, both the plaintiff and the realtor defendants operated under the impression that the action had been dismissed as against the realtor defendants and had not been restored.

[ 17 ] Shortly before the trial was to proceed against the vendor defendants, it was discovered, upon a search of the court file, that the action in fact had not been struck and no order was ever made dismissing the action.

[ 18 ] When the action came up for trial on June 20, 2011, the plaintiff’s new counsel, Mr. Thapar, brought a motion for the determination that the action continued against the realtor defendants. Justice Penny found that the consent order of Master Glustein was not self-enforcing. He stated that although that order put the plaintiff at risk, it did not automatically result in the striking of the statement of claim and dismissal of the action if the plaintiff’s affidavit of documents was delivered some time after 4pm on May 7, 2009. He stated that evidence would have to be given that there indeed was a failure to deliver the affidavit of documents in compliance with the time line in the Master’s order and that an order of the court dismissing the action would then have to be obtained. That was not the case here and Penny J. found that the action against the realtor defendants was still in existence.

[ 19 ] Penny J., however, acknowledged that the realtor defendants were only given very short notice to respond to the plaintiff’s motion. He stated that his order was without prejudice to the realtor defendants bringing a motion to seek an order of dismissal for delay.

[ 20 ] The realtor defendants, as a result, have now brought this motion for a stay or to dismiss the action as an abuse of process. Although Penny J. characterized the possible motion as one “to dismiss for delay”, the intent was to give the realtor defendants an opportunity to bring a motion to argue that the impact of the delay is such that the action should be dismissed as against them.

Realtor defendants’ submissions

[ 21 ] Mr. Postelnik, for the realtor defendants, submits that the fact a formal court order had not been taken out dismissing the action is a mere technicality and that what is important is the intention of all of the parties and how they conducted themselves accordingly. All parties were under the impression that the action as against the realtor defendants had been dismissed and not restored and Mr. Postelnik submits that equity should consider the circumstances to have the same effect as if a formal order had been issued.

[ 22 ] Mr. Postelnik submits that the realtor defendants legitimately assumed that they were no longer at risk and need not participate further in the proceedings based on the representation of counsel for the vendor defendants that in fact the statement of claim had been struck out and the action dismissed. He submits that it would be manifestly unfair to drag the realtor defendants, after the passage of two years, back into the action.

[ 23 ] He submits that the realtor defendants are entitled to rely upon the principle of finality as articulated by Cronk J.A. in Wellwood v. Ontario Provincial Police, 2010 ONCA 386 at para. 76 as follows:

When an action has been disposed of in favour of a party, that party’s entitlement to rely on the finality principle grows stronger as the years pass. Even when the order dismissing the action was made for delay or default and not on the merits, and even when the party relying on the order could still defend itself despite the delay, it seems to me that at some point, the interest in finality must trump the opposite party’s plea for an indulgence.

[ 24 ] Mr. Postelnik argues that it would bring the administration of justice into disrepute to have the plaintiff rely on the technicality of the absence of a formal order when the parties had based their affairs on the fact that the action had been dismissed as against the realtor defendants. He submits that even in the absence of evidence of actual prejudice to the realtor defendants, the consideration of the finality principle should be paramount and reinstating the action at this point would undermine that principle. Moreover, he points out that the plaintiff is not left without a remedy as it still has recourse through an action in solicitor’s negligence against Novak and, indeed, has commenced such an action.

Disposition

[ 25 ] With respect to the finality principle, Penny J. pointed out in his reasons,

The principle of finality is an important one. However, that principle is applied where a final order of dismissal has been made. In this case, no final order of dismissal in 213’s action was made. Accordingly, in my view, prejudice cannot be presumed. The finality principle cannot operate in the context of a valid and subsisting action which has never been struck out.

[ 26 ] I agree that, in these circumstances, prejudice cannot be presumed. When the matter was argued before Penny J., he found that there was no evidence of prejudice to the realtor defendants. Even though they had a further opportunity to adduce evidence of prejudice on this motion, they have not done so. Accordingly, all they can really rely upon is the fact that they have been mistakenly left with the understanding that the action as against them had been dismissed and that delay alone, in fairness, should determine that they should be released from this action.

[ 27 ] It should be noted, however, that not only were the realtor defendants mistakenly left with the impression that the action had been dismissed, but that the plaintiff was in the same boat, all as a result of the representation made by the solicitor for the vendor defendants.

[ 28 ] Even if there is a presumption of prejudice to the realtor defendants, it has been rebutted by the plaintiff. There is evidence that if the action is not allowed to proceed against the realtor defendants, there will be serious prejudice to the plaintiff. That is so because:

(a) the realtor defendants, and in particular, Naman are necessary and important parties to the adjudication of the issues in the action. Naman was both the real estate agent for the vendor defendants and manager of the strip plaza and is alleged to have played a critical role in facilitating the sale of the property and had intimate knowledge of the property and the leases. In this regard, the plaintiff should have the right to discover them.

(b) The realtor defendants were kept abreast of the dates for discovery, mediation and pre-trial involving the vendor defendants but decided not to participate, and

(c) The realtor defendants should not be able to take advantage of the representation made by the vendor defendants that was relied upon not only by them but by the plaintiff to avoid the action against them from being determined on the merits.

[ 29 ] Moreover, there is no assertion of any prejudice to the vendor defendants if the action is further delayed to permit discovery of the realtor defendants. The vendor defendants did not appear on this motion and took no position in this regard.

[ 30 ] On a motion of this nature, the court has to take into account notions of fairness to all the parties to the action and, in this regard, the element of delay simpliciter is an important factor. However, on balance and weighing all of the considerations, justice requires that this action continue to proceed as against the realtor defendants.

[ 31 ] The present state of affairs began with the late delivery of an affidavit of documents, followed by an incorrect conclusion as to the effect of the consent Master’s order. It was compounded by Novak’s failure to ensure that the action against the realtor defendants was restored or continued. Dismissal of the action as against the realtor defendants would, in these circumstances, be a consequence totally out of proportion to what has taken place in this matter.

[ 32 ] The realtor defendants’ motion is therefore dismissed.

[ 33 ] Costs may be addressed by way of written submissions within 30 days of the release of this decision.

Lederman J.

Released: 20121115

COURT FILE NO.: CV-09-371844-0000
DATE: 20121115

ONTARIO SUPERIOR COURT OF JUSTICE 2130685 ONTARIO INC. Plaintiff and 1722034 ONTARIO INC., BAHRAM YADOLLAHI, HOMELIFE PLUS REAL ESTATE INC. and RON NAMAN Defendants REASONS FOR DECISION Lederman J.

Released: 20121115