COURT FILE NO.: CV-08-00357786-0000

DATE: 20130404

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Bank of Montreal v. George Papadogambros (aka George Papas) et al.

BEFORE: Master Glustein

COUNSEL: Allyson Fox for the plaintiff

Barry Weintraub as agent for the defendant George Papadogambros (aka George Papas)

HEARD: April 2, 2013

Endorsement

[1] I grant the motion by the plaintiff, Bank of Montreal (“BMO”) under Rule 37.14 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) to set aside the registrar’s dismissal order dated May 17, 2012 (the “Dismissal Order”).

Analysis

[2] I rely on the factors summarized by Master Muir in Taheem v. Palmer, 2012 CarswellOnt 6260 (Mast.) (“Taheem”) at para. 19. In particular, I consider the four Reid factors and adopt a contextual approach as required under Scaini v. Prochnicki, 2007 ONCA 63, 2007 CarswellOnt 408 (C.A.) (“Scaini”). I address the relevant factors below.

(a) Explanation of the litigation delay

[3] The plaintiff must adequately explain the delay in the progress of the litigation from the institution of the action until the deadline for setting the action down for trial. The explanation does not need to be perfect. It needs to be adequate. (Taheem, at paras. 19, 32)

[4] I consider the entire period from the date of the action until the set down deadline of May 16, 2012 ordered by Master Haberman at the May 16, 2011 status hearing, as required under 1196158 Ontario Inc. v. 6274013 Canada Ltd. (2012), 2012 ONCA 544, 112 O.R. (3d) 67 (C.A.) at para. 25.

[5] I rely on the following evidence to find that the explanation for the delay is adequate:

(i) In the present action, the defendant George Papadogambros (aka George Papas) (“Papas”) is alleged to be the principal behind the fraud which allegedly was based on mortgage referrals by Papas on behalf of mortgagors in relation to 39 impugned mortgages. BMO alleges that Papas provided BMO with appraisals that stated inflated values so that BMO would loan more money than the mortgagors required and Papas would receive the difference;

(ii) Papas was an officer and director of the defendants 1581957 Ontario Limited (“1581957”) and Quickloans Corp. (“Quickloans”). In the present action, BMO alleges that those defendant companies received disbursements from the allegedly fraudulent mortgage advances;

(iii) The present action is part of a series of related actions arising from the alleged mortgage fraud involving 39 mortgages. In addition to this action, BMO brought four actions against lawyers acting for BMO on the mortgages and three actions against former BMO employees for their roles in the alleged fraud;

(iv) BMO also brought 39 mortgage enforcement actions, including a mortgage enforcement action against Papas that he did not defend (the “Papas Mortgage Action”) and upon which Papas was examined in aid of execution of default judgment;

(v) BMO also brought a separate claim against Century 21 Leading Edge Realty Ltd., the brokerage firm who BMO alleges was Papas’ de facto employer (the “Century 21 Action”). In the Century 21 Action, Papas is also named as a defendant and Papas’ alleged conduct is at issue. The Century 21 Action is ongoing;

(vi) In the present action, the statement of claim was issued on June 26, 2008;

(vii) The defendants Papas, 1581957, Quickloans, Farid Muhtat (“Muhtat”) and Abbasi Mustafa (“Mustafa”) filed statements of defence in the present action in July 2008;

(viii) In July 2008, the defendants Yousef Zamanifar and 2030044 Ontario Inc. delivered an undated statement of defence in the present action;

(ix) In September and October 2008, BMO obtained orders in the Papas Mortgage Action for the search of premises controlled by Papas, for searches of Papas’ computers, and for disclosure by Papas;

(x) On March 24, 2009, BMO obtained an order in the Papas Mortgage Action requiring disclosure of emails from Papas’ email accounts;

(xi) On March 27, 2009, BMO obtained an order in the present action adding the defendant Envizion Solutions Inc. and freezing certain assets in Envizion’s accounts including approximately $430,000 allegedly funded by Papas or 1581957;

(xii) On December 22, 2009, BMO obtained a certificate of pending litigation in the present action against property owned by Muhammad Shakil Shahzad Butt (“Butt”). Pursuant to an agreement between BMO’s then counsel Neil Abbott (”Abbott”) at Gowlings LLP, and Howard Gerson (“Gerson”), counsel for Butt, the sum of approximately $27,000 was held in a solicitor’s trust account;

(xiii) By a “Third Amended Statement of Claim” amended March 3, 2010, BMO added the defendants Butt and Khalid Nafis in the present action;

(xiv) Butt filed his statement of defence in the present action in June 2010;

(xv) On or about July 17, 2010, the court issued a status notice in the present action;

(xvi) On October 5, 2010, BMO obtained an order from Master Muir in the present action extending the deadline for dismissal until April 12, 2011 and scheduling a case conference;

(xvii) On April 5, 2011, BMO requested a status hearing in the present action;

(xviii) On May 16, 2011, Master Haberman conducted a status hearing in the present action. Papas appeared at the status hearing. No one appeared on behalf of the remaining defendants;

(xix) Master Haberman ordered the parties to follow a timetable under which (i) examination for discovery of BMO was to take place during the week of September 12, 2011; (ii) examination for discovery of Papas was to take place during the week of September 19, 2011; (iii) mediation was to be conducted before the action was set down for trial; and (iv) the action was to be set down for trial by May 16, 2012;

(xx) BMO subsequently settled the present action as against Muhtat and Mustafa;

(xxi) On October 26, 2011, BMO examined Papas for discovery in the present action. Papas has not examined BMO for discovery;

(xxii) In March 2012, BMO began the process of transferring carriage of the present action and related actions from its previous solicitors, Gowlings to its new counsel, Joshua Siegel (“Siegel”) at Rubenstein Siegel. The transfer involved the delivery of 26 boxes of documents;

(xxiii) On April 11, 2012, BMO served its Notice of Change of Lawyer;

(xxiv) In April 2012, Rubenstein Siegel prepared extensively for a two-day mediation in the four actions against the lawyers that acted on BMO’s behalf in respect of the mortgages. The mediation resulted in a settlement against those defendants;

(xxv) In April and May 2012, Siegel had discussions with Butt’s lawyer (Gerson) about the resolution of issues in the present action relating to the certificate of pending litigation and the funds held in court. The issue of the funds held in the solicitor’s trust account was resolved on May 3, 2012 following discussions between Gerson and Siegel;

(xxvi) On May 14, 2012, Papas called Siegel to discuss a possible resolution of the present action; and

(xxvii) On May 15, 2012, Siegel responded to Papas with an email discussing the possibility of a consent judgment in the present action.

[6] On the above evidence, I find that there is an adequate explanation for the litigation delay from the institution of the action until the deadline in Master Haberman’s status hearing order.

[7] In particular, throughout the above history, BMO took steps in the present action to move the action forward, with some gaps as appropriate to address other related actions. In some of those steps taken in related actions, Papas was directly involved as a defendant. In other steps taken in related actions, it was reasonable for BMO to proceed against other defendants for short periods of time without spending every litigation resource on one particular action against Papas and the other defendants in the present action.

[8] The steps taken by BMO in the present action (even omitting steps taken in related actions) were sufficient to provide an adequate explanation for the delay. There were numerous pleadings, preliminary orders, and an examination for discovery which explain the delay. Even if I accept Papas’ submission that BMO took no steps against Papas between October 2011 (examination for discovery) and April 2012 (because of the mediation and settlement in the four actions against the lawyers), this time period would not be sufficient to demonstrate an inadequate explanation when taken in the context of the entire litigation history of the present action.

[9] Consequently, the explanation for the litigation delay is satisfactory both in the context of the present action and even more so in the overall context of the numerous actions arising out of the alleged fraud.

[10] While Papas submits that BMO chose to bring the numerous actions, there is no evidence that the litigation would have moved any faster if BMO had sued all the lawyers, former employees, brokerage firm, and 39 individual mortgagors in one action.

[11] I accept the evidence from BMO’s present and former counsel (Siegel and Abbott) that it was always BMO’s intention to pursue the action and obtain judgment against the alleged fraudsters in the present action. I also accept the evidence from Abbott that BMO never instructed him to stop pursuing judgment against the defendants in the present action.

[12] While Papas swore in his affidavit that BMO’s primary purpose in suing him was to obtain information from him, BMO claimed from the outset that Papas was the primary participant in the fraud perpetrated against BMO. Further, BMO took numerous steps in the present action and in related actions to protect their interests. Consequently, even if I accept Papas’ evidence that he cooperated with BMO at all times, this does not support a finding that BMO did not intend to proceed with the present action.

[13] There is no evidence that BMO put the present action in abeyance, refused to proceed with this action, or took a deliberate decision not to advance the action. The fact that BMO at times took steps in related actions or obtained information from Papas in the present or related actions does not mean that BMO did not intend to proceed with the present action.

[14] For the above reasons, BMO satisfied this element of the Reid test.

(b) Inadvertence

[15] The court must be satisfied that the plaintiff or the solicitor intended to set the action down within the time limit set out in the status hearing order or request an extension, but failed to do so through inadvertence (Taheem, at para. 19).

[16] Evidence that the plaintiff’s lawyer is taking steps to move the action forward around the time the action was dismissed supports a finding of inadvertence (Taheem, at para. 26).

[17] Siegel’s evidence is that because of the transfer of the 26 boxes of files, which took place in March and April 2012 in the context of Siegel having to prepare for a two-day mediation in late April 2012 relating to the four claims against the lawyers, “[t]he focus of [BMO’s] prior counsel and this firm was on the mediation scheduled in April 2012” and “[u]nfortunately in the transfer, the deadline for setting the within action down for trial was missed”.

[18] Similarly, BMO’s former counsel, Abbott, stated that “[i]n the course of the transfer of the file and the focus on the upcoming mediation in the actions against the Closing Lawyers, the deadline for setting this action down for trial appears to have been missed due to inadvertence”.

[19] I accept the above evidence as sufficient to meet the inadvertence test. The court can look at all the evidence to determine whether the failure was inadvertent. The statements by BMO’s current and former counsel demonstrate conduct consistent with an intention to proceed with the present action and that counsel inadvertently missed the deadline in the context of a large file transfer just weeks prior to a two-day mediation in four related actions.

[20] The inadvertence to seek an extension or set the action down for trial is further confirmed by the uncontested evidence that Siegel was engaged in discussions with Butt’s counsel about the certificate of pending litigation and funds held in the solicitor’s trust account at the same time that the set down deadline was looming. Further, Siegel was discussing consent judgment issues directly with Papas on the day prior to the May 16, 2012 timetable deadline.

[21] Inadvertence does not mean that BMO or its counsel was never aware of the deadline in the status hearing order. It means only that the failure to seek an extension or set the action down for trial was inadvertent.

[22] For the above reasons, I find that BMO has met this factor under the Reid test.

(c) Promptness in bringing the motion

[23] BMO moved forthwith to set aside the Dismissal Order as soon as the order came to its attention (Taheem, at para. 19).

[24] On May 22, 2012, Siegel discovered that the May 16, 2012 set down deadline had passed. Siegel confirmed with the court that the matter had been dismissed and then spoke with Ms. Fox to ask her to bring the present motion.

[25] BMO served the motion record on July 25, 2012 returnable on August 12, 2012. The motion was adjourned on consent to November 30, 2012, when it was adjourned by Master Muir to April 2, 2013 since a number of the defendants had not been served with the notice of motion.

[26] On the above evidence, I find that BMO has met this factor under the Reid test.

(d) Prejudice

[27] Prejudice is a key consideration. There is a presumption of prejudice which arises once a limitation period has expired. Prejudice to defendants is not prejudice inherent in facing an action but prejudice in “presenting their case at trial” caused by reviving the action after it has been dismissed as a result of the plaintiff’s delay or as a result of steps taken following the dismissal of the action (Taheem, at para. 19).

[28] BMO led uncontested evidence to rebut the presumption of prejudice. Abbott stated:

This is to a great extent a document-driven case involving thousands of documents. The documents relevant to this action have been collected and produced and there is no danger of documents being lost.

[29] Further, Papas was examined for discovery as required under the Master Haberman timetable so any issues of recollection have been addressed.

[30] Papas led no evidence of prejudice in defending the action arising from the delay. Papas only led evidence that “I have been unable to carry on my real estate business or any other business” as a result of the injunction, and that “my wife and I have had to sell our previous house and move to much smaller accommodations”. Papas’ evidence does not demonstrate the actual prejudice in presenting his case at trial which a court may consider when a plaintiff rebuts the presumption of prejudice.

[31] On the above evidence, I find that BMO has met this factor under the Reid test.

(e) Other factors

[32] Papas states that Abbott advised Papas on numerous occasions that BMO did not intend to pursue the present action against Papas and that BMO was keeping the present action alive until it had resolved the other actions.

[33] However, Abbott directly refutes Papas’ evidence. Abbott states that at no time did he advise Papas that BMO intended to let Papas out of the present action. Abbott’s evidence is that he initiated discussions with Papas regarding a resolution of the present action, but that all such settlement discussions included obtaining judgment against Papas.

[34] I accept the evidence that from time to time, Papas cooperated with BMO to provide information. However, that evidence is not conclusive as to whether BMO gave any assurances (as opposed to Papas’ belief) that the result of such cooperation would be a dismissal of the present action against him. Further, the uncontested evidence that BMO and Papas were still discussing the possibility of a consent judgment on May 15, 2012 is inconsistent with Papas’ evidence.

[35] The emails upon which Papas relies are consistent with both versions of the discussions between Papas and Abbott. Consequently, the evidence on this issue cannot support a contextual factor against setting aside the Dismissal Order.

[36] For the above reasons, I do not find that this additional factor assists Papas.

[37] Papas further relies on the fact that BMO has missed three deadlines to set the present action down for trial: the first arising under the Rules, the second being the deadline of April 12, 2011 in Master Muir’s order, and the third deadline of May 16, 2012 in Master Haberman’s status hearing timetable order.

[38] I agree with Papas that repeated failures to meet statute or court-ordered deadlines can be considered by the court as a factor in deciding whether to set aside a dismissal order. In some cases, repeated failure may be a determining factor even if some or all of the Reid factors are met.

[39] However, the present case does not demonstrate facts sufficient to allow the missed deadlines to overcome BMO’s satisfaction of all of the Reid factors. In particular, the evidence establishes complex litigation with many branches, efforts made by BMO to comply with the steps required under the timetable (e.g. by completing examination for discovery of Papas), Papas’ involvement throughout with the present action and other related litigation, and BMO’s efforts to deal with the numerous defendants in a reasonable manner. In complex litigation involving numerous actions and parties, it is not unusual to have several extensions of deadlines.

[40] Consequently, this additional factor does not modify the conclusion I would reach under the contextual approach of the Reid factors required under Scaini.

[41] As Master Haberman stated in 1639662 Ontario Inc. v. 956112 Ontario Inc., 2011 CarswellOnt 9291 (Mast.) at para. 23, “At the end of the day, the court must balance all relevant evidence and seek to do justice between the parties, in the context of addressing the tension between the need to achieve finality and resolution within a reasonable period of time and having the case heard on its merits”. Based on the evidence I review above, the balance falls in favour of setting aside the Dismissal Order.

Order and costs

[42] I grant the motion to set aside the Dismissal Order for the reasons discussed above. BMO sought partial indemnity costs of the motion in the amount of approximately $7,400 and Papas sought partial indemnity costs of the motion in the amount of approximately $7,750.

[43] Even though BMO was successful on this motion, I do not order costs in its favour since the court has granted BMO an indulgence in order to allow it to continue with its action against Papas and the other remaining defendants (who did not oppose the motion). In particular, the motion would not have been necessary if BMO had not missed the deadline imposed by Master Haberman, which was the third deadline to set the action down for trial. Further, while I did not accept Papas’ arguments, his opposition was reasonable. Consequently, I do not order costs in favour of BMO.

[44] I also reject Papas’ submission for costs as an unsuccessful defendant. In some cases, the court has ordered costs in favour of an unsuccessful defendant on a motion to set aside a dismissal order, when the plaintiff failed to lead proper evidence before the court, or the plaintiff’s conduct in the litigation or prior to the motion was so flawed as to merit an award of costs to the defendant (Taheem, at para. 42). However, in the present case, while the conduct of BMO was such that it ought not be entitled to obtain its own costs, the delay in the litigation and evidence filed was not so “troubling” (Taheem, at para. 42) to merit costs in favour of the unsuccessful defendant.

[45] Consequently, I grant the motion and set aside the Dismissal Order without costs. BMO shall file its trial record within 30 days of this order, pursuant to a timetable to be agreed between the parties in which mediation may take place after the action has been set down for trial. If the parties cannot agree on a timetable, I will set the timetable at a case conference to be scheduled with my assistant trial coordinator, to be held no later than May 3, 2013.

[46] I thank counsel for their thorough written and oral submissions which were of great assistance to the court.

Master Benjamin Glustein

DATE: April 4, 2013