ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-08-358687
DATE: 20130924
B E T W E E N:
Michael Przysuski
Applicant
- and -
City Optical Holdings Inc., Yorkville Optical Labs Ltd., City Optical Inc., Empire Optical Labs Ltd., Steeles Eyewear Inc., Valleyview Eyewear Inc., Boots Vision Inc., Golden Mile Vision Inc., Optical Authority Inc., Robert Parr and Betty Holloway Parr
Respondents
Charles Wagman,
for the Applicant
Alex Flesias & Diana Bloom,
for the Corporate Respondents and Robert Parr
Chris Reain,
for the Respondent, Betty Holloway Parr
HEARD: August 30, 2013
REASONS FOR DECISION
FIRESTONE J.:
[1] The Corporate Respondents, which includes City Optical and Robert Parr (“Parr”), bring this motion pursuant to rules 14 and 38.10 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for an order converting an application by Michael Przysuski (“Przysuski”) into an action with terms. The motion is brought as an interlocutory matter prior to the hearing of the application and is supported by the Respondent, Betty Holloway Parr (“Holloway Parr”).
Background
[2] The Applicant (and responding party on this motion), Przysuski, issued a Notice of Application on July 11, 2008, pursuant to the Partnerships Act, R.S.O. 1990, c. P.5 and Rule 14 of the Rules, regarding a business dispute between himself and the Respondents. Przysuski alleges that Parr diverted the assets of City Optical for Parr’s own personal benefit.
[3] In the Notice of Application, Przysuski pleads and relies on the provisions of Part XVII of the Business Corporations Act, R.S.O. 1990, c. B.16. He claims various forms of relief including:
• damages for conversion in the sum of $5,000,000.00;
• punitive damages in the sum of $500,000.00;
• a declaration that Parr exercised his powers as a director of the Corporate Respondents in a manner that is oppressive, unfairly prejudicial, and unfairly disregards the interests of the Applicant;
• an order appointing a receiver or receiver manager for the Corporate Respondents;
• an order appointing a director or directors in place of Parr;
• an order allowing the Applicant access to the Respondent corporations books and records for a specified time period or in the alternative, an order appointing an auditor for the purpose of determining the amount of funds and property of the Respondent corporations misappropriated by Parr and an order allowing the Applicant access to the business premises of the Respondents to retrieve personal property;
• an order against Parr requiring him to compensate the Applicant and Respondent corporations for monies and property misappropriated; and
• an order requiring Parr to purchase all shares of the Applicant in the Respondent corporations.
Can an application be converted to an action prior to hearing the application?
[4] In University Health Network v. Made in Japan Japanese Restaurants Ltd., 2003 46976 (Ont. S.C.), the court confirms that rule 1.04 read in conjunction with rule 38.10 of the Rules allows a motion judge to convert an application into an action before the hearing of the application. Pitt J. states in part as follows, at para. 10:
[R]ule 1.04, which provides that the rules are to be construed liberally to secure the just, most expeditious and least expensive resolution of a proceeding would support an interpretation of rule 38.10 that protects the parties against the requirement that they always wait until they are at the judgment seat, to know whether their issue will be adjudicated.
General principles to consider in determining whether to convert an application
into an action
[5] It is a well-established general principle that an application should be used when there is no matter in dispute and when the issues to be determined do not go beyond the interpretation of a document: see Collins v. Canada (Attorney General) (2005), 2005 28533 (ON SC), 76 O.R. (3d) 228 (S.C.), at para. 28; Marten Falls First Nation v. Ontario (1994), 1994 7555 (ON SC), 31 C.P.C. (3d) 149 (Ont. C.J. (Gen. Div.)), at paras. 7, 17; Re City of Burlington v. Clairton Village (1979), 1979 2059 (ON CA), 24 O.R. (2d) 586 (C.A.), at pp. 588-90; and Re Acumen Investments Ltd. v. Williams (1985), 1985 2068 (ON SC), 53 O.R. (2d) 247 (H.C.), at p. 250. This is not an application concerning the interpretation of a document.
[6] Where the legislature has stipulated that a proceeding may be brought by application, there is a prima facie right to proceed by application and the matter should not be converted into an action without good reason: see Sekhon v. Aerocar Limousine Services Co-Operative Ltd., 2013 ONSC 542, at paras. 48-49; and College of Opticians (Ontario) v. John Doe, 2006 42599 (Ont. S.C.), at paras. 18-21.
[7] A good reason to convert an application into an action is when the judge who will hear the matter cannot make a proper determination of the issues on the application record: see Collins, at para. 29.
[8] When issues of credibility are involved the matter should proceed by way of action: see Gorden Glaves Holdings Ltd. v. Care Corp. of Canada (2000), 2000 3913 (ON CA), 48 O.R. (3d) 737 (C.A.), at para. 30; and Cunningham v. Front of Yonge (Township) (2004), 73 O.R. (3d) 721 (C.A.), at para. 20.
[9] A factual dispute simpliciter in itself is not sufficient to convert an application. The fact(s) in dispute must be material to the issues before the court: see Niagara Air Bus Inc. v. Camerman (1989), 1989 4161 (ON SC), 69 O.R. (2d) 717 (H.C.), at pp. 725-26; and BPCO Inc. v. Imperial Oil Ltd. (1993), 17 C.P.C. (3d) 130 (Ont. C.J. (Gen. Div.)), at para. 13.
[10] In determining whether to convert an application into an action, Collins sets out the following factors that are relevant at para. 5:
• Whether material facts are in dispute;
• The presence of complex issues that require expert evidence and/or a weighing of the evidence;
• Whether there is a need for pleadings and discoveries; and
• The importance and impact of the application and of the relief sought.
Analysis
[11] After reviewing the record and hearing submissions of counsel, it is my view that this application should be converted into an action with terms.
[12] While the Applicant has the prima facie right to choose their originating process by way of application if so authorized by the Rules or a statute, the court maintains the right to convert the application into an action for good reason.
[13] In this case, there is good reason. First, the nature of the conduct entitling a party to punitive damages and the assessment of a punitive damage award involves issues of credibility and are of a nature which requires a trial. I adopt the reasoning of Perell J. in Allied Systems (Canada) Company, 2012 ONSC 3142, at para. 21, which is equally applicable to a claim for punitive damages:
In a given case, an application might be suitable to resolve a matter of contract interpretation, but this case is not such a case. In particular, in my opinion, the determination of the arguments about the doctrine of good faith do raise both factual and legal questions that as a matter of procedural fairness and as a matter of substantive justice require the full evidentiary record of an action.
[14] Second, in addition to punitive damages, Przysuski has claimed $5,000.000 in damages for conversion. This court will no doubt require expert evidence to determine both entitlement and quantum. I anticipate that the parties will also require expert evidence given the nature and size of the damage claims being advanced. Counsel for the Respondents during oral argument indicated they intend to introduce expert evidence.
[15] I agree with the statements of G.P. Smith J. in Collins where he states as follows, at paras. 43-45:
When it is anticipated that conflicting expert evidence will be relied upon by the parties on a number of disputed facts it is inappropriate to deal with the dispute by way of application.
Should there be conflicting expert evidence proffered, this would require the court to embark upon a weighing of the evidence. In such cases it is preferable that the court have the opportunity to hear viva voce evidence to be able to better assess the credibility of the witnesses and the reliability of the evidence.
As well, viva voce evidence will provide the trier of fact with a more complete evidentiary record on which to base a decision. [Footnotes omitted]
[16] Determining credibility of a deponent to resolve material facts in dispute that may affect the result is beyond the proper role of an application judge: see Moyle v. Palmerston Police Services Board (1995), 1995 10659 (ON SC), 25 O.R. (3d) 127 (Div. Ct.), at pp. 132-33.
[17] Finally, the evidence before me discloses that there are and will likely be material facts in dispute regarding the parties’ business relationships that go to the very core of the claims for punitive damages and damages for conversion. Based on the record before me, it cannot be said that this is an uncomplicated matter.
[18] The interests of justice and procedural fairness require that this matter be converted into an action.
[19] Given Przysuski’s medical condition, and the delay of proceedings to date, the same principles of justice and procedural fairness require that this matter be expedited and proceed to trial as quickly as possible. The record discloses that the Respondents had previously failed to comply with various court orders concerning cross-examinations and productions. This has undoubtedly delayed the matter from being heard on its merits and is unacceptable.
[20] Counsel for the Applicant, Mr. Wagman, indicated during oral argument that he chose to proceed by application in part because of his client’s medical condition. Przysuski is seriously ill with multiple sclerosis. Counsel understandably wanted to do everything he could to have this matter heard on its merits as expeditiously as possible. I commend Mr. Wagman for acting in his client’s best interests.
Disposition
[21] For the reasons set forth above, I order as follows:
• This application is converted into an action. The Applicant shall be the Plaintiff and the Respondents shall be the Defendants.
• The Plaintiff shall deliver a Statement of Claim within 15 days from today’s date.
• The Defendants shall deliver their pleadings within 10 days after receiving the Plaintiff’s Statement of Claim.
• All cross-examinations to date shall be deemed to constitute Examinations for Discovery and all cross-examination transcripts shall be treated as Discovery Transcripts in this action.
• All prior court orders made in this application will apply without exception to this action.
• This action is referred to Master Abrams, the case managing Master, to set a timetable.
• All steps in this action are to be expedited.
[22] Written cost submissions with a costs outline totaling no more than three pages must be filed by all parties within 15 days.
FIRESTONE, J.
DATE: September 24, 2013
COURT FILE NO.: CV-08-358687
DATE: 20130924
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Michael Przysuski
Applicant
- and -
City Optical Holdings Inc., Yorkville Optical Labs Ltd., City Optical Inc., Empire Optical Labs Ltd., Steeles Eyewear Inc., Valleyview Eyewear Inc., Boots Vision Inc., Golden Mile Vision Inc., Optical Authority Inc., Robert Parr and Betty Holloway Parr
Respondents
REASONS FOR DECISION
FIRESTONE J.
Released: September 24, 2013