SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: CV-12-00450094
DATE HEARD: 20140526
ENDORSEMENT RELEASED: 20140818
RE: The Estate of Hassanali Dharsi by its Estate Trustee Moez Dharssi v.
Sadrudin Dharssi Manji a.k.a. Saudrudin Dharssi Manji and Leader Food and
Nut Importers Ltd.
BEFORE: Master B. McAfee
COUNSEL: A. Jiwa for the Moving Party, the Plaintiff
A.G. Formosa for the Responding Parties, the Defendants
REASONS FOR DECISION
Nature of the Motion
[1] This is a motion brought by the plaintiff, the Estate of Hassanali Dharsi by its Estate Trustee Moez Dharssi (the plaintiff) for the following relief:
An order granting leave to withdraw admissions respecting ownership of property and of shares of the corporation, and leave to amend the statement of claim issued on March 29, 2012;
An order consolidating the application issued under court file no. CV-12-445945 and the action issued under court file no. CV-13-486000 with the within action issued under court file no. CV-12-450094.
[2] The defendants consent to an order that leave be granted to amend the statement of claim in the within action with respect to the proposed amendments at paragraphs 1(b)(iv), 1(b)(ix), 1(d), 1(e) (only the words “In the alternative, Dharsi seeks a determination by this court to establish the extent of the interest held by Manji and Dharsi in accordance with their investments made in Leader),” 1(j), 1(k), 1(l) (only the words “An Order removing Manji as a Director and/or Officer of Leader.”), 1(n), 4, 6, 9, 10, 11, 12, 14, 16, 20, 25, 26, 33 (only the words “and in conducting himself in an oppressive manner”), 33(v), 33(w), 33(x), 33(y), 33(z), 33(aa), 33(bb) (except for the words “selling the Property” and except for the words “and placing all of the net proceeds into court pending the determination of this action,” 33(cc), 36, 46, 47 (except the words “and the Property”). On consent, an order shall go accordingly.
[3] For the reasons that follow, the balance of the motion is dismissed.
Background Facts
[4] In or about 1974 Sadrudin Dharssi Manji a.k.a. Saudrudin Dharssi Manji (Manji) and his two brothers, Adbulsultan Dharssi Manji (Abdulsultan) and Hassanali Dharsi (Dharsi), established a wholesale business in Ontario to import and distribute grocery products in Canada. The business was incorporated in 1982 as Leader Food and Nut Importers Ltd. (Leader).
[5] In 1986 the property municipally known as 28 Skagway Avenue, Scarborough, Ontario (the property) was purchased. Manji, Abdulsultan and Dharsi took title to the property as tenants in common. Following the death of Abdulsultan, title to the property was transferred to Dharsi and Manji as tenants in common with an equal interest. Leader operated from the property.
[6] In 1997 Abdulsultan died. In 2007 Dharsi died. The only surviving brother is Manji.
[7] Dharsi’s son, Moez Dharssi (Moez) was named estate trustee for Dharsi in 2010.
[8] On February 8, 2012, Manji commenced application number CV-12-445945 against Moez in his capacity as estate trustee seeking an order directing the sale of the property and an order directing a reference to determine all issues relating to the conduct of the sale and the taking of accounts (sale of the property application).
[9] On March 29, 2012, Moez in his capacity of estate trustee, commenced the within action against Manji and Leader for inter alia damages for misappropriation and/or conversion of funds and/or property and oppression (the within action).
[10] On July 31, 2013, Leader commenced action number CV-13-486000 against Moez in his personal capacity seeking inter alia damages for unpaid rent on a sublease of the property (the arrears action).
[11] On September 6, 2013, on consent, Justice Pollak made the following order in the sale of the property application:
THIS COURT ORDERS AND ADJUDGES that all necessary inquiries be made, accounts taken, costs assessed and steps taken by the Master at Toronto for the sale of the land described in the attached Schedule “A” in accordance with the interests of the parties entitled to share in it, as determined by the Master.
THIS COURT ORDERS AND ADJUDGES that the land be sold under the direction of and in accordance with the terms set by the Master, there being no encumbrances on the land, and that the purchaser pay the purchase money into court to the credit of this proceeding, subject to the further order of the court.
Motion for Leave to Amend the Statement of Claim and Leave to Withdraw Admissions
[12] Rule 26.01 of the Rules of Civil Procedure provides as follows:
On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.
[13] In Marks v. Ottawa (City), 2011 ONCA 248 at para 19, Justice LaForme states, “[a]lthough the general rule is that amendments are presumptively approved, there is no absolute right to amend pleadings. The court has a residual right to deny amendments where appropriate.” The court summarizes the factors to be considered when determining whether a proposed amendment should be permitted:
(a) An amendment should be allowed unless it would cause an injustice not compensable in costs.
(b) The proposed amendment must be shown to be an issue worthy of trial and prima facie meritorious.
(c) No amendment should be allowed which, if originally pleaded, would have been struck.
(d) The proposed amendment must contain sufficient particulars.
[14] A proposed amendment may also be refused if the pleading is untenable at law, constitutes an abuse of process or fails to follow the rules of pleading (Shannon (Litigation Guardian of) v. St. Catharines General Hospital, 2009 CarswellOnt 5927 (Ont.S.C.J. at para 24).
[15] Portions of a pleading that are irrelevant, argumentative, inserted for colour or that constitute bare allegations should be struck as scandalous (Ronan Ulyanov v. TD Canada Trust, 2013 ONSC 5602 (Ont.S.C.J.) at para 10.
[16] If a proposed amendment concerns the withdrawal of an admission, rule 51.05 of the Rules of Civil Procedure is applicable:
An admission made in response to a request to admit, a deemed admission under rule 51.03 or an admission in a pleading may be withdrawn on consent or with leave of the court.
[17] A party requesting leave to withdraw an admission must pass a three part test. The onus is on the moving party to satisfy all three parts of the test (Bradhill Masonry Inc. v. Simcoe County District School Board, 2011 ONSC 6230, 2011 CarswellOnt 11350 (Ont.S.C.J.) at para 20).
[18] The first and third branches of the test are: (1) that the proposed amendment raises a triable issue; and, (3) that the withdrawal will not result in any prejudice that cannot be compensated for in costs (Bradhill at para 19). The parties do not agree on the applicable second branch of the three part test.
[19] The defendants argue that the applicable second branch of the test is: (2) that the admission was inadvertent or resulted from wrong instructions.
[20] The plaintiff argues that the applicable second branch of the three part test is: (2) that there is a reasonable explanation for the change in position. The plaintiff relies on the decision of Master Dash in 1194388 Ont. Inc. v. The Toronto-Dominion Bank, 2014 ONSC 215 (Master), wherein Master Dash states as follows at paras 21 and 22:
There appears to be two lines of authority as to the second part of the test. Some cases set the test as requiring the moving party to show (a) the proposed amendment raises a triable issue, (b) the admission was made inadvertently or the solicitor was wrongfully instructed and (c) the withdrawal of the admission will not cause injustice to the other parties.
In my view, the better assertion of the test, and the version explicitly recognized by the Court of Appeal is as follows:
A party seeking to withdraw an admission must establish that:
(i) There is a triable issue with respect to the amendment;
(ii) There is a reasonable explanation for the change in position; and
(iii) There is no prejudice to the other party that cannot be compensated by costs.
[21] As noted by Master Dash in 1194388 Ont. at footnote 6, in the decision of Antipas v. Coroneos, 1988 10348 (ON SC), 1988 CarswellOnt 358 (Ont.H.C.), Saunders J. was of the view that the narrowness of the second part of the test could lead to an injustice and that it should be sufficient for the moving party to furnish a reasonable explanation of the change in position. Master Dash notes that the Court of Appeal has accepted this change in jurisprudence.
[22] As set forth in Antipas and accepted by the Court of Appeal the second branch of the three part test is the requirement to establish that there is a reasonable explanation for the change in position.
[23] The proposed amendments were grouped into three main categories by the parties, with some overlap in the categories.
Proposed amendments relating to the property (paragraphs 1(b)(iii), 1(c), 1(e) (only the words “and/or in the Property in accordance with their average investment ratios over the period they operated the business.”), 1(f), 1(h), 1(i), 5, 33(bb) (only the words “selling the Property” and the words “and placing all of the net proceeds into court pending the determination of this action”), 42, 43, 44, 45, 47 (only the words “and the Property”) and 50)
[24] Pursuant to the consent order of Justice Pollak dated September 6, 2013, a process was ordered for the sale of the property. The parties agreed that the sale of the property shall be referred to a Master and Justice Pollak so ordered. In my view it is an abuse of process to allow the plaintiff to deal with the property in another manner that is contrary to manner agreed to and contrary to the order of Justice Pollak. Accordingly, leave to amend the statement of claim with respect to these proposed amendments is denied.
Proposed amendments re: withdrawal of admissions (at paragraphs 1(b)(iii), 1(c), 5, 42, 47 (only the words “and the Property”)
[25] At paragraph 1(b)(iii) of the statement of claim, the plaintiff pleads that the property is jointly owned by Manji and Dharsi. The plaintiff now seeks leave to plead that the property is held in trust by Manji and Dharsi for the benefit of Leader.
[26] Although the plaintiff sought an order withdrawing these admissions, the plaintiff now takes the position that these proposed amendments do not result in the withdrawal of admissions. I am satisfied that these proposed amendments are withdrawals of admissions. The original pleading is an unambiguous and deliberate statement that Manji and Dharsi own the property jointly (see 1194388 Ontario Inc. at para 17).
[27] The defendants argue that the plaintiff has not satisfied the plaintiff’s onus with respect to the second and third branches of the test for the withdrawal of an admission.
[28] I am not satisfied that the plaintiff has satisfied the second branch of the test. Applying the second branch of the test relied on by the plaintiff, which in my view is the applicable second branch, I am not satisfied that there is a reasonable explanation for the change in the plantiff’s position. I am not satisfied that the change in the plaintiff’s position is a result of newly obtained documentation from Manji. The plaintiff was in receipt of the relevant documents in advance of issuing the statement of claim in the within action. The plaintiff retained an accountant in June 2011 to review the financial records. In addition, the plaintiff had all of the documentation prior to consenting to the order of Justice Pollock.
[29] If I am wrong with respect to the applicable second branch of the test, applying the second branch of the test relied on by the defendants, there is no evidence that the admission that the property is owned by Manji and Dharsi was inadvertent or resulted from wrong instruction.
[30] With respect to the third branch of the test, the defendants argue that the withdrawal of these admissions will delay the sale of the property and cause prejudice that cannot be compensated for in costs. The plaintiff has not satisfied the plantiff’s onus to demonstrate that the withdrawal of the admission will not result in prejudice to the defendants that cannot be compensated for in costs.
[31] The plaintiff has not satisfied the applicable test for the withdrawal of admissions.
[32] To the extent that I am wrong and that the proposed amendments do not constitute withdrawal of admissions, the proposed amendments are an abuse of process. In the sale of property application, Justice Pollock ordered on consent that the property be sold based on Manji and Dharsi being joint owners.
Proposed amendments at paragraphs 1(l) (only the words “In the alternative, an Order that Manji be restrained from taking any decisions respecting Leader and/or its operations, including any receipts, or the making of any payments, or any decisions effecting Leader, its bank accounts, or any of its property without first obtaining the consent of Moez), 48, 48(b), 49 and 50
[33] The proposed amendments at paragraphs 1(l) and 50 are an abuse of process. The plaintiff seeks an order restraining Manji from making any decisions respecting Leader without first obtaing the consent of the plaintiff. It is not possible for the court to supervise any such order in any way that would be meaningful.
[34] The proposed amendments at paragraphs 48, 48b and 49 are irrelevant pleadings.
Motion for Consolidation
[35] The plaintiff seeks an order consolidating the within action, the sale of the property application and the arrears action.
[36] Rule 6.01 of the Rules of Civil Procedure provides as follows:
(1)Where two or more proceedings are pending in the court and it appears to the court that,
(a) they have a question of law or fact in common;
(b) the relief claimed in them arises out of the same transaction or occurrence or series of transactions or occurrences; or
(c) for any other reason an order ought to be made under this rule,
the court may order that,
(d) the proceedings be consolidated, or heard at the same time or one immediately after the other; or
(e) any of the proceedings be,
(i) stayed until after the determination of any other of them, or
(ii) asserted by way of counterclaim in any other of them.
[37] In Paglia v. Favot, 2014 ONSC 230 (Ont.S.C.J.) at para 23, Justice Stewart states that “[t]he fundamental rule relating to consolidation is that, as far as possible, all matters in controversy between the parties should be determined in one proceeding.”
[38] The underlying purpose of the rule allowing for consolidation of pleadings is to avoid multiplicity of proceedings, to promote expeditious and inexpensive determination of the proceedings and to avoid inconsistent judicial findings (Pilon v. Janveaux, 2000 CarswellOnt 4785 (Ont.S.C.J.) at paras 6 to 8).
[39] The decision to consolidate is discretionary (Marchant (Litigation Guardian of) v. RBC Dominion Securities Inc., 2013 ONSC 2042, 2013 CarswellOnt 4323 (Ont.S.C.J.) at para 10).
[40] Justice Pollak ordered, on consent, that the sale of property application proceed by way of a reference before a master. The order sought by the plaintiff is contrary to the processs ordered on consent by Justice Pollak. Accordingly, I decline to make an order consolidating the actions and application.
[41] Even if the process for dealing with the property had not already been determined, I would decline to exercise my discretion to consolidate the within action and the sale of property application and arrears action.
[42] The court should not exercise its discretion to consolidate where it would result in increased complexity (Reichmann v. Toronto Life Publishing, 1988 CarswellOnt 494 (S.C.O.) at para 15). The within action is largely about Leader and the alleged improprieties of Manji. In contrast, the sale of property application only relates to the sale of the property. The arrears action is a leasing dispute between Leader and Moez in his personal capacity, not in his capacity as Estate Trustee. In my view the arrears action involves a narrow and distinct issue. Notwithstanding the reference in the the statement of defence in the arrears action at paragraph 5 to the allegations in the within action and notwithstanding the defendants’ pleading of equitable set off in the within action at paragraph 51 of the defence, I am not satisfied that consolidation is the most efficient or least complex manner for the actions and application to proceed.
[43] I decline to exercise my discretion to consolidate the within action, the arrears action and the sale of property application in all of the circumstances.
[44] Although not sought in the notice of motion, an oral request was made for alternative relief of trial together of the actions and application. In my view, this alternative relief must also fail for the same reasons that the relief with respect to consolidation fails.
In argument, defendants’ counsel raised for the first time an issue of a possible conflict of interest on the part of plaintiff’s counsel. I have not considered or addressed this issue in my reasons as there was no material filed in this regard nor any notice of this issue to plaintiff’s counsel.
Summary of Order
[45] Order to go as follows:
On consent, leave is granted to amend the statement of claim with respect to the proposed amendments at paragraphs 1(b)(iv), 1(b)(ix), 1(d), 1(e) (only the words “In the alternative, Dharsi seeks a determination by this court to establish the extent of the interest held by Manji and Dharsi in accordance with their investments made in Leader),” 1(j), 1(k), 1(l) (only the words “An Order removing Manji as a Director and/or Officer of Leader.”), 1(n), 4, 6, 9, 10, 11, 12, 14, 16, 20, 25, 26, 33 (only the words “and in conducting himself in an oppressive manner”), 33(v), 33(w), 33(x), 33(y), 33(z), 33(aa), 33(bb) (except for the words “selling the Property” and except for the words “and placing all of the net proceeds into court pending the determination of this action,” 33(cc), 36, 46, 47 (except the words “and the Property”).
The balance of the motion is dismissed.
[46] If any party seeks costs of the motion and if after reasonable attempts have been made to agree on costs the parties are unable to agree, the parties may contact me to make arrangements to speak to costs.
Master B. McAfee
DATE: August 18, 2014