CITATION: Auciello v. Mahadeo et al., 2015 ONSC 1267

COURT FILE NO.: CV-13-00493897

DATE: 20150310

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

VITO AUCIELLO

Plaintiff

– and –

GAIL MAHADEO, KLEIN & SCHONBLUM ASSOCIATES; FRED GOLDBERG; DAVID WAGMAN; JEFFERY WAGMAN; RONNI FINGOLD; ARNOLD BOBKIN; FOREST HILL REAL ESTATE INC.; JAN PERKINS; McLARENS CANADA; GRANITE CLAIMS SOLUTIONS

Defendants

Thomas Matthews for the Plaintiff

R. Leigh Youd, for the Defendants Gail Mahadeo and Klein & Schonblum Associates (“Klein Group”)

Jeffrey Klein, for the Defendants Fred Goldberg, David Wagman, Jeffery Wagman, Ronni Fingold, Arnold Bobkin and Forest Hill Real Estate Inc.(“Forest Hill Group”)

Murray Stieber, for the Defendants, Granite Claims Solutions and Jan Perkins (“Granite Group”)

HEARD: February 4, 2015

FAIETA, j

REASONS FOR DECISION

[1] This action is one of three actions brought by the plaintiff, either directly or through his company Network Cash Mart Ltd. (“Network”), that arises from Network’s purchase of a property in April 2008. The plaintiff settled both of the other actions and the defendants now bring this motion for an order to strike out this action on several grounds, including the submission that this action is an abuse of the process of this court.

[2] The defendants did not file any affidavit evidence. The outline below is taken from the various pleadings and court orders issued related to this matter.

Background

[3] The plaintiff purchased a property located in Toronto (the “Property”) in trust for Network on April 30, 2008.

[4] On January 28, 2010 the plaintiff commenced an action in the Toronto Small Claims Court against the Forest Hill Group defendants seeking damages arising from the purchase of the Property. (“Small Claims Court Action”). The plaintiff alleged that the defendant Fred Goldberg acted as the real estate agent for both the plaintiff and the vendor of the Property. The plaintiff alleged that Goldberg told him that the lots could be separated on closing by the plaintiff’s lawyer however this could not be accomplished. The plaintiff alleged that Goldberg had failed or neglected to protect the buyer’s interest by not including a clause in the sale that required the property to be transferred in two separate lots.

[5] On October 27, 2010 Network issued a claim in this court (CV-10-410355) against the defendants Fred Goldberg and Forest Hill as well as Ettie Rosen (“First Superior Court Action”). This action also seeks damages arising from the purchase of the Property. It alleges breach of contract against the vendor, Ettie Rosen. It alleges breach of contract, negligence and breach of fiduciary duty against Goldberg largely for the same reason described in the Small Claims Court Action namely, the failure to protect the plaintiff’s interest by ensuring that the Property was transferred as two separate lots.

[6] On November 20, 2011 an order dismissing the First Superior Court Action as abandoned was issued by the Local Registrar.

[7] On December 2, 2011 a settlement conference was held in the Small Claims Court Action. The court’s endorsement on that day indicates that two things happened:

(a) On consent, the plaintiff’s Small Claims Court Action against the Forest Hill Group defendants, other than Fred Goldberg and Forest Hill, was dismissed.

(b) The balance of the claim was settled pursuant to Minutes of Settlement filed.

[8] The Minutes of Settlement dated December 2, 2011 were signed twice by the plaintiff. Once in his personal capacity and once on behalf of Network. The Minutes of Settlement contain the following terms:

1. The defendants (Forest Hill and Fred Goldberg) agreed to pay the plaintiff the sum of $11,500.00 on or before January 6, 2012;

2. The defendants agreed to waive the cost award of $1,000 in the [first] Superior Court action;

3. The plaintiff agreed to consent to a dismissal of the [first] Superior Court action without costs. Such dismissal was to be taken out by the defendants;

4. The Small Claims action and the defendants’ claim, if any, are dismissed;

5. Should the defendants default, the plaintiff may ask the Clerk of the Court to sign judgment, without notice, for $11,500.00 plus interest and costs, less any payments made;

6. Provided that the terms of settlement are complied with, the parties above fully and finally release one another from all claims related to the facts and issues in this action. The Plaintiff in this action and in the [first] Superior Court action will execute a Full and Final Release containing a confidentiality provision in a form acceptable to all parties. The Release shall encompass the Small Claims Court action, the Superior Court action, and all past, present and future claims pertaining to the Property and the subject transaction

7. No admission of liability on the part of any party in this action and the Superior Court action is being made by entering into this settlement.

[9] On May 17, 2013 the defendants Forest Hill and Goldberg brought a motion in the First Superior Court Action for judgment on the terms of the settlement dated December 2, 2011. Network filed a cross-motion to validate service of the Statement of Claim in the First Superior Court Action. Judgment was granted on the terms sought by the defendants Forest Hill and Goldberg. Oral reasons were given by Chiappetta J. however they have not been filed. Network’s motion was dismissed as moot.

[10] On June 26, 2013 Network appealed Justice Chiappetta’s decision to the Ontario Court of Appeal.

[11] On September 18, 2013 the Ontario Court of Appeal granted Network’s request for an extension of time to perfect the appeal. The court’s endorsement includes the following observation:

Apart from the absence of any evidence explaining the delay, I am also concerned regarding the merits of the proposed appeal. Mr. Aucielos signed a full and final settlement of his claims against the respondents on December 2, 2011 during a settlement conference with Deputy Amenta at the Toronto Small Claims Court. The terms of settlement were signed by him in his personal capacity and as an officer of Network, with “authority to bind the corporation”. The settlement encompassed all Mr. Auciello and Network’s claims against the respondents in a then pending Small Claims Court action and the Superior Court action that underlies this proceeding. When Mr. Auciello and Network failed to complete the settlement, the respondents moved successfully for an enforcement order, which is the order granted by Chiappetta J.

[12] On November 28, 2013 a judge of the Small Claims Court dismissed the plaintiff’s motion to set aside the settlement. The court stated:

I have no jurisdiction to deal with this matter. Leaving aside the merits of a motion to set aside a settlement, there was a motion in Superior Court dealing with this action and the Superior Court action and an Order was made. That Order may be under appeal, but the Order deprives me of any jurisdiction to set aside the resolution of this action.

[13] On December 2, 2013, the plaintiff commenced this action by the issuance of a Notice of Action (“the Second Superior Court Action”). The Second Superior Court Action raises the same allegations as against the Forest Hill Group. It has added the defendants Klein and Granite.

[14] On January 12, 2015 the Ontario Court of Appeal dismissed Network’s appeal of Justice Chiappetta’s decision dated May 17, 2013 as follows:

The appellant’s request for an adjournment is refused. The appeal is quashed for lack of jurisdiction without prejudice to the corporation taking whatever steps it may deem advisable in the proper court.

While both parties submit that we have jurisdiction because the amount claimed in the Superior Court action, that action was settled together with the small claims court action for a global amount that falls within the jurisdiction of the small claims court and hence any appeal lies to the Divisional Court.

[15] The Plaintiff served a Fresh as Amended Statement of Claim (“Claim”) on January 13, 2015. It acknowledges that Network is the plaintiff’s company.

[16] The essence of the Claim is described at paragraphs 3, 30, 37, 39 and 46 as follows:

3. The plaintiff pleads that the defendants are liable for the tort of deceit, conspiracy, bad faith conduct, fraudulent misrepresentation or in the alternative negligent misrepresentation. In not disclosing material facts to both the plaintiff and the court, a settlement was mistakenly and inappropriately agreed upon. Both the plaintiff and the court relied upon this misrepresentation, and the plaintiff consequently suffered damages. Had the material facts been validly disclosed, the terms of settlement would have been agreed upon on materially different terms, or instead, the causes of action maintained if not settlement could be reached.

4. The plaintiff pleads that the defendants conspired to deceive/mislead both Auciello and the court, thereby allowing them to negotiate a favourable settlement for the TSCC claim, knowing full well that the Superior Court action had been dismissed and certain defendants would not face any consequences with respect to said action. Details are best known to the defendants, and will be provided after the plaintiff has had an opportunity to examine the defendants for discovery.

5. The plaintiff agreed to settlement terms based on deceit, bad faith conduct, conspiracy, and fraudulent/negligent misrepresentation by the defendants. This coercion cost the plaintiff a fair settlement and/or his day in court.

6. Had the plaintiff known that the Superior Court action had been dismissed, he argues he would not have settled the TSCC claim for the amount he did or have agreed to release many of the defendants to this claim. If no adequate settlement could be reached, he would have likely sought to transfer the entire file, with all named defendants, to the Superior Court.

7. The plaintiff, through extensive research, thought, and work, only pieced together all details of the defendants’ actions and the extent of their deceit/misrepresentation in December 2014 to January 2015.

[17] The defendants ask this court to strike or dismiss the claim under Rules 21.01(1)(b), 21.01(3)(c),(d) and 25.11(b),(c).

Issue #1: Does the Claim Disclose A Reasonable Cause of Action?

[18] Under Rule 21.01(1)(b) a party may move before a judge to strike out a pleading on the ground that it discloses no reasonable cause of action and the judge may make an order or grant judgment accordingly. Amongst other reasons, a defendant may move before a judge to have an action stayed or dismissed on the grounds that: (a) another proceeding is pending in Ontario or another jurisdiction between the same parties in respect of the same subject matter; and (b) the action is frivolous or vexatious or is otherwise an abuse of the process of the court and the judge may make an order or grant judgment accordingly.[^1]

[19] The test for striking out a claim at the pleadings stage under Rule 21.01(b) is whether it is plain and obvious that the claim discloses no reasonable cause of action.[^2] The purpose of this rule is to promote effective and fair litigation by weeding out hopeless claims and ensuring that those that have some chance of success go to trial. If the claim, as pleaded, has a reasonable prospect of success, then the claim should be allowed to proceed to trial.[^3]

[20] A claim will be struck under Rule 21.01(b) when either the allegations in the claim do not give rise to a recognized cause of action, or the claim fails to plead all the requisite elements of a recognized cause of action.[^4]

[21] If a claim has a chance of success, it should be determined at trial with the benefit of a full factual record. Only where an action is certain to fail because it contains a radical defect should the statement of claim be struck. Accordingly, the threshold to be met by a moving party on a motion under Rule 21.01(1)(b) is very high.[^5]

[22] As this determination under Rule 21.01(1)(b) is purely a question of law, no evidence is admissible.[^6] Instead, the plaintiff is entitled to the benefit of an assumption that the facts pleaded are true or capable of being proven. In making its determination a court is required to give a generous reading to the statement of claim and construe it in a manner most favourable to the plaintiff.[^7] However, a court is not required to take allegations based on assumptions and speculation as true for the purpose of assessing the cause of action at issue. Therefore, a party may not supply a missing element of a cause of action by pleading speculative allegations.[^8]

[23] If a claim is found to disclose no reasonable cause of action, then it should not be struck without leave to amend except in the clearest of cases, for instance when the deficiencies in the pleading cannot cured by an appropriate amendment.[^9]

[24] As noted above the Claim asserts that the defendants are liable to the plaintiff in the following causes of action but pleads no material facts in support: the tort of deceit[^10], conspiracy[^11], bad faith conduct[^12], fraudulent misrepresentation[^13], and negligent misrepresentation[^14]. The Claim, as pleaded, fails to plead the requisite elements of these causes of action. The Claim acknowledges the lack of material fact as it states that:

Details are best known to the defendants, and will be provided after the plaintiff has had an opportunity to examine the defendants for discovery.

[25] The failure to plead any material facts to support these causes of action, most of which suggest malice on the part of the defendants, is manifestly unfair to the defendants. This also represents the plaintiff’s second attempt at properly pleading this Claim.

[26] Further, I am unaware of any cause of action that would provide the relief sought by the plaintiff in the circumstances described in the Claim.

[27] I accept Klein Group’s submission that as solicitors for the Forest Hill Group in the first two actions, that the Klein Group owed no duty of care to the plaintiff, whether based in negligence or breach of fiduciary duty.[^15] I also accept the Klein Group’s submission that an attempt by an unhappy litigant to sue opposing counsel simply because he takes offence with their litigation tactics is an abuse of process as an impermissible collateral attack on the court’s decision.[^16]

[28] I also accept the Granite Group’s submission that as insurance adjusters for the Forest Hill Group’s insurer, the Granite Group owed no duty of care to the plaintiff, whether based in negligence or breach of fiduciary duty.[^17]

[29] The doctrine of abuse of process is a flexible doctrine that engages the inherent power of the court to prevent the misuse of its procedure, in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute.[^18]

[30] For the above reasons, I find that the Second Superior Court action is an abuse of process. I order that the Claim be struck without leave to amend.

Issue #2: Is the Second Superior Court Action Scandalous, Frivolous or Vexatious?

[31] The defendants ask that this court strike out the claim, with or without leave to amend, on the ground that the pleading is scandalous, frivolous, vexatious or otherwise an abuse of the process of this court.[^19]

[32] In Cerqueira v. Ontario[^20] the general principles governing pleadings were described, in part, as follows:

(a) the purpose of pleadings is to give notice of the case to be met, to define the matters in issue for the parties and for the court, and to provide a permanent record of the issues raised;

(b) the causes of action must be clearly identifiable from the facts pleaded and must be supported by facts that are material;

(c) every pleading must contain a concise statement of the material facts on which the party relies but not the evidence by which those facts are to be proved: rule 25.06; this includes pleading the material facts necessary to support the causes of action alleged;

(d) a party is entitled to plead any fact that is relevant to the issues or that can reasonably affect the determination of the issues, but it may not plead irrelevant, immaterial or argumentative facts or facts that are inserted only for colour;

(e) allegations that are made only for the purpose of colour or to cast a party in a bad light, or that are bare allegations, are scandalous and will be struck under rule 25.11(b);

(f) any fact that can affect the determination of rights between the parties can be pleaded, but the court will not permit facts to be alleged that are immaterial or irrelevant to the issues in the action;

(g) allegations of fraud, misrepresentation, negligence and conspiracy must be pleaded with particularity;

(h) a document that demonstrates a complete absence of material facts will be declared to be frivolous and vexatious

(i) portions of a pleading that are irrelevant, argumentative or inserted for colour, or that constitute bare allegations should be struck out as scandalous;

(j) statements in a document that consist of argument and unfounded, inflammatory attacks on the integrity of a party, and speculative, unsupported allegations of defamation will also be struck out as being scandalous and vexatious;

(k) documents that are replete with conclusions, expressions of opinion, provide no indication whether information is based on personal knowledge or information and belief, and contain many irrelevant matters, will be rejected in their entirety. [emphasis added]

[33] The Claim offends many of the general principles governing pleadings described above.

[34] In my view the Claim is scandalous, frivolous and vexatious. The Claim has a complete absence of material fact. It fails to plead allegations of fraud, misrepresentation, negligence and conspiracy with particularity. It contains bare allegations of deceit and misrepresentation against all of the defendants and amounts to a personal attack on their integrity. I order that the Second Superior Court Action be dismissed pursuant to Rule 21.01(3)(d).

Issue #3: Is the Claim Res Judicata and thus an Abuse of the Court’s Process?

[35] The defendants ask that the court to strike out the claim without leave to amend, on the ground that the Claim is an abuse of process as it attempts to re-litigate issues already decided.[^21]

[36] The defendants submitted that the Claim was res judicata on the basis of both issue estoppel and cause of action estoppel for the following reasons:

Res Judicata

[37] The doctrine of res judicata is a common law doctrine that prevents the re-litigation of issues already decided. It is part of the general law of estoppel and has two branches: "cause of action estoppel" and "issue estoppel."[^22]

[38] Cause of action estoppel refers to the determination of the cause or causes of action before the court.[^23] The Forest Hill Group and the Granite Group submit that cause of action estoppel is applicable. However the cause(s) of action in the first two actions (generally, negligence on the part of Goldberg, and vicarious liability of the remainder of the Forest Hill Group, by not requiring that the Property be transferred as two lots) bears no similarity to the Second Superior Court action which asserts several other causes of action not earlier advanced (such as deceit and conspiracy) for alleged failure to disclose to the plaintiff, prior to the settlement conference that the First Superior Court Action (which he had commenced) had been administratively dismissed for delay. The causes of action are distinct and therefore cause of action estoppel is inapplicable.

[39] Issue estoppel prevents a litigant from re-litigating an issue that has been clearly decided by a court of competent jurisdiction in a previous proceeding between the same parties or their privies even if the new litigation involves a different cause of action.[^24] The Forest Hill Group and the Granite Group submit that cause of issue estoppel is applicable. However, it is also inapplicable on a number of grounds. None of the issues in the First Superior Court Action or the Small Claims Court Action are the same as the issues in the Second Superior Court Action. Further the only parties common to the First Superior Court Action or the Small Claims Court Action and the Second Superior Court Action are the plaintiff and the Forest Hill Group. It is my view that the Granite Group and Klein Group were not “privies” with the Forest Hill Group as there was not “a sufficient degree of identification between two persons to make it just to hold that the decision to which one was a party should be binding in the proceedings to which the other is a party.”[^25]

Conclusion

[46] For the reasons given above the Claim is struck without leave to amend and the Second Superior Court Action is dismissed.

[47] Having considered the cost outlines and submissions of counsel, the plaintiff shall pay costs on a partial indemnity basis of $6,500 to each of the Forest Hill Group, the Klein Group and the Granite Group.

Mr. Justice M. Faieta

Released: March 10, 2015

[^1]: Rule 21.01(3)(c),(d).

[^2]: Hunt v. Carey Canada Inc. 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959, at 980.

[^3]: R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42; [2011] 3 S.C.R. 45, at paras. 17, 19.

[^4]: Dawson v. Rexcraft Storage and Warehouse Inc. (1998), 1998 CanLII 4831 (ON CA), 164 D.L.R. (4th) 257 (Ont. C.A.), at paras. 8-11.

[^5]: Amato v. Welsh, 2013 ONCA 258, 362 D.L.R. (4th) 38, at paras. 31-33 (C.A.)

[^6]: Rule 21.01(2).

[^7]: Dawson, at para.9

[^8]: Deep v. Ontario, [2004] O.J. No. 2734, at para. 35 (S.C.), affirmed [2005] O.J. No. 1294 (C.A.)

[^9]: South Holly Holdings Ltd. v. Toronto-Dominion Bank, 2007 ONCA 456, para. 6.

[^10]: Derry v. Peek [1889] UKHL 1;

[^11]: Ontario Consumer Home Services Inc.v. EnerCare Inc., 2014 ONSC 4154; Carbone v. DeGroote 2014 ONSC 6146.

[^12]: Deep v. Ontario.

[^13]: Lana International Ltd. v. Menasco Aerospace Ltd. (1996) O.R. (3d) 298

[^14]: Hamilton v. 1214125 Ontario Ltd., 2009 ONCA 684; Fuda v. Jim McIntosh Petroleum Engineering Ltd. 2013 ONSC 2122.

[^15]: Hanna v. Polanski 2012 ONSC 3229; MacDonald v. MCAP Service Corporation 2013 ONSC 4473.

[^16]: Biron v. Aviva Insurance Co. 2014 ONCA 558.

[^17]: Coote v. Ontario Human Rights Commission [2009] O.J. No. 4264; Nobili v. Economical Mutual Insurance Co. 2014 ONSC 6333.

[^18]: Toronto (City) v. Canadian Union of Public Employees, Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, at para. 37.

[^19]: Rules 21.01(3)(d) and 25.11(b).

[^20]: 2010 ONSC 3954, at paras. 11-13

[^21]: Rule 21.01(3)(d) and Rule 25.11(c)

[^22]: EnerNorth Industries Inc. (Re) 2009 ONCA 536, 96 O.R. (3d) 1, at paras 53, 54.

[^23]: EnerNorth, para. 54

[^24]: EnerNorth, at para. 54

[^25]: EnerNorth, at para. 62.