Court File and Parties

CITATION: Elia et al. v. Alizadeh et al., 2015 ONSC 4085

COURT FILE NO.: 01-CV-205661

DATE: 20150624

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Paul Elia, Furl Investments Limited, Furl Automotive Inc. and Highcastle Investments Limited, Plaintiffs

AND:

Shahin Alizadeh, Downtown Automotive Inc., King Parliament Automotive Inc., 997350 Ontario Inc. (formerly known as King Toyota Inc.), Key Holdings Inc., 1007006 Ontario Limited, Cina Hull, Charisma Marketing Inc., 1390835 Ontario Limited and MPI Investment Corp., Defendants

BEFORE: Sean F. Dunphy J.

COUNSEL: Andrea J. Sanche, for the Plaintiffs

Michael Simaan and Alexander Minkin, for the Defendants Shahin Alizadeh, Downtown Automotive Inc., King Parliament Automotive Inc., 997350 Ontario Inc. (formerly known as King Toyota Inc.), Key Holdings Inc., 1007006 Ontario Limited, Cina Hull, Charisma Marketing Inc. and 1390835 Ontario Limited

HEARD: June 23, 2015

ENDORSEMENT

[1] This is an appeal from a decision of Master Short released March 16, 2015 dismissing the motion of the defendants for an order dismissing the action for delay. Since the action dates from 2001, itself a substantial re-issue of a claim commenced in 1999 relating to promissory notes and events dating back to the early 1990’s, this action has indeed acquired the veneer of respectable old age. This appeal raises the question of whether Master Short applied the correct principles in exercising his discretion to permit the plaintiff to continue with an action so little cherished as to have been permitted to languish for nearly a generation.

[2] The learned Master delivered extensive reasons analyzing the evidence and the law in great detail. I adopt the facts as described in his judgment and proceed to address the issues raised on this appeal without repeating them here.

[3] The defendants allege the following errors by Master Short:

• Failure to consider the plaintiff’s failure to fulfill the conditions of the Order of Justice Then in regards to continuing the 2001 Action;
• Misapprehension of the evidence regarding prejudice of the defendants in the delay;
• Palpable and overriding error in finding the plaintiffs had discharged their onus to rebut the presumption of prejudice;
• Misapprehension of the evidence regarding the plaintiffs’ explanation for the delay; and
• Failure to consider whether the 2001 action should be dismissed as against Ms. Hull and Charisma Marketing Inc. (“Charisma”).

Standard of Review

[4] The decisions of whether to make an order dismissing an action for delay under Rule 24.01 or to set aside a deemed dismissal under Rule 48.15(6) are both discretionary orders. It is not sufficient for the appellant to persuade me that I might have exercised that discretion differently. Both parties cite the decision of the Court of Appeal in Zeitoun v. Economical Insruance Group 2009 ONCA 415 affirming the decision of Low J. in the Divisional Court (at 2008 CanLII 20996 (ON DC). The Zeitoun case confirms that there is no distinction to be made as regards the standard of review of decisions of a judge or of a master. Such “decisions will be interfered with only if the master made an error of law or exercised his or her discretion on the wrong principles or misapprehended the evidence such that there was palpable or overriding error” (per Low J. at para. 40).

[5] I adopt that statement as guiding my approach to the appeal of Master Short’s decision in the present case.

Analysis

I have carefully reviewed the endorsement of Master Short in light of the factum of the appellants and the oral arguments made. I find that I am in agreement with his careful review of the applicable legal principles and have found no fault in them.

The delay in this case has indeed been very substantial and it is clear from a review of the learned Master’s reasons that the plaintiffs’ case only just cleared the hurdles necessary to avoid being dismissed for delay. Master Short either expressly found or I have inferred from his reasons and the record that he was satisfied of the following facts which in my view fully support the exercise of his discretion and there was ample basis in the record before him to support such findings:

i. While separately represented in the 1999 action, all of the defendants in the 2001 action are acting together represented by a single counsel;

ii. The two individual defendants are spouses of each other while all of the remaining corporate defendants are controlled by them and the two allegations against Ms. Hull are directly related to her alleged activities or transactions undertaken with her spouse Mr. Alizadeh and his various companies who are defendants;

iii. While the plaintiffs may have filed no evidence on the motion directly dealing with the defendants Hull and Charisma individually, the plaintiffs knew the parties and neither Ms. Hull nor Charisma filed any evidence of their own indicating any prejudice arising from delay particular to them;

iv. There were serious, if not necessarily intensive and continuous, settlement negotiations during the period of inactivity which discussions involved the use of a mediator;

v. During the settlement process, there was evidence of an agreement to hold the legal proceedings in abeyance and the plaintiff had indicated that if the settlement process did not bear fruit, the 2001 action would be proceeded with;

vi. There was no evidence that Mr. Alizadeh was somehow engaged in the settlement process on behalf of a subset of the defendants that excluded Ms. Hull or her company Charisma: any settlement would have been for the benefit of all;

vii. The “main” protagonists had demonstrated with affidavit and cross-examination evidence that their recollection of the evidence was reasonably acute despite the passage of time;

viii. The one witness who had passed away in the interim was found not likely to be a crucial witness given the allegations;

ix. There was no evidence of any actual loss of documentary evidence by the plaintiffs: the plaintiffs were not likely to have much of relevance beyond what had already been produced given the nature of their claims and their status as outside investors

x. If there was any loss of documents on the part of the defendants it occurred when they had full notice of the plaintiffs’ claim and had no reasonable grounds to believe the plaintiffs had desisted in it;

xi. If many of the plaintiffs’ claims have become more difficult of proof due to the delay (which is almost certainly the case given the nature of the allegations), the defendants’ cannot raise that as a ground of prejudice to them – it is only prejudice in mounting a defence by some or all of the defendants which would be material.

[6] The defendants do not necessarily agree with many of the conclusions that I have listed above. That is not the test. Master Short had before him evidence from which those conclusions could reasonably be reached without palpable and overriding error. He either expressly so concluded or I have inferred from the evidence cited that the he grounded his findings on the factors listed.

[7] The appellants placed great weight on what they maintained was a failure to consider the motion to dismiss from the perspective of each defendant separately. In their submission, the record contains insufficient evidence to have enabled the learned Master to determine not to dismiss the claims as against Ms. Hull and Charisma.

[8] I cannot agree with their submission which, in my view, represents an overly technical and almost mechanical view of the task of assessing the factors for exercising discretion under Rule 24.01.

[9] The two individual defendants are spouses of each other, all of the other defendants are controlled by them (whether singly or jointly). They have worked together in the same businesses and that is precisely the reason for Ms. Hull having been added as a defendant. Her alleged liability and that of Charisma are, in essence, derivative of the claims against her spouse and his companies. All of the defendants have had the same counsel since the 2001 action was commenced. While it is theoretically possible that Ms. Hull could have become estranged from Mr. Alizadeh, been entirely unaware of the intervening settlement negotiations and otherwise have incurred prejudice individual to her in the intervening years, there is not a scintilla of evidence to suggest that such purely hypothetical scenario is actually true. Ms. Hull filed no evidence of her own and, given past experience and the way in which the plaintiffs (who knew Mr. Alizadeh well) had acted, the plaintiffs’ affidavit materials did not make specific statements about her. While it may be that the significant intervening delay placed an onus upon the plaintiffs to provide a satisfactory explanation before the court for the delay (which they only just managed to do) and to deal with the issue of prejudice, it is impossible for a plaintiff to establish a negative fact conclusively (lack of prejudice). If the defendants had actual prejudice to point to, such evidence should not have been hidden under a basket but should have been brought to the fore when the motion was argued. I can find no error in the manner in which the learned Master dealt with the arguments for separate treatment of Ms. Hull and Charisma. There was sufficient evidence before him for the Master to adopt the common sense inferences and approach that he did and nothing whatsoever to suggest that he was wrong in doing so.

[10] The overall approach taken by Master Short was in my view the correct one. Assessing a motion seeking dismissal for delay under Rule 24.01 is not a mechanical, rule-driven process. Some cases have found evidence of settlement discussions not to be a persuasive factor in those cases. The plaintiffs’ evidence as to the reasons for delay in this case only just cleared the bar in terms of being persuasive enough to have secured the learned Master’s exercise of his undoubted jurisdiction to exercise his discretion in their favour. Of all of the evidence he reviewed, in my view, the most important was this: the plaintiffs’ actions, while lacking at times in vigour and diligence, nevertheless displayed to the defendants a constancy of intent to pursue a remedy for the claims alleged by settlement if possible, by litigation if not.

[11] The defendants were never in a position where they could reasonably have assumed that the plaintiffs’ delay signaled intent to abandon the claims. The defendants acted at all material times as members of an allied group and presented no evidence to suggest sufficiently material actual individual prejudice (as opposed to the “spectre” of prejudice) and certainly presented none to suggest that Ms. Hull or Charisma should be treated separately from the perspective of assessing the evidence regarding prejudice.

[12] Lastly I turn to the rather technical arguments raised regarding the decision of Then J. which the appellants fault the learned Master for having allegedly misconstrued.

[13] Paragraphs 20-24 of Master Short’s endorsement clearly considered the impact of the decision of Then J., and I can see no error in his analysis of it. There was in fact no “stay” of the 2001 action ordered. The defendants had brought a motion to stay the 2001 action which was not granted. The last paragraph of Then J’s decision thus permitted the plaintiffs to continue with the 2001 action but imposed a condition regarding the payment of certain costs, only one element of which had been quantified while the remainder required quantification by the defendants. The condition was not described as a stay in the endorsement although clearly it was a condition and not to be ignored by either side. The defendants sat on their hands and failed to get all of the costs assessed or to follow up on the matter. No formal order was taken out. Furthermore, the defendants themselves had other unpaid payment obligations from a prior costs award which had not paid (perhaps explaining their lack of zeal in seeking collection of awards in their favour). This rather murky story of mutual neglect of an order did not strike the learned Master as sufficient grounds to dissuade him from exercising his discretion in the manner that he did and I see no reason to question that assessment.

[14] The appellants note that one of the costs awards (amounting to $1,800) ordered to be paid was in favour of a single defendant (Ms. Hull) whereas the countervailing costs awards in favour of the defendants were made against the other defendants. While the learned Master may or may not have appreciated that minor nuance of the evidence, I am not satisfied that his lack of appreciation of that subtlety in relation to orders not formally taken out and never pursued had any material bearing upon his disposition of the issues can accordingly cannot be construed as a reversible error. While having apparently been separately represented in a prior time when the $1,800 costs award was made in favour of Ms. Hull, all of the defendants were represented by the same counsel when the matter was heard by Master Short.

[15] If error there was on this point, it was not material and had no bearing on the ultimate outcome of the motions. The test under Rule 24.01 is not a mechanical one. Rather, it is a discretionary test applied having regard to established principles after a full and contextual analysis of the circumstances. The learned Master did not in my view demonstrate any failure to understand the test to be applied nor was there any palpable error in his assessment of the evidence before him.

Disposition

[16] I therefore dismiss this appeal and uphold the decision of Master Short for the reasons which he gave subject to the comments made above. He has appropriately considered the delays in this case.

[17] The plaintiffs are entitled to their costs of this appeal. At the conclusion of the hearing, the parties agreed that $5,500 was a reasonable figure for costs to be awarded to the successful party, whomever that might be. I so order. The appeal is dismissed with costs payable to the plaintiffs in the amount of $5,500.

Sean F. Dunphy

Date: June 24, 2015