SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 13-57301

DATE: 2015/09/15

RE: 1860035 ONTARIO LTD, Plaintiff

AND

VELIKA REALTY INC. and AHMED ABOU-GABAL, Defendants

BEFORE: Justice Paul Kane

COUNSEL:
Craig O’Brien, for the Plaintiff

Christopher S. Spiteri, for the Defendants

HEARD: August 31, 2015 (at Ottawa)

ENDORSEMENT

[1] The plaintiff by notice of motion dated May 20, 2015, seeks:

(a) A Declaration that the Defendants are in contempt of the following Orders:

(i) December 13, 2013, by Roccamo J.;

(ii) June 26, 2014, by McLean J.;

(iii) February 23, 2015, by Master MacLeod; and

(iv) April 17, 2015, by Master MacLeod.

(b) An Order striking the Statement of Defence;

(c) Leave to issue a Writ of Sequestration on 425-427 Bank Street and 390 Frank Street, Ottawa;

(d) A Declaration that the defendants are in breach of the Order of McLean J. and for the appointing of a receiver or administrator to manage and administer the leased premises;

(e) An Order directing the Accountant of the Ontario Superior Court of Justice to release funds in court to pay the administrators’ invoices;

(f) An Order that this Order be served on the mortgagee of the leased property; and

(g) Alternatively, an Order that the defendants be fined or Mr. Abou-Gabal be imprisoned;

pursuant to Rules 21.01(1) (b), 60.02, 60.09, 60.11, 60.19 and 37 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, ss. 98 and s. 129(1) and 129(2) of the Courts of Justice Act, R.S.O. 1990, c. C-43; 2006, c. 19, Sched. C and ss. 19 and 20 of the Commercial Tenancies Act, R.S.O. 1990, c. L-7.

Grounds

[2] The grounds cited in the motion in support of the above remedies include:

(a) Past conduct of the defendants, preventing the plaintiff from occupying the subject leased restaurant premises;

(b) The defendants changing the premises’ locks;

(c) The defendants cutting off electricity;

(d) The defendants’ attempts to terminate the plaintiff’s lease of the premises;

(e) Non-payment of cost awards against the defendants; and

(f) Non-compliance with orders directing the defendants to do and not do several things, including the defendants’ failure to attend court ordered examinations for discovery.

[3] In argument today, the plaintiff limited the relief sought to striking the Statement of Defence due to the defendants’ misconduct to date in this proceeding. The plaintiff sought adjournment of the balance of the motion sine die, including the remedy of contempt.

[4] The defendants submit this is solely a contempt motion, that the plaintiff has failed to meet the requirements and onus as to contempt and therefore seek:

(a) The dismissal of the motion for failure to meet the requirements for contempt;

(b) Alternatively, an order dismissing the motion without prejudice to the plaintiff’s right to bring a new motion; and

(c) In the further alternative, should the Court determine the defendants are in contempt, the second stage of a contempt hearing should be adjourned to a hearing to determine what is the appropriate remedy.

Background

[5] The defendants leased the premises to the plaintiff pursuant to a five year written lease dated May 1, 2012. The plaintiff entered the lease and operated a restaurant therein. The landlord, pursuant to the lease, was entitled to a reasonable period to complete fit-up renovations during which no rent was payable.

[6] This proceeding was commenced on April 11, 2013. The plaintiff’s claim seeks:

(a) A declaration that the landlord has breached the lease;

(b) An injunction forcing the landlord to complete its fit-up obligations and to repair structural deficiencies related to the leased premises; and

(c) Damages in the form of an abatement of rent, for lost revenue and expenses caused to the plaintiff.

[7] The plaintiff submits:

(a) The landlord did not complete its fit-up work until November, 2013;

(b) The interfering actions of the defendants prevented the plaintiff opening its restaurant until September 1, 2014; and

(c) The defendants have breached numerous court orders before and after September 1, 2014.

[8] The plaintiff on this motion presented 18 Orders and Endorsements negative to the defendants, plus four certificates of non-attendance for examination for discovery and cross-examinations dated May 22 and June 24, 2015.

[9] The Orders, Endorsements and Examination Notices during the past 28 months include:

(a) June 21, 2013: On consent, the defendants are ordered to complete by July 30, 2013 the landlord’s fit-up work and repairs including completing the electrical upgrades, completing façade or cladding of the building, installing an air conditioning system, installing plywood subfloor and completing the water service upgrade. The landlord was prevented from selling the building prior to completion of its work.

(b) December 13, 2013: The defendants are ordered to remove locks they installed preventing the plaintiff access, provide the plaintiff access and determine the plaintiff was in good standing under the lease. The landlord was thereafter prohibited (i) from changing the locks, and from entering the premises unless 24 hours prior notice was given to the tenant and (ii) only if the plaintiff was present during the defendants’ entrance.

(c) March 21, 2014: The plaintiff tenant is ordered to pay its monthly rent into court to the credit of this proceeding.

(d) April 11, 2014: The court ordered the landlord to reconnect electricity to the premises.

(e) April 16, 2014: The defendants were directed to reconnect electricity to the leased premises. It was ordered that Servicemaster was to carry out remediation work on the premises and to be paid from the money paid into court.

(f) June 26, 2014:

(i) The court appointed an accountant (“Accountant”) to determine the accuracy of costs and expenses being charged the tenant by the landlord for the period June 2012 until June 2014, with that determination to be binding on the parties.

(ii) The parties were required to provide the Accountant, within 5 days, with documentation requested by the Accountant to make the above expense determination.

(iii) The landlord was obligated to provide the tenant with all inspections regarding the heating and cooling system in the lease.

(iv) The landlord was required to complete all remediation work and install two kitchen heaters in the leased premises.

(g) August 12, 2014: The plaintiff was granted leave to issue and register a Certificate of Pending Litigation against this property.

(h) December 9, 2014: The Certificate of Pending Litigation was to remain registered against title.

(i) February 23, 2015: The defendants are required to:

(i) provide their reasons for disputing the account of Servicemaster by March 6, 2015;

(ii) pay the retainer of MNP LLP; and

(iii) produce correspondence between themselves and the court appointed Accountant;

Examinations for discovery were to be completed by May, 2015.

(j) April 9, 2015: It is ordered that payment of Servicemaster’s account be paid from money deposited into court.

(k) April 17, 2015: The defendants are ordered:

(i) to pay the outstanding retainer owing to the Accountant within 7 days;

(ii) to provide the Accountant with documentation he requests to perform his mandate;

(iii) to provide the plaintiff with an index and copies of the above documents provided by the defendants to the Accountant.

It was ordered that the plaintiff may proceed with a contempt motion or a motion for other relief if there continues to be noncompliance by the defendants.

(l) June 4, 2015: It is ordered that:

(i) the Master is to set a hearing date for the plaintiff’s contempt motion and the defendants’ motion to pay money out of court;

(ii) the defendants are to deliver further better responding materials within 10 days;

(iii) cross-examinations on affidavits are to be held on June 23 and 24, 2015. Failure to attend such cross-examinations will result in the deponent’s affidavit being struck.

(m) June 19, 2015: The Court directs counsel for the parties to ensure that the correct materials are before the Court on the plaintiff’s contempt motion and the defendants’ motion to remove the Certificate of Pending Litigation. Outstanding costs awards are to be paid forthwith.

(n) August 13, 2015: A 10 day interrogatory Mareva injunction is granted requiring the defendants to pay $900,000 from its sale proceeds of the property into court, or to post substitute security.

(o) August 21, 2015: The interrogatory Mareva injunction is granted with the above terms.

(p) December 2, 2014: The plaintiff served a notice to cross-examine the defendants on its 2014 affidavits. Mr. Abou-Gabal failed to attend that appointment.

(q) May 22, 2015: The defendants were served on May 13, 2015 with a notice of examination for discovery returnable on May 22, 2015, but failed to attend.

(r) June 24, 2015: The individual defendant and two other individuals who filed affidavits on behalf of the defendants, failed to attend an appointment for cross-examination on their affidavit.

Grounds for Motion

[10] The contraventions by the defendants of the Orders relied upon today by the plaintiff are:

(a) The defendants’ failure to complete the façade or cladding of the building as ordered on June 21, 2013.

(b) The defendants’ breach of the December 13, 2013 prohibition order on two occasions that they not enter the leased premises without 24 hours prior notice and while the plaintiff was in attendance.

(c) The defendants, contrary to the Order dated February 23, 2015, failed to:

(i) Provide copies of correspondence between themselves and the court appointed Accountant;

(ii) Provide the plaintiff with their reasons for disputing the account of Servicemaster; and

(iii) Attend on examinations for discovery pursuant to the plaintiff’s notice which were to be completed by May, 2015.

(d) Contrary to the Order dated April 17, 2015, the defendants failed to provide the plaintiff with the inventory of documents they gave to the court appointed Accountant.

(e) Contrary to the June 4, 2015 Order, the individual defendant and the two other persons who presented affidavit evidence for the defendants, failed to attend for cross-examination pursuant to the plaintiff’s appointment notice.

No Responding Affidavits

[11] On June 4, 2015, it was ordered that:

(a) The parties were to file any further affidavit material on this and the defendants’ motion by June 15, 2015.

(b) June 23 and 24, 2015 was set as the dates to conduct cross-examination on such affidavits.

(c) Failure to attend for cross-examination on the above dates will result in the deponent’s affidavit being struck.

[12] The defendants failed to serve a new affidavit(s) on this motion by June 15, 2015. The defendants further failed to attend the court-ordered appointment to be cross-examined on their earlier 2014 affidavits, thereby resulting in those 2014 affidavits being struck as ordered.

[13] There are therefore no responding affidavits by the defendants to the present motion.

August 26, 2015 Return of Motion

[14] The defendants’ new legal counsel was retained on approximately August 20, 2015.

[15] The present motion of the plaintiff came on for hearing before Robertson J. on August 26, 2015. The defendants requested an adjournment of several weeks.

[16] The defendants sought leave on August 26, 2015, to file a factum, a book of authorities and the defendants’ record containing affidavits responding to this motion. Such fresh affidavit(s) from the defendants pursuant to the above June 4 order, should have been served by June 15, and subjected to cross-examination on June 23, 2015.

[17] Robertson J. refused to adjourn this motion for several weeks because the property was scheduled to be sold by September 8, 2015.

[18] At a later point in argument, the Court stated that it was not prepared to “change a bunch of Orders” or conduct an appeal of a prior order. Counsel for the defendants replied the defendants were not asking to amend any Orders, but then stated that due to their recent engagement, counsel expressed a lack of familiarity with the prior Orders.

Terms of Adjournment

[19] Robertson J. granted a five-day adjournment until today, on the condition that the defendants provide the plaintiff by August 28, 2015:

(a) The scope of work;

(b) The name of contractors;

(c) The license of contractors,

(d) The timeline for the façade repair work;

(e) For the mould remediation; and

(f) To fix the plumbing.

[20] The defendants today did not seek leave to file responding affidavits to the plaintiff’s motion.

[21] In response to the conditions of Robertson J., the defendants, with consent of the plaintiff, today filed:

(a) Correspondence from the Accountant dated August 28, 2015 [exhibit 2]. The Accountant therein states he received responses to his July 29, list of questions on August 21, 2015. The accountant states he expects to provide a final draft of its report by September 10, 2015. The Accountant states that his draft report should be ready by mid-September, but cannot be finalized until he examines the defendants’ original documents as only scanned documents were sent by the defendants. The preliminary opinion of the Accountant is that the $65,000 expenses claimed by the defendants from the tenant may require an adjustment of approximately $17,000.

(b) Correspondence from defence counsel which states that there is no license requirements for the installation of acrylic stucco and encloses payment of the cost ordered by Robertson J.

(c) An unsigned and undated statement from Joe Vallati stating the demolition of the old stucco, application of insulation and installation of new stucco, is to be completed by September 3, 2015.

(d) Two plumbing invoices which state that pursuant to its inspection to determine the cause of water leaking through the ceiling into the plaintiff’s restaurant, the plumber replaced the wax seal underneath the toilet and replaced the shower in the apartment above the plaintiff’s restaurant. One of the invoices state that, although not an expert on the subject, the plumber did not notice any signs of mould in carrying out the above work. [(b) to (d) combined are Exhibit 3].

[22] In relation to the August 26, 2015 order of Robertson J.:

(a) Mould is not a new issue between the parties.

(b) Mould remediation work, as addressed in the order of Robertson J., has not been carried out. It appears the defendants have no intention of doing such work and as such, exhibits 2 and 3 are silent as to mould.

(c) The defendants saw no need to obtain an expert’s opinion that there is no mould under the apartment floor above the restaurant. The defendants did not ask a mould expert to seek permission to speak with the plaintiff about or examine the inside of the restaurant to determine whether mould existed therein. The Court for that reason has no evidence indicating that this portion of Robertson J.’s endorsement was incorrect.

(d) For the above reasons, this Court has not been provided with the scope of work, the name of contractor, the license and the timeline to carry out the “mould remediation” work.

(e) The name of the contractor(s) removing the old stucco, installing insulation, and installing the new stucco has not been provided.

Breaches of Prior Orders

[23] The evidence establishes the following breaches by the defendants of prior Orders in this proceeding.

[24] Contrary to the April 17, 2015 Order, the defendants have failed to provide the plaintiff with:

(a) A copy of the documents the defendants provided to the Accountant; and

(b) An index of the documents the defendants provided to the Accountant.

[25] Contrary to the December 13, 2013 Order, the defendants entered the leased premises without prior notice and without the plaintiff being present to cut off power and remove the plaintiff’s surveillance camera in the premises, on March 19 and December 23, 2014.

[26] Contrary to the June 21, 2013 consent Order that remedial work be completed by July 30, 2013. Such work was not completed by April 16, 2014, resulting in the April 16, 2014 court appointment of Servicemaster to complete the same. Exhibit 3 establishes that the building stucco façade work is currently “scheduled” to be completed by September 3, 2015.

[27] As of August 11, 2015, the defendants continued their refusal and delay to provide the Accountant with documentation to perform its cost determination, as ordered on June 26, 2014.

[28] The defendants failed to provide their reasons for disputing the Servicemaster account, as ordered on February 23, 2015.

[29] The defendants refused to pay the account of Servicemaster by April 24, 2015, as ordered on April 17, 2015.

Conclusion

[30] Contempt and striking a pleading are separate remedies sought in this motion. The latter has been granted. The defendants are incorrect that this is only a contempt motion.

[31] Disputed claims should be decided upon evidence and representations of both parties. The rules of the court and jurisprudence impact that goal in unusual cases.

[32] The defendants are free to decide how they will conduct business. There are potential legal consequences however as to their contractual obligations and the manner or non-performance thereof.

[33] The defendants have extended their intransigence and delay towards their tenant, into this proceeding and regarding court Orders herein.

[34] Compliance with court Orders, including the conditions of the August 26, 2015 adjournment, is not optional. The defendants’ repeated non-compliance of court Orders demonstrates their disregard of the legal process.

[35] The defendants’ above conduct over 28 months necessitating repeated court attendances in a case managed proceeding to address a relatively limited commercial dispute constitutes an unacceptable expenditure of limited public and judicial resources.

[36] The plaintiff’s listing of the above procedural rules relied upon in this motion, omits to include R. 60.12. That is not determinative of the court’s jurisdiction. The notice of motion is clear that the plaintiff seeks to strike the Statement of Defence because of the defendants’ conduct in breaching numerous interlocutory court Orders. The remedies for those breaches are presented in the motion in support of seeking several remedies, only one of which was argued.

[37] The court is required to control its process and not allow parties to manipulate a proceeding to delay or defeat the adjudication of claims.

[38] This is an instance, reluctantly, where the pleading of a party should be struck. The Statement of Defence is struck on the authority of R.34.15(1), R.60.12(b), R.3.04(4) and Vacca v. Banks, 2005 CarswellOnt 146, [2005] O.J. No 147 (Div. Ct.) at paras 23-28; aff’d 2004 CarswellOnt 6722 (Master).

[39] This proceeding shall continue to an undefended trial.

[40] The plaintiff’s request to adjourn the other heads of relief in this motion is denied.

[41] The Notice of Motion is dated May 20, 2015. There are subsequent Orders scheduling its argument. There has been sufficient time to comply with the Rules of Civil Procedure.

[42] A contempt motion under R. 60.11(2) must be served personally or alternatively, if permitted. Neither of those requirements occurred.

[43] The affidavit seeking the Order of contempt must, as to the deponent’s information and belief, be limited to non-contentious facts under R. 60.11 (3). The plaintiff’s affidavit is not so limited.

[44] The balance of this motion is accordingly dismissed, without costs to the plaintiff as to relief sought beyond striking the statement of defence.

Costs

[45] Any party seeking costs shall submit brief written argument within 30 days from the date of this decision. Any written opposition thereto is due 20 days thereafter. Any reply to that opposition is due within 10 days thereafter.

Kane J.

Released: September 15, 2015

COURT FILE NO.: 13-57301

DATE: 2015/09/15

ONTARIO

SUPERIOR COURT OF JUSTICE

RE: 1860035 ONTARIO LTD, Plaintiff

AND

VELIKA REALTY INC. and AHMED ABOU-GABAL, Defendants

BEFORE: Justice Paul Kane

COUNSEL:
Craig O’Brien, for the Plaintiff

Christopher S. Spiteri, for the Defendants

ENDORSEMENT

Kane J.

Released: September 15, 2015