Court File and Parties

Court File No. CV-14-508860

SUPERIOR COURT OF JUSTICE

B E T W E E N:

2289878 ONTARIO INC.

Plaintiff

• and -

GOURMET GRINGOS LTD., TERRY NICOLAOU, LEONIDAS KARABELAS, ERIN BREE CATALA and KRYSTIAN CATALA

Defendants

RULING

BEFORE THE HONOURABLE JUSTICE F. KRISTJANSON

on September 26, 2016, at TORONTO, Ontario

APPEARANCES :

J. Silver Counsel for the plaintiff

D. Silver Agent for J. Vamvakidis for the defendants

Table of Contents

SUPERIOR COURT OF JUSTICE

Ruling 1

Legend

[sic] – Indicates preceding word has been reproduced verbatim and is not a transcription error. (ph) – indicates that a word was spelled phonetically.

Transcript Ordered: September 27, 2016

Transcript Completed: October 3, 2016

Ordering Party Notified: October 3, 2016

Ruling

MONDAY, SEPTEMBER 26, 2016

...SUBMISSIONS BY COUNSEL

RULING

KRISTJANSON, J : (Orally)

This is a motion brought by the moving defendants to set aside or vary the order of Master Haberman dated January 28th, 2016, as well as a motion pursuant to Rule 19.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to set aside the Registrar’s noting in default, default judgement and writs of seizure and sale registered against them. I note at the outset that this case does not reflect well on members of the legal profession. It is my hope that through today’s order this matter can get back on track.

I adopt the words of the Court of Appeal in Finlay v Van Paassen, (2010) ONCA 204, at para 33, that,

[O]n a motion to set aside a dismissal order, the court should be concerned primarily with the rights of the litigants, not with the conduct of their counsel... The law will not ordinarily allow an innocent client to suffer the irrevocable loss of the right to proceed by reason of the inadvertence of his or her solicitor.

I note as well that Rule 2.01(1) of the Rules of Civil Procedure provides that:

“A failure to comply with these rules is an irregularity,” and the court “may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters in dispute.”

Rule 1.04(1) of the Rules of Civil Procedure provides that:

“These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.”

Rule 1.04(1.1) of the Rules of Civil Procedure provides:

“In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved in the proceeding.”

The statement of claim in this matter was issued on July 22nd, 2014. This case involves all of the defendants except for Leonidas Karabelas, who is separately represented, and I will simply refer to the remaining defendants as the defendants. Their statement of defence and counterclaim was filed on August 25th, 2014 and a reply and defence to counterclaim in September 2014.

In February 2015, the plaintiff brought a motion regarding a discovery plan, returnable May 6th. At that time the defendants were represented by a lawyer, Mr. Grossi, who on the evidence had failed to respond to numerous requests by the plaintiffs for a discovery plan. However, the defendants retained new counsel. The moving defendants retained Mr. Vamvakidis on May 5th, 2015.

In light of this new retainer Mr. Vamvakidis requested an adjournment from Mr. Jeffrey Silver who refused to grant the adjournment. A consent order was obtained the next day before Master Graham.

There were a number of subsequent orders obtained before a variety of Masters relating to both the discovery plan and to affidavits of documents. There were also cost orders, which were not paid in a timely manner in accordance with the orders. I will not go into the details here, as this matter relates to an attendance scheduled for January 12th, 2016, after a number of orders had been taken out and not complied with. However, the defendants’ solicitor was supposed to attend before Master Haberman on January 12th, 2016. The defendants’ counsel was late in that attendance.

It is uncontested that Mr. Vamvakidis arrived at court just before 11 a.m. on January 12th. He was travelling from Stouffville and his affidavit evidence is that he was delayed due to poor weather conditions caused by about eight centimetres of snow fall.

When he arrived at court he saw Mr. Jeffrey Silver outside the courtroom and asked that he accompany Mr. Vamvakidis back into the courtroom to speak to the matter. With Mr. Jeffrey Silver present, Mr. Vamvakidis attempted to explain to Master Haberman the reasons for the delay. Master Haberman was not prepared to hear from him and indicated that she had already ruled on the motion, striking out the defendants’ statement of defence and dismissing the counterclaim. It is that attendance and the written reasons dated January 28th, 2016, which form the basis of this proceeding.

The decision of January 12th issued with a failure of natural justice, in that both parties were not heard due to the inadvertence of the solicitor who arrived late by mistake. There is clear affidavit evidence on this point.

The defendants had a continuing intention to defend, and indeed throughout the fall had continued to deliver further and better affidavits of documents and continued to pay costs orders, although they did appear to not have fully complied. However, none of this was properly argued before Master Haberman, given the failure of the defendants’ counsel, Mr. Vamvakidis, to attend.

Following this, Mr. Vamvakidis advised LawPRO of his failure to attend. LawPRO appointed Koskie Minsky to appear on behalf of the moving defendants to bring a motion to set aside the order of Master Haberman.

On February 26th the lawyer appointed by LawPRO advised Mr. Jeffrey Silver by letter that Koskie Minsky and Mr. David Silver had been retained by LawPRO to bring a motion on behalf of Mr. Vamvakidis to set aside Master Haberman’s decision of January 28th, 2016, and canvassing dates.

Mr. Jeffrey Silver clearly received that letter because he wrote back on the same day, February 26th, 2016, advising that he was unavailable on the proposed dates. He advised further that two hours was insufficient as Master Haberman’s decision had been based on the previous motions and attendances, which numbered six attendances, and asked for a further estimate on timing once Mr. David Silver had the opportunity to review the materials going back to May of 2015. That was on February 26th.

Mr. Jeffrey Silver was actively engaged in correspondence with counsel for LawPRO, who had informed him that they would be bringing a motion to set aside Master Haberman’s order. Notwithstanding this active correspondence, on March 1st, 2016, Mr. Jeffrey Silver, on behalf of his client noted the defendants in default, then requisitioned default judgement from the Registrar and certified that this was appropriate for a Registrar’s default judgement, as it was a debt or liquidated demand in money.

The noting in default, followed by a requisition for default judgement of March 7th, 2016, were obtained by Mr. Silver following an exchange of correspondence with Mr. David Silver. However, Mr. Jeffrey Silver did not advise Mr. David Silver that the parties had been noted in default and default judgement had been obtained, despite correspondence February 26th, further correspondence March 9th, further correspondence March 10th, further correspondence May 4th. The counsel for the defendants did not discover the noting in default until approximately May 4th, 2016.

A letter on May 4th, 2016 from David Silver, for the defendants, to Mr. Jeffrey Silver noted that it was in the search of a court file, during the course of preparing motion materials, that they found out that the plaintiff, without notice, had requisitioned default judgement March 7th and obtained default judgement on March 17th. Mr. David Silver indicated this was most concerning given the correspondence of February 26th and that during the period of time contemporaneous with exchange of emails to canvas dates, the plaintiff had obtained default judgement. I note further that the plaintiff further proceeded to obtain writs of seizure and sale in respect of all the moving defendants. On May 6th, 2016, the moving defendants served this notice of motion.

This action by Mr. Jeffrey Silver was not acceptable conduct by counsel. I note that the Consolidated Practice Direction for Civil Actions, Applications, Motions and Procedural Matters in the Toronto Region encourages parties to refer to the Guide Concerning Best Practices for Civil Actions, Applications and Motions in the Toronto Region. The Guide, which is on the Superior Court’s website, describes the practices the court encourages both counsel and self-represented parties to use. Part II of the Best Practices Guide deals with “Co-operation and Civility Between Counsel and Between Counsel and Self-Represented Parties.”

Section 3 of the Best Practices Guide provides,

The court expects counsel to conduct applications and motions having regard to the Principles of Professionalism for Advocates and Principles of Civility for Advocates published by The Advocates’ Society.

It references the URL for that publication, which is available through the Superior Court’s website.

I note in particular under the heading “Conduct That Undermines Cooperation Among Advocates” in the Principles of Civility, item 17,

Advocates should avoid sharp practise. They should not take advantage of, or act without fair warning to opposing counsel, upon slips, irregularities, mistakes or inadvertence.

I note as well paragraph 19,

Subject to the Rules of Practice, advocates should not cause any default or dismissal to be entered without first notifying opposing counsel, assuming the identity of opposing counsel is known.

In terms of default judgement, that default judgement was clearly obtained by plaintiff’s counsel when he was in live correspondence with the LawPRO appointed lawyer for the defendants.

I follow the Court of Appeal in Male v. Business Solutions Group, 2013 ONCA 382, a decision by the court. The court in that case set aside default judgement, “as a matter of justice without an inquiry into the merits of the defence” for two reasons which I rely on here. The court said that the motion’s judge had failed to take into account that the defendants were actively defending the case, as is clearly the same here. The defendants were actively defending the case and the defendants were, and had advised the plaintiff, bringing a motion to set aside that order.

And secondly, the Court of Appeal said at para 18:

[I]n the circumstances of this case, it was unreasonable for counsel for the respondent to have noted the appellants in default and to have pursued default judgement without notice to appellants’ counsel, with whom he was actively engaged, when he knew that the appellants were defending.

The Court of Appeal also relied on the Principles of Civility, section 19 that no noting in default or dismissal should be entered “without first notifying opposing counsel.”

So for those reasons I set aside the noting in default, the default judgement, and the writs of seizure and sale and anything associated with that improper obtaining of default judgment.

Turning then to whether or not the order of Justice Haberman should be set aside in accordance with Rule 37.14(1)(b) of the Rules of Civil Procedure. Sorry 37.14 sub - I have to find it.

MR. SILVER: It is B, Your Honour.

THE COURT: Huh?

MR. SILVER: It is B.

THE COURT: Okay. I think it’s sub (2) sub (b), perhaps.

MR. SILVER: No, it’s 1 – it’s (1)(b) I believe.

THE COURT: (1)(b).

MR. SILVER: Yeah.

THE COURT: (1)(b).

MR. J. SILVER: It’s 37.14(1)(b)...

THE COURT: Yes.

MR. J. SILVER: ...and in 37.14(2), which is the....

THE COURT: Okay.

MR. J. SILVER: To set aside...

THE COURT: So that’s the order with respect to Rule 37.14(1)(b) that the party may move to set aside or vary an order with respect to a party or person who “fails to appear on a motion through accident, mistake or insufficient notice.” Under Rule 37.14(2), I “may set aside or vary the order on such terms that are just.”

In respect of this I adopt a contextual approach to this question as set out in Ontario (Attorney General) v. 15 Johnswood Crescent Inc., a decision of Justice Strathy of the Superior Court, as he then was.

I note that para 29 states:

The purpose of Rule 37.14(1)(b) is to prevent unfairness or, worse, a miscarriage of justice, where a party’s inadvertence or the absence of sufficient notice has resulted in an an order being obtained without that party being afforded an opportunity to present his or her case. A party who does not appear in these circumstances will usually be given a chance to present evidence and to argue the motion on its merits, assuming that he or she moves promptly and provided there are no countervailing considerations.

A contextual approach considering all relevant factors with the view to balancing the interests of the parties is preferred when considering issues. I have considered the factors set out in paragraph 34 of the 15 Johnswood Crescent Inc. case.

First, I accept that the moving party has established that Mr. Vamvakidis did not appear through accident or mistake. He has filed affidavit evidence to this regard, in relation to being late because of the snow on his commute for Stouffville.

On factor number two, I have considered that the moving defendants did move forthwith after the order came to their attention. In this regard the reasons are delivered on January

MR. SILVER: 28th.

THE COURT: 28th. During that period in time Mr. Vamvakidis would have reported himself to LawPRO, and LawPRO appointed Koskie Minsky. Koskie Minsky took steps and informed Mr. Jeffrey Silver very clearly, on February 26th, they would be moving to set aside the order.

In terms of the length of the delay and the reasons for it there is affidavit evidence in the defendants’ motion record, including that of the process server, in terms of having difficulties locating all matters in the court file. There is also significant affidavit evidence here, filed by both parties.

In terms of the presence or absence of prejudice, in this case the order, which was obtained without the attendance of the lawyer for the defendants, finally determines and dismisses their defence and counterclaim; it is not an interlocutory order. So that is a compete loss of a chance to proceed on the merits and to defend themselves. But on the other side, I appreciate that there have been numerous attendances when the parties were represented by previous lawyers for the defendants and while orders of costs have been made, there has been delay.

MR. J. SILVER: From compliance delay.

THE COURT: Have been made, cost orders generally on a partial indemnity basis not fully satisfied.

I understand that those cost orders now have been brought to date.

Given the ultimate severity with respect to the defendants, and the lack of prejudice and certainly the lack of direct evidence of any prejudice because there is no affidavit filed by the plaintiff, in this the severity of the prejudice to the defendants moves me to find this factor weighs in their favour.

Finally, I briefly consider the underlining merits of the moving party’s case. In this case because the order had the effect of ending their defence, I look at the defence; I determine there is an air of reality. There is affidavit evidence filed by the moving parties with respect to a $65,000 fixed price contract, rather than the $102,000 decision that was obtained by way of default. I note that the plaintiff did not file any responding evidence and did not cross-examine on this point. I also note that the defendants throughout were represented by counsel. The defendants were entitled to rely upon their counsel to take appropriate steps to defend. Many of the procedural orders relate to procedural failures, such as the failure to properly list documents or late filing of inadequate materials.

Counsel for the defendants has accepted responsibility for issues leading to the order in January.

So on a contextual basis, evaluating all of the factors, having reviewed all of the affidavit evidence and having received submissions from counsel, I am of the view that while timely justice and obedience to procedural orders are important principles, there is also a general principle that the trial of actionable wrongs shouldn’t be defeated by procedural irregularities. In this matter, given the breach of natural justice caused by the inadvertence or mistake of Mr. Vamvakidis in failing to attend, and considering all the other contextual factors I’ve just reviewed, I find it is fair and just to set aside the order of Master Haberman.

Turning then to the terms of the order, I have concluded that the order dismissing the action should be set aside, but on strict terms. First, Koskie Minsky is here today as LawPRO counsel. They have indicated that the defendants are considering the retainer of new counsel. First and foremost, new counsel is to be appointed without delay by the defendants.

The defendants are directed to comply with all outstanding orders which have not been appealed from. This does not include the order of Master Haberman on January 28th, but it does refer to all prior orders.

Thirdly, the new counsel must regularize the status of this file and as a result no motions to be brought by the plaintiff in relation to either enforcement of the earlier orders, any other procedural order, no motions of any kind for a period of 60 days from today, to allow the defendants time to regularize this matter.

And that is my ruling on the motion.

Costs

Both the plaintiff and the defendants seek their costs in this matter. The plaintiff seeks it on the grounds that, at least with respect to the setting aside of Master Haberman’s order, that it is being granted because of lawyer misconduct, defendants come with dirty hands, or Master Haberman ought not to have proceeded in the way that she did.

On the other hand, the counsel for the moving defendants seeks costs on the normal basis that cost follow success of the moving party. The party that succeeds is entitled to costs. Counsel for the moving defendants submits that they should be entitled to substantial indemnity costs given that the majority of the work involved setting aside the default judgement, but acknowledges a discount of 30 percent might be appropriate such that no costs be awarded in relation to the Rule 37.14 matter.

The fixing of costs is a discretionary decision under section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. That discretion is generally to be exercised in accordance with the factors listed in Rule 57.01 of the Rules of Civil Procedure. These include the principle of indemnity for the successful party; the expectations of the unsuccessful party; the amount claimed and the amount recovered; the apportionment of liability; the importance of the issues; complexity; conduct of the parties; whether steps were improper, vexatious, or unnecessary; a party’s denial or a refusal to admit anything that should have been admitted.

Overall, the court is required to consider what is fair and reasonable in fixing costs and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice. Boucher v. Public Accountants Council for the Province of Ontario at paragraphs 26 and 37.

In addition, in applying these rules, Rule 1.04(1.1) provides that, “The court shall make orders and give directions that are proportionate to the importance and complexity of the issues and the amount involved in the proceeding.” And the principle of proportionality thus informs the balancing of interests in deciding whether an award of costs is fair and reasonable.

It is clear to me that it is the conduct of solicitor Jeffrey Silver, both in noting in default, obtaining the writs of seizure and sale, and then in failing to consent to its setting aside that has caused a great deal of the costs. All of those costs should be paid by the plaintiff.

On the other hand the Rule 37.14 setting aside, the defendants were successful on that, but it was caused by the inadvertence or mistake of their counsel at the time, in failing to attend. As a result, I would discount the claim made by the counsel for the moving defendants.

Taking into account all factors, the submissions of the parties and determining what is fair and reasonable in the circumstances, I find that it is fair and reasonable to award the sum of $15,000 in costs, inclusive of taxes and disbursements to the defendants, payable within 30 days by the plaintiff.

...EXCERPT COMPLETED

Certificate of Transcript

FORM 2

CERTIFICATE OF TRANSCRIPT Evidence Act, Subsection 5(2)

I, Tiffany Hewson, certify that this document is a true and accurate transcript of the recording of 2289878 Ontario Ltd v Gourmet Gringos Ltd et al. in the Superior Court of Justice Small Claims Court held at 393 University Avenue, Toronto, Ontario taken from Recording(s) 4899_803_20160926_111533__10_KRISTJF, which has been certified in Form 1 by Jacob Lahartinger.

(Date)

(Signature of authorized person)

This certification does not apply to (i.e. Rulings, Reasons for Judgment, Reasons for Sentence, Charge), which was/were judicially edited.