Court File and Parties

COURT FILE NO.: CV-15-11187-00CL DATE: 20170630 SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

B E T W E E N:

Khashayar Khavari and Mohammad Mahdi Tajbakhsh Plaintiffs/Defendants by Counterclaim

– And –

Sam Mizrahi, Michal Renee Mizrahi, Ziba Mizrahi, Mizrahi Enterprises Inc., Mizrahi Inc., 133 Hazelton Inc. (Corp No: 2289816), 133 Hazelton Inc. (Corp No: 1895309), 133 Hazelton Inc. (Corp No: 1927750), 1834369 Ontario Inc., Soaring Mizrahi Developments Inc., Mizrahi Development Group (131 Hazelton ) Inc., Mizrahi Development Group (133 Hazelton) Inc., One8One Davenport Inc. (Corp No: 2325793), One8One Davenport Inc. (Corp No: 1912202), One8One Davenport Inc. (Corp No: 1927751), Mizrahi Soaring Developments Inc., Mizrahi Development Group (145 Davenport) Inc., Mizrahi Development Group (185 Davenport) Inc., Unimax International Ltd., 129 Hazelton Inc., Mizrahi Development Group (The One) Inc., Mizrahi Residential (The One) GP Inc., Mizrahi Commercial (The One) GP Inc., Sam M Inc., S. & Z. Mizrahi Investment Ltd., Mizrahi (128 Hazelton) Inc., Mizrahi Development Group (1451 Wellington) Inc., Mizrahi Khalili Inc., Mizrahi (C-GMSO) Inc., and Northern Citadel Capital Inc. Defendants/Plaintiffs by Counterclaim

– And –

Mahmoud Reza Khavari, Khahayar Khavari, Mohammad Mahdi Tajbakhsh, Ardavan Khavari, Nicholas Tyacke, Vria Investment Ltd., Mandana Khalili Shavarini, Parandis Khalili Khavari Tajbakhsh and Aylar Moussavi Defendants to the Counterclaim

BEFORE: L. A. Pattillo J.

COUNSEL: Matthew M. A. Stroh, for Ardavan Khavari, Aylar Moussavi and Vria Investment Ltd., Defendants to the Counterclaim/Moving Parties Lawrence E. Thacker and Chris Kinnear-Hunter for the Respondents/Plaintiffs by Counterclaim

HEARD April 20, 2017

Endorsement

Introduction

[1] The defendants by counterclaim, Ardavan Khavari (“Ardavan”), Aylar Moussavi (“Aylar”) and Vria Investments Limited (“Vria”) (collectively the “Vria Parties”) move to strike the Fresh as Amended Statement of Defence and Counterclaim (the “Amended Defence and Counterclaim”) as against them pursuant to r. 21.01(1)(b) (discloses no reasonable cause of action) and r. 25.11 (frivolous, vexatious and an abuse of process) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”).

[2] The plaintiffs’ action (the “Action”) is an oppression claim against, among others, the defendants Sam Mizrahi (“Mizrahi”), Michal Renee Mizrahi, Ziba Mizrahi, Mizrahi Enterprises Inc., Mizrahi Inc., 129 Hazelton Inc., Mizrahi Development Group (The One) Inc., Mizrahi Residential (The One) GP Inc., Mizrahi Commercial (The One) GP Inc., Sam M. Inc., S.& Z. Mizrahi Investment Ltd., Mizrahi (128 Hazelton) Inc., Mizrahi Development Group (1451 Wellington) Inc. and Mizrahi (C-GMS0) Inc. (collectively the “Mizrahi Parties”).

[3] The Action arises out of the plaintiffs’ involvement with Mizrahi in the development of two residential condominiums located at 133 Hazelton Avenue and 181 Davenport Road in the City of Toronto and the subsequent termination of their relationship.

[4] For the reasons that follow, I dismiss the Vria Parties motion. The Vria Parties motion which concerns irregularities in the Amended Defence and Counterclaim has not been brought promptly. More importantly, however, it is barred given that the Vria Parties have already filed a defence to the Mizrahi Parties’ original statement of defence and counterclaim (the “Defence and Counterclaim”). The Amended Defence and Counterclaim raises no new causes of action from those pleaded in the Defence and Counterclaim.

Discussion

[5] The Defence and Counterclaim and the Amended Defence and Counterclaim plead 14 causes of action against the defendants to the counterclaim: conspiracy; abuse of process; breach of contract; breach of duty of good faith; negligence; fraudulent misrepresentation; negligent misrepresentation; conversion; unjust enrichment; intimidation; tortious interference with economic relations; conspiracy to cause economic harm; intrusion upon seclusion; and defamation.

[6] The Mizrahi Parties filed the Defence and Counterclaim on February 23, 2016. On March 29, 2016, the Vria Parties filed a statement of defence to the Counterclaim (the “Defence”) and advanced a separate counterclaim against the defendant Unimax and certain of the Mizrahi Parties for, among other things, breach of a loan agreement.

[7] The Defence specifically pleaded to and joined issue with each of the causes of action asserted against them in the Counterclaim.

[8] On August 17, 2016, the plaintiffs issued a Fresh as Amended Statement of Claim in the Action. In response, and pursuant to r. 26.02(a), the Mizrahi Parties issued the Amended Defence and Counterclaim.

[9] When compared with the Defence and Counterclaim, it is apparent that the changes in the Amended Defence and Counterclaim primarily involve some consolidation of paragraphs, the pleading of further particulars (including events that have occurred since the commencement of the Action) and wording changes to make the pleading more readable. There is no substantive change to the causes of action pleaded in the Amended Defence and Counterclaim when compared to the causes of action pleaded in the Defence and Counterclaim. If anything, the causes of action in the Amended Defence and Counterclaim are now more particularized.

[10] Nor is there any new cause of action alleged in the Amended Defence and Counterclaim from the causes of action pleaded in the Defence and Counterclaim.

[11] Rule 2.02 bars any challenge to a pleading for irregularity if the moving party has taken a further step in the proceeding with knowledge of the irregularity. Further, an allegation that a statement of claim (or counterclaim) fails to disclose a cause of action is an allegation that the claim is irregular.

[12] As noted, rather than bringing a motion to attack the causes of action pleaded against them by the Mizrahi Parties in the Defence and Counterclaim, the Vria Parties filed a defence to it. I agree with the statement by D. Brown J. (as he then was) in Bell v. Booth Centennial Healthcare Line Services, [2006] O.J. No. 4646 (SCJ) at para. 6, that the filing of a statement of defence signifies that the claim contains recognizable causes of action to which the defendant can respond and should prevent a defendant from complaining subsequently about an irregularity in the statement of claim. See too: Canadian National Railway v. Holmes, 2014 ONSC 2914 (SCJ) at para. 28.

[13] In my view, the above principle is equally applicable in circumstances such as the present where the amendments to the Defence and Counterclaim do not assert any new causes of action, but only further particularize the claims. Otherwise pleadings motions could continue indefinitely.

[14] The time for the Vria Parties to have moved to strike the Counterclaim was following service of the Mizrahi Parties Defence and Counterclaim on February 23, 2016. By electing to file their defence to the Defence and Counterclaim, they have joined issue with the causes of action pleaded and are barred from now bringing this motion. The fact that the Mizrahi Parties have subsequently amended the Defence and Counterclaim does not assist the Vria Parties, having regard to the nature of the amendments.

[15] I am also of the view that the Vria Parties’ motion should be dismissed on the basis that it has not been made promptly.

[16] Rule 21.01 provides that the Court “may” make an order. The power is discretionary. A motion pursuant to r. 21.01 must be made promptly. As stated in Fleet Street Financial Corp. v. Levinson, [2003] O.J. No. 441 (SCJ), at para. 17: “The obligation to act promptly is clear and the failure to bring a rule 21.01 motion promptly can, in the appropriate circumstances, be the basis for the judge exercising his discretion pursuant to rule 21.01 not to grant the relief sought.”

[17] The Vria Parties have had the Defence and Counterclaim since February 2016. In addition to not initially moving under r. 21.01 but rather filing the Defence, the Vria Parties have caused further delay by their actions. The Action is a complex commercial multi-party proceeding involving numerous counsel which is being actively case managed by the court. Rather than bring their motion on a timely basis, the Vria Parties delayed in bringing it until after the court has set a timetable for the documentary review and production process.

[18] In the circumstances, I would also not entertain the motion on account of the Vria Parties’ delay in bringing it.

[19] In light of the above conclusions dismissing the Vria Parties’ motion, I do not intend to address that Mizrahi Parties’ arguments that the Amended Defence and Counterclaim fully and specifically pleads the required elements for each of the 12 causes of action pleaded against the Vria Parties (there is no claim asserted against the Vria Parties for negligence and intrusion upon seclusion).

[20] The Vria Parties’ motion is therefore dismissed.

[21] The parties have agreed that the successful party shall receive costs of $10,000. In my view, having regard to the issues raised, that amount is fair and reasonable. Accordingly, costs to the Mizrahi Parties fixed at $10,000.00 in total.

L. A. Pattillo J. Date of Release: June 30, 2017