COURT FILE NO.: CV-15-2933-00
DATE: 2017-08-10
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
DARIA SULAIMAN
Joseph Irving, for the Plaintiff
Plaintiff
- and -
RENATA MIELCZAREK, ALEKSANDRA MIELCZAREK, and JAMES WILLIAM SINCLAIR
Self-Represented
Defendants
HEARD: August 9, 2017, at Brampton, Ontario
Price J.
Reasons For Order
OVERVIEW
[1] Renata Mielczarek (“Ms. Mielczarek”), is a shareholder of Oko Blu Mediterranean Restaurant and Lounge Inc., operating a restaurant under the name Oko Blu (“Oko Blu #1). In 2015, she applied to the court for a remedy under section 248 of the Business Corporations Act as an oppressed shareholder. She alleged that two brothers, Hanna Eid and Issa Eid, had become 50% shareholders of Oko Blu and had conspired with each other and with others to remove her from the business and deprive her of the value of her shares.
[2] On September 16, 2013, Justice Miller found that Hanna Eid and Issa Eid had oppressed Ms. Mielczarek. It ordered that the shares of Oko Blu be valued and that the respondents buy Ms. Mielczarek’s 50% shares, failing which the respondents’ shares would be transferred to her.
[3] Ms. Mielczarek asserts that the respondents breached Justice Miller’s Order by transferring the assets of the business to a new corporation with a similar name that was established for the purpose, by faking the bankruptcy of the original corporation and causing the landlord to transfer the lease and causing the original corporation to transfer its assets to the new corporation. The respondents then established a third corporation to operate the banquet hall, the most profitable part of the original corporation’s business, and refused the valuator access to the records of that business on the basis that it was now owned by a different corporation than was the subject of the December Order.
[4] On December 4, 2014, this Court appointed a Supervisor of the new corporation and ordered that no shares be issued by it and none of its assets be sold until the issues in the proceeding were determined. The respondents appealed from that Order unsuccessfully to the Divisional Court.
[5] Dalia Sulaiman commenced an action against Ms. Mielczarek, her daughter Aleksandra Mielczarek, and James Sinclair, for causing a security interest for an assignment of book debts that was never, in fact, made to Ms. Mielczarek to be registered under the Personal Property Security Act in September 2014. Ms. Sulaiman asserts that she discovered the registration in March 2015, when financing the purchase of a new home, and that as a result of the registration, which Ms. Mielczarek says was removed two days after Ms. Sulaiman complained to her, the Bank charged her a penalty of $15,000. As a result, Ms. Sulaiman claims damages of $340,000, including punitive and exemplary damages.
[6] Ms. Mielczarek characterizes Ms. Sulaiman’s action against her and her daughter as a form of bullying or intimidation in retaliation for Ms. Mielczarek’s oppression application. She moves to consolidate the two proceedings and asserts in her supporting affidavit that she registered the security interest to ensure that she was notified of any effort by Ms. Sulaiman to sell assets which might be in breach of Justice Miller’s Order
BACKGROUND FACTS
[7] Renata Mielczarek (“Ms. Mielczarek”), is a shareholder of Oko Blu Mediterranean Restaurant and Lounge Inc., operating a restaurant under the name Oko Blu (“Oko Blu #1). In 2015, she applied to the court in Court File No. CV-13-1432-00 for a remedy under section 248 of the Business Corporations Act as an oppressed shareholder. She alleged that two brothers, Hanna Eid and Issa Eid, had become 50% shareholders of Oko Blu #1 and had conspired with each other and with others to remove her from the business and deprive her of the value of her shares. Renata Mielczarek assigned her actions to her daughter, Aleksandra Mielczarek, as Aleksandra is more fluent in English than her mother.
[8] On September 16, 2013, Justice Miller heard Ms. Mielczarek’s application. She found that Hanna Eid and Issa Eid had oppressed Ms. Mielczarek as a shareholder of Oko Blu #1. She ordered Ms. Mielczarek to retain a Chartered Business Valuator (CBV) to give an opinion as to the fair market value of her shares of Oko Blu #1, ordered the respondents to give the CBV access to the records of Oko Blu #1, pay for the costs of the CBV, and not interfere or obstruct the CBV, and that, upon receipt of the CBV’s opinion, the respondents were to purchase Ms. Mielczarek’s 50% interest in Oko Blu #1, failing which their shares were to be transferred to Ms. Mielczarek. She further ordered that the Shareholder Agreement of Oko Blu #1 be terminated and ordered the respondents to jointly and severally indemnify Ms. Mielczarek for certain liabilities, and granted leave to Ms. Mielczarek to return the matter to Court for a determination of an amount of compensation for the oppression.
[9] Ms. Mielczarek asserts that Hanna Eid and Issa Eid breached Justice Miller’s Order by refusing to provide information to the CBV, thereby preventing him from determining the value of Oko Blu #1, and conspired to transfer the business of Oko Blu #1 to new corporations, by the following means:
a) Dalia Sulaiman, the sister of the then fiancée of Hanna Eid, incorporated a new Ontario corporation, Oko Blue Lounge Inc. (“Oko Blu #2”), of which Dalia Sulaiman held 50% of the shares and Hanna Eid and Issa Eid each held 25% of the shares;
b) The respondents caused Oko Blu #1 to default in its obligations to its landlord, thereby causing the landlord to transfer Oko Blu #1’s lease to Oko Blu #2. Dalia Sulaiman’s father, Ameer Sulaiman, furthered the conspiracy by paying $5,000 to the bailiff and $15,000 to the landlord’s representative to transfer the lease, previously held by Oko Blu #1, and the assets of Oko Blu #1, to Oko Blu #2.
c) The respondents then changed the corporate name of Oko Blu #2 to Le Royal Resto & Lounge Inc. (“Oko Blu #3”).
d) Dalia Sulaiman and Ameer Sulaiman’s friend, Barwa Rashid, then incorporated another corporation, Le Royal Lux Inc. (“Oko Blu #4”), which became the lessee for the banquet hall, being the more profitable part of the premises formerly operated by Oko Blu #1.
[10] This Court head a further motion by Ms. Mielczarek on December 4, 2014, and ordered the following:
a) That the issues of Hanna Eid’s and Issa Eid’s liability, and the ownership of the common shares of Oko Blu #3 be adjourned to a long motion to be heard on April 23, 2015, and a timetable was established for that motion, and this Court seized itself of the matter;
b) That no shares of Oko Blu #3 be issued, nor assets of that company be sold until the final disposition of the matter;
c) That Dalia Sulaiman, Ameer Sulaiman, and Oko Blu #3 be added as respondents to the proceeding.
d) That Paddon + Yorke Inc. be appointed as Supervisor of Oko Blu #3;
e) That costs be reserved to the hearing of the motion.
[11] As a result of the above-mentioned actions, Ms. Mielczarek made a further application to the court in Court File No. CV-15-0103-00 against Hanna Eid, Issa Eid, Le Royal Lux Inc., Le Royal Resto & Lounge Inc., Oko Blu Mediterranean Restaurant and Lounge Inc., Barwa Rashid, Dalia Sulaiman, and Ameer Sulaiman. On May 25, 2016, this Court made an Order consolidating Court File No. CV-13-1432-00 and Court File No. CV-15-0103-00.
[12] On June 25, 2015, Dalia Sulaiman commenced an action against Ms. Mielczarek, her daughter Aleksandra Mielczarek, and James Sinclair, as Court File Number CV-15-2933-00, for causing a security interest for an assignment of book debts that was never, in fact, made to Ms. Mielczarek to be registered under the Personal Property Security Act in September 2014. Ms. Sulaiman asserts that she discovered the registration in March 2015, when financing the purchase of a new home, and that as a result, of the registration, which Ms. Mielczarek says was removed two days after Ms. Sulaiman complained to her, the Bank charged her a penalty of $15,000. As a result, Ms. Sulaiman claims damages of $340,000, including punitive and exemplary damages.
[13] Ms. Mielczarek characterizes Ms. Sulaiman’s action against her and her daughter as a form of bullying or intimidation in retaliation for Ms. Mielczarek’s oppression application. On May 24, 2017, Ms. Mielczarek moved to consolidate Court File Number CV-15-2933 and the consolidated court files CV-13-1432-00 and CV-15-0103-00. She asserts in her supporting affidavit that she registered the security interest to ensure that she was notified of any effort by Ms. Suleiman to sell assets of Oko Blu #1 or its successors which might be in breach of Justice Miller’s Order.
ISSUES
[14] The court must determine whether it is appropriate to consolidate Dalia Sulaiman’s action against Ms. Mielczarek, her daughter Aleksandra, and Mr. Sinclair arising from the registration under the P.P.S.A. with Ms. Mielczarek’s consolidated proceedings against Ms. Sulaiman and others for oppression.
PARTIES’ POSITIONS
[15] Ms. Mielczarek argues that the proceedings should be consolidated because all of the proceedings arise from the same events involving the same parties, and there are over-lapping issues of fact and law among them.
[16] Ms. Sulaiman opposes a consolidation of the proceedings and argues that there are no over-lapping issues between her action and the consolidated oppression proceedings.
ANALYSIS AND EVIDENCE
Legislative Framework
[17] Where two or more proceedings are pending in court and the two proceedings have issues of fact and law in common, Rule 6.01 of the Rules of Civil Procedure provides that they may be consolidated. The Rule states:
6.01(1) Where two or more proceedings are pending in the court and it appears to the court that,
(a) they have a question of law or fact in common;
(b) the relief claimed in them arises out of the same transaction or occurrence or series of transactions or occurrences; or
(c) for any other reason an order ought to be made under this rule, the court may order that,
(d) the proceedings be consolidated, or heard at the same time or one immediately after the other; or
(e) any of the proceedings be,
(i) stayed until after the determination of any other of them, or
(ii) asserted by way of counterclaim in any other of them.[^1]
Jurisprudence
[18] Consolidation protects the scarce resources of the court and saves expense to the parties by avoiding a multiplicity of proceedings, safeguards fairness by preventing tactical decisions from subjecting a party to more than one action, and protects the administration of justice against the risk of inconsistent findings of fact or of law that would tend to bring the administration of justice into disrepute.[^2]
[19] Consolidation is appropriate where both proceedings arise from the same factual background.[^3] Consolidation is especially appropriate where it appears one of the proceedings may have been undertaken for tactical reasons to intimidate or discourage a litigant from continuing another proceeding in a manner that would amount to an abuse of process.[^4]
Applying the law to the facts of this case
[20] The Personal Property Security Act provides for a penalty for the registration of a security interest if such security should not have been registered. The penalty is the sum of $500.00 plus any damages, if the registration is not discharged within 10 days of the request for discharge. In the present case, the defendants assert that the discharge was registered within two business days of the receipt of the request for discharge.[^5]
[21] Ms. Sulaiman alleges that the Bank charged her a penalty of $15,000 as a result of the registration of the security interest. She claims damages in the amount of $340,000 against the defendants. I infer that the majority of damages claimed are for punitive and exemplary damages.
[22] Ms. Mielczarek submits that her purpose in registering the security interest was to prevent a breach of Justice Miller’s Order. When the Court asked Ms. Sulaiman’s counsel at the hearing whether Ms. Mielczarek’s motivation, as might be demonstrated by her oppression proceedings, was not relevant to Ms. Sulaiman’s claim for punitive damages, he asserted that a defendant’s motivation is not relevant to a claim for punitive damages. I disagree. In Whiten v. Pilot Insurance Co., (2002), Binnie J., speaking for the majority for the Supreme Court, stated that in considering the right of a plaintiff to recover punitive damages, relevant factors included whether the defendant’s misconduct was planned and deliberate and the intent and motive of the defendant.[^6]
[23] There is evidence, based on Ms. Mielczarek’s explanation for the registration, that the events that gave rise to Ms. Sulaiman’s action are the same events that gave rise to Ms. Mielczarek’s oppression application, and that consolidation is therefore justified under Rule 6.01(1)(b).
[24] Additionally, I find that there are overlapping issues of fact between Ms. Sulaiman’s action and Ms. Mielczarek’s application, in that whether Ms. Mielczarek’s motivation in registering the security interest was to protect her rights as a shareholder for which she seeks an oppression remedy and ensure the effectiveness of Justice Miller’s preservation order is relevant to the court’s determination of Ms. Sulaiman’s claim for punitive and exemplary damages, which appears to represent the majority of the damages she claims in her action. Consolidation is therefore justified under Rule 6.01(1)(a).
[25] Allowing Ms. Sulaiman’s action for damages arising from Ms. Mielczarek’s registration of a security interest under the PPSA to proceed separately from Ms. Mielczarek’s application for an oppression remedy could undermine the effectiveness of the latter proceeding, and give rise to a risk that Ms. Sulaiman would employ her action as a means of discouraging Ms. Mielczarek from protecting her rights as a shareholder, which would amount to an abuse of process. The amount of damages claimed by Ms. Sulaiman, in proportion to the penalty provided for by the P.P.S.A. and the actual damages she says she suffers, gives an air of reality to Ms. Mielczarek’s assertion that the action was undertaken in an effort to bully her into abandoning her oppression application.
CONCLUSION AND ORDER
[26] For the reasons stated above, it is ordered that:
The proceedings under Court File No. CV-13-1432-00 and the proceedings under Court File No. CV-15-0103-00, and the proceedings under Court File No. CV-15-2933 shall be heard together, and the parties in each proceeding shall be given notice of all pre-trial proceedings in the other proceedings;
If the parties are unable to agree on the costs of this motion, they shall by August 31, 2017, submit written arguments, not to exceed 4 pages double-spaced, and a Costs Outline with dockets or, in the case of self-represented litigants, an affidavit setting out the facts relevant to a determination of costs, as set out in Rule 57.01(1) of the Rules of Civil Procedure, and in
accordance with the principles reviewed by this Court in the context of a family proceeding in Bergen v Sharpe, 2013 ONSC 74188.
Price J.
Released: August 10, 2017
COURT FILE NO.: CV-15-2933-00
DATE: 2017-08-10
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
DARIA SULAIMAN
Plaintiff
- and -
RENATA MIELCZAREK, ALEKSANDRA MIELCZAREK, and JAMES WILLIAM SINCLAIR
Defendants
REASONS FOR ORDER
Price J.
Released: August 10, 2017
[^1]: Rules of Civil Procedure, R.R.O. 1990, Reg. 194
[^2]: Wood v. Farr Ford Ltd, 2008 ONSC 53848, at para. 23.
[^3]: Jaffe v. Miller 1992 ONSC 7230, p. 6, para. 1
[^4]: Fitney v. Howard, 1958 ONCA 118, p. 9, para. 2
[^5]: Personal Property Security Act, R.S.O. 1990, c. P.10, s. 56(4)
[^6]: Whiten v. Pilot Insurance Co. (2002), 2002 SCC 18, 209 D.L.R. (4th) 257 (S.C.C.), at para. 299