COURT FILE NO.: CV-12-462706

CITATION: Tabrizi v. Kaushal; 2017 ONSC 5181

DATE: 2017/08/31

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ani Tabrizi and Haroutioun Tabrizi v. Rajan Kaushal, Tribecca Finance Corporation et al.

BEFORE: Master A. Graham

HEARD: August 28, 2017

APPEARANCES: S. McGrath and B. Roe for the plaintiffs (moving parties) N. Wilson for the defendants

REASONS FOR DECISION

(Motion for a status hearing)

[1] This action and the related Brampton action Tribecca Finance Corporation et al. v. Tabrizi (Brampton file no. CV-12-3165) arise from the purchase by the Tabrizi plaintiffs (“the Tabrizis”), on June 1, 2010, of the property at 3 Cachet Parkway in Markham and the ensuing construction and financing of a new home on that property. To finance the purchase, the Tabrizis took two mortgages, one of which was from the defendant Tribecca Finance (also a plaintiff in the Brampton action), of which the defendant Kaushal was the principal. The Tabrizis entered into a construction management contract with Tribecca Developments Inc., which was also controlled by Mr. Kaushal.

[2] The Tabrizis allege in this action that Mr. Kaushal, through his companies, took control of the construction project away from them, increasing the costs while acting as project manager, which increased his security against the property as financier and by extension, the payments owed by the Tabrizis to Tribecca Finance on the construction mortgages. The Tabrizis claim damages for breaches of contract and fiduciary duty, misrepresentation and conspiracy.

[3] The claim by Tribecca Finance in the Brampton action, commenced July 24, 2012, is for enforcement of the Tabrizis’ unpaid mortgage. The Tabrizis counterclaimed in that action for damages for breach of contract, breach of fiduciary duty, and fraudulent or negligent misrepresentation.

[4] The statement of claim in this action was issued on September 4, 2012. The Tabrizis now bring a motion for a status hearing under rule 48.14(5) so that they may show cause why the action should not be dismissed for delay, and for an order establishing a timetable for the completion of further steps in the action.

[5] For the reasons set out below, I have concluded that the plaintiffs have shown cause why the action should not be dismissed and the action should proceed.

The law

[6] Under rule 48.14(1), the registrar was to dismiss the action for delay in the event that the action was not set down for trial by September 4, 2017, being the fifth anniversary of the commencement of the action:

48.14(1) Unless the court orders otherwise, the registrar shall dismiss an action for delay in either of the following circumstances, subject to subrules (4) to (8):

1. The action has not been set down for trial or terminated by any means by the later of the fifth anniversary of the commencement of the action and January 1, 2017.

2. The action was struck off a trial list and has not been restored to a trial list or otherwise terminated by any means by the later of the second anniversary of being struck off and January 1, 2017.

[7] As this action has not been set down for trial, the potential dismissal of the action would be under rule 48.14(1)1..

[8] Under, rule 48.14(4), the dismissal contemplated by rule 48.14(1) can be avoided if the parties consent to a timetable setting deadlines for further steps in the action, including the setting down of the action. In this case, no such timetable was agreed to, so subrules 48.14(5) – (7) apply:

48.14(5) If the parties do not consent to a timetable under subrule (4), any party may, before the expiry of the applicable period referred to in subrule (1), bring a motion for a status hearing.

(6) For the purposes of subrule (5), the hearing of the motion shall be convened as a status hearing.

(7) At a status hearing, the plaintiff shall show cause why the action should not be dismissed for delay, and the court may,

(a) dismiss the action for delay; or

(b) if the court is satisfied that the action should proceed,

(i) set deadlines for the completion of the remaining steps necessary to have the action set down for trial or restored to a trial list, as the case may be, and order that it be set down for trial or restored to a trial list within a specified time,

(ii) adjourn the status hearing on such terms as are just,

(iii) if Rule 77 may apply to the action, assign the action for case management under that Rule, subject to the direction of the regional senior judge, or

(iv) make such other order as is just. [emphasis added]

[9] In considering whether a plaintiff has shown cause why the action should not be dismissed for delay, the court is guided by the following case law, which I set out previously in Cedrom-SNi Inc. v. Meltwater Holding B.V., 2017 ONSC 3387, [2017] O.J. No. 2810:

1. The onus is on the plaintiff to demonstrate why the action should not be dismissed for delay. The test requires the plaintiff to demonstrate that there was an acceptable explanation for the delay and establish that, if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice. (See: Khan v. Sun Life Assurance Co. of Canada, 2011 ONCA 650, and Faris v. Eftimovski, 2013 ONCA 360, [2013] O.J. No. 2551 at para. 32)

2. The test is conjunctive, not disjunctive. Even if the plaintiff can provide a satisfactory explanation for the delay, the action will be dismissed if there would be prejudice to the defendant. And if the plaintiff is not able to provide a satisfactory explanation for the delay, it is still open to the court to dismiss the action, even if there is no proof of actual prejudice to the defendant. (See: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 at para. 33)

3. The responsibility to move the action along lies chiefly with the plaintiff. (See: Faris, supra, at para. 33) However, the conduct of a defendant is also a factor to be considered in determining whether the action should be dismissed for delay or allowed to proceed. (See: Carioca’s Import & Export Inc. v. Canadian Pacific Railway, 2015 ONCA 592 at para. 53)

4. The possible dismissal of an action for delay involves a careful balancing between the interests of the parties and society in timely and efficient justice on one hand and in the resolution of disputes on their merits, on the other. (See: Kara v. Arnold, 2014 ONCA 871 at para. 9)

5. There is little to be gained in debating whether there is a bright line between the “contextual approach” applicable to motions to set aside registrar’s dismissal orders (per Scaini v. Prochinicki, 2007 ONCA 63 at para. 23) and the approach taken in Faris, supra to status hearings. In considering the reasonableness of any explanation for delay, the status hearing court will almost invariably engage in a weighing of all relevant factors in order to reach a just result. (See: Kara, supra, at para. 13)

6. It is reasonable to approach the plaintiff’s explanation for the delay in an action on the basis that “the longer the delay, the more cogent the explanation must be”. (See: Kara, supra at para. 17)

7. Settlement discussions can constitute a reasonable explanation for litigation delay. A party should not be penalized for not pursuing the costly steps of litigation while engaged in a settlement process that was ultimately unsuccessful. (See: Apotex Inc. v. Relle, 2012 ONSC 3291 at paras. 7, 50 and 51)

8. The prejudice at issue is to the defendant’s ability to defend the action as a result of the plaintiff’s delay, not as a result of the sheer passage of time. (See: MDM Plastics Ltd. v. Vincor International Inc., 2015 ONCA 28 and Carioca’s Import & Export Inc., supra at para. 57)

9. A defendant’s lack of display of any sense of urgency undercuts any claim of actual prejudice. (See: Aguas v. Rivard Estate, 2011 ONCA 494 at para. 19 and H. B. Fuller Co. v. Rogers, 2015 ONCA 173 at para. 42)

The issue

[10] The main issue on this status hearing is whether the Tabrizis can both provide an acceptable explanation for the delay in the action and establish that, if the action were allowed to proceed, the defendants would suffer no non-compensable prejudice. The defendants have also raised the issue of whether the Tabrizis’ conduct in the Brampton action would warrant denying them the right to proceed with this action.

Have the plaintiffs provided an acceptable explanation for the litigation delay?

[11] In explaining the delay in this action, the Tabrizis submit that for much of the time that has passed since starting their action, they were focussed on defending the Brampton action in which the relevant steps were as follows:

• July 24, 2012: Tribecca Finance and two other mortgagees issued the statement of claim.

• October 10, 2012: Default judgment was signed against the Tabrizis.

• November 13, 2012: The Tabrizis first brought a motion to set aside the default judgment. The relief sought in the notice of motion included an order for trial together with the Toronto action in which the Tabrizis are plaintiffs.

• December 11, 2012: The Tabrizis’ motion was argued and on December 12, 2012, Miller J. ordered that the default judgment be set aside. Her reasons for decision do not address the motion for trial together.

• December 28, 2012: The Tabrizis served their statement of defence and counterclaim.

• January 7, 2013: The plaintiffs served a motion for summary judgment returnable February 14, 2013.

• January 14, 2013: The plaintiffs served their reply and defence to counterclaim.

• August 21, 2013: There was an appearance before Lemon J. but his endorsement does not reflect the subject matter.

• March 5, 2014: According to the endorsement of Daley J., the plaintiffs’ summary judgment motion was returnable but the Tabrizis were not ready to proceed. Specifically, they had not ordered cross-examination transcripts and had not filed a factum. Daley J. made orders with respect to further steps in the motion, awarded costs against the Tabrizis and adjourned the motion to July 9, 2014.

• May 16, 2014: There was an appearance before Andre J. but his endorsement does not reflect the subject matter.

• November 19, 2014: Donohue J. heard the summary judgment motion and rendered judgment against the Tabrizis. The Tabrizis brought a cross-motion for consolidation of the two actions, which Donohue J. dismissed.

• January 21, 2015: Donohue J. ruled on the costs of the motion based on written submissions.

• April 15, 2015: Counsel for both sets of parties made arguments with respect to the appropriate rate of interest on the judgment and Donohue J. made rulings so that the judgment could be finalized.

• October 6, 2015: The Tabrizis’ appeal of the summary judgment was argued before the Court of Appeal.

• November 5, 2015: The Court of Appeal dismissed the Tabrizis’ appeal and also upheld Donohue J.’s refusal to consolidate the two actions.

• January 25, 2016: The plaintiffs, now judgment creditors in the Brampton action, conducted examinations in aid of execution of the Tabrizis.

• January 26, 2017: Baltman J. ordered that the Tabrizis answer questions refused at their examinations in aid of execution.

• May 9, 2017: Bloom J. dismissed the motion for leave to appeal Baltman J.’s decision.

[12] The Tabrizis further submit that they could not take any further steps in the action currently before the court owing to the defendants’ failure to deliver a statement of defence. The steps taken in this action are as follows:

• September 4, 2012: Statement of claim issued.

• September 19, 2012: The defendants served a notice of intent to defend.

• November 30, 2015: The Tabrizis amended their statement of claim. (As indicated above, the Tabrizis’ appeal of the summary judgment in the Brampton action was dismissed on November 5, 2015.)

• April 16, 2016: The defendants served their statement of defence.

• May 27, 2016: The defendants served a notice of motion for security for costs, returnable August 22, 2016. The parties exchanged material for this motion but it did not proceed on the scheduled date and it has not yet been re-scheduled.

• February 21, 2017: The Tabrizis’ current counsel delivered notices of change of lawyer in both this action and the Brampton action.

• May 17, 2017: The Tabrizis’ counsel wrote to the defendants’ lawyer proposing a timetable.

• July 10, 2017: The Tabrizis’ counsel served the notice of motion for this status hearing.

[13] The Tabrizis submit that subsequent to the service by the defendants of their notice of intent to defend, the obligation remained on them to take the next step in the action by serving a statement of defence. They contend that the defendants’ failure to do so caused or at least contributed to the subsequent delay in the action. The Tabrizis also submit that once the defendants delivered their statement of defence in April, 2016, the action was then delayed by the defendants’ motion for security for costs, which they scheduled but never actually proceeded with.

[14] The defendants submit that based on the obligation on a plaintiff to ensure that the action progresses, it was incumbent on the Tabrizis to take proactive steps to require that they deliver a statement of defence and they failed to do so.

[15] As indicated above, the Tabrizis’ counterclaim in the Brampton action contain claims and allegations similar to those in their statement of claim in the action before me, so they clearly took steps to assert those allegations. I accept that the Tabrizis’ efforts in defending the Brampton action are at least a partial explanation for not advancing the Toronto action. The Tabrizis also manifested their intention to proceed with their own action by twice moving for an order for consolidation or trial together of the two actions and these motions constitute steps in both actions. After the Brampton action was finally disposed of by the dismissal of the appeal of the summary judgment on November 5, 2015, the Tabrizis immediately took steps to prosecute this action by issuing an amended statement of claim and requesting a statement of defence. The delay from the amendment of the statement of claim on November 30, 2015 until August, 2016 is explained by the defendants’ delivery of their statement of defence and their security for costs motion.

[16] While I accept that the responsibility to move this action along lies chiefly with the Tabrizis as plaintiffs (see Faris, supra), it does not lie well in the mouths of the defendants to complain about the plaintiffs’ conduct where they were in default of their own obligation to deliver a statement of defence. The defendants are, in effect, saying: “Our failure to serve a statement of defence is partly the fault of the plaintiffs for not forcing us to do what we were supposed to do in the first place”.

[17] The plaintiffs’ involvement in the Brampton action, in which they asserted a counterclaim based on allegations similar to those in this action and attempted to have the two actions consolidated, combined with their efforts to move this action forward immediately following the dismissal of the appeal in the Brampton action, constitutes an acceptable explanation for the litigation delay. The defendants’ conduct in not serving a statement of defence is also properly a factor to be considered in determining whether the action should be dismissed for delay or allowed to proceed (see: Carioca’s Import & Export Inc., supra). Any unexplained delay is sufficiently minor as not to be fatal to the action. For these reasons, I conclude that the plaintiffs have satisfied the first part of the applicable test on this status hearing.

Have the plaintiffs established that, if the action were allowed to proceed, the defendants would suffer no non-compensable prejudice?

[18] The Tabrizis submit that as this action and the Brampton action were commenced within two months of each other in 2012 and the issues in the two actions are similar, the defendants have known what evidence to preserve in order to defend this action and they have the benefit of the record from the summary judgment motion. Further, the defendants’ responding affidavits on this motion do not include any evidence of actual prejudice such as documents not being available or witnesses having disappeared or died.

[19] The defendants submit that the Tabrizis must demonstrate that there would be no prejudice to them if the action were permitted to proceed. As stated by Master MacLeod (as he then was) in Platinum Brokers v. Hyacinth, 2014 ONSC 1502 at paragraph 21: “The rule presumes prejudice and the onus is on the plaintiff to displace it”. The defendants submit that the Tabrizis have provided no evidence to overcome this presumption. The defendants further submit that there is actual prejudice to them arising from the fact that the subject property was sold on May 27, 2013 and there is therefore no current information as to the state of the property.

[20] I accept that the counterclaim in the Brampton action raises the same issues as the statement of claim in this action, so the defendants were well aware of the documents and witnesses that they would require for both actions. Further, they were aware of the Tabrizis’ motions to consolidate the two actions which indicated an intention to proceed with this action. In these circumstances, I adopt the following passage from Platinum Brokers, supra, at paragraph 23:

“23 . . . Though I regard the plaintiff’s evidence about lack of prejudice to be inadequate since the defendant is not asserting any significant prejudice and the status hearing was scheduled promptly after the expiry of the time in Rule 48.14, I do not regard prejudice to be a significant factor in this case.”

[21] In the face of the defendants’ prosecution of the Brampton action, which would require the same evidence as this action, the absence of any evidence of missing documents or witnesses, and the Tabrizis taking steps to schedule the status hearing before the expiry of the time in rule 48.14(1)1., I am similarly persuaded that prejudice is not a significant factor.

[22] With respect to the defendants’ contention that there is actual prejudice, the sale of the subject property occurred less than nine months after the Tabrizis issued their statement of claim, and therefore any possible prejudice related to the sale did not arise from any delay in the action.

[23] I therefore conclude that the Tabrizis have demonstrated that any unexplained delay in the action has not resulted in any prejudice to the defendants and they have met the second part of the test.

Is the plaintiffs’ conduct in the Brampton action a factor to be considered on this status hearing?

[24] The defendants rely on Master Muir’s decision in Business Development Bank of Canada v. I Inc., [2013] O.J. No. 1346, at paragraph 14, to argue that the court should consider the larger context of the action in deciding whether or not the plaintiffs have shown cause why the action should not be dismissed for delay. They submit that the context in this case includes the Tabrizis’ conduct in avoiding payment of the judgment in the Brampton action. They rely on the statements of Baltman J. in her endorsement on the motion brought in the Brampton action to compel answers to questions refused on the Tabrizis’ examinations in aid of execution that “there is compelling evidence that [the Tabrizis] have set out to deliberately frustrate the recovery of monies owed” and that there are “reliable indicators that the defendants are trying to shield or move their assets in order to evade repayment”.

[25] The defendants submit that the Tabrizis’ conduct in evading payment of the judgment in the Brampton action is sufficiently reprehensible that the court should not grant them the indulgence of being permitted to proceed with this action.

[26] On a status hearing, the court will almost invariably engage in a weighing of all relevant factors in order to reach a just result (see: Kara, supra, at para. 13). In this case, the defendants are currently seeking relief in the Brampton action by way of a motion returnable August 30, 2017 for a finding of contempt against the Tabrizis. It would not be appropriate for me to impose a sanction against the Tabrizis by refusing to allow this action to proceed based on their conduct in the Brampton action, particularly where the defendants are currently seeking remedies specifically for that conduct from a Brampton judge. I therefore decline to consider the plaintiffs’ conduct in the Brampton action on this status hearing.

Conclusion

[27] I conclude that the plaintiffs have shown cause why the action should not be dismissed for delay and the action shall proceed.

[28] The plaintiffs submitted a timetable in their factum, but it would be preferable for counsel to confer with a view to agreeing to a timetable and a discovery plan. However, regardless of the timetable that they agree to, as a term of the order allowing the action to proceed, the parties require a new deadline for the setting down of the action. In that regard, I hereby order that the plaintiffs set the action down for trial by September 30, 2018.

[29] If the parties cannot agree to a timetable that fits within that deadline, or require a longer deadline, they may arrange to address the issue before me by way of a telephone conference. If they can agree to a timetable and require an order requiring that the action proceed in accordance with any such timetable, they may submit the timetable in writing, along with a draft order. Any order shall stipulate that the timetable may be varied on consent except for the deadline for the setting down of the action which may only be varied by court order.

Costs

[30] Counsel for both sets of parties have filed costs outlines. If the parties cannot agree to the disposition of the costs of the motion, they shall provide written submissions, not to exceed three pages, the plaintiffs within 30 days and the defendants within 20 days thereafter. For the purpose of assisting counsel in resolving the issue, my current inclination, without the benefit of submissions, is that there should be no order as to costs.

MASTER A. GRAHAM

DATE: August 31, 2017