Court File and Parties

COURT FILE NO.: CV-12-469042 DATE: 20180731 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SARBJIT SINGH, Plaintiff/Defendant by Counterclaim AND: DONALD JOHN TRUMP SR., TRUMP TORONTO HOTEL MANAGEMENT CORP., TRUMP MARKS TORONTO LP, TALON INTERNATIONAL INC., TALON INTERNATIONAL DEVELOPMENT INC., VAL LEVITAN, ALEX SHNAIDER AND TORONTO STANDARD CONDOMINIUM CORPORATION NO 2267, Defendants/Plaintiff by Counterclaim

BEFORE: Cavanagh J.

COUNSEL: Mitchell Wine, for Plaintiff Sarbjit Singh and for Se Na Lee (Plaintiff in CV-15-522065) and Bharat Shah and Suresh Patel (Defendants and Plaintiffs by Counterclaim in CV-14-505147) Brian N. Radnoff, for the Defendant Val Levitan Clifford Lax and Paul Fruitman, for the Defendants Donald John Trump Sr., Trump Toronto Hotel Management Corp., and Trump Marks Toronto LP. Nancy Tourgis and Symon Zucker, for Defendants Talon International Inc., Talon International Development Inc., Alex Shnaider and Toronto Standard Condominium Corporation No. 2267

HEARD: July 27, 2018

Endorsement

Introduction

[1] This motion involves 20 separate actions brought by 22 purchasers (or groups of purchasers) dealing with 27 hotel condominium units in the former hotel portion (the “Trump Hotel”) of the former Trump International Hotel and Tower Toronto (the “Trump Tower”).

[2] The moving parties are Sarbit Singh and Se Na Lee, each a plaintiff in two of the actions, and Bharat Shah and Suresh Patel, defendants and plaintiffs by counterclaim in a third action. The purchasers in all of the actions are represented by the same counsel. Mr. Singh is the plaintiff in the within action in which this motion has been brought.

[3] The moving parties seek an order consolidating 19 of the actions into two consolidated actions, the Singh action (consolidating 16 actions) and the Lee action (consolidating 3 actions). The Shah/Patel action would remain as a third, unconsolidated, action.

[4] As part of the same motion, the moving parties seek an order requiring one of the defendants, Talon International Inc. (“Talon”), to pay the amount that it owes pursuant to costs orders that were made against it in the Singh action and in the Lee action within ten days of the consolidation order, failing which Talon’s statement of defence and counterclaim in the two consolidated actions would be struck out.

[5] The moving parties also seek an order for security for costs against Talon in the proposed consolidated Singh action and in the Shah/Patel action.

[6] Talon opposes the motion for consolidation and the motion for security for costs. The motion for consolidation is also opposed by the other defendants.

[7] For the following reasons,

a. The motion to consolidate 19 of the actions into two consolidated actions is dismissed.

b. If Talon fails to pay the costs awards within ten days of the release of this decision, Talon’s statement of defence and counterclaim in each of the Singh action and the Lee action is struck out. None of the statements of defence and counterclaims in the other actions will be struck out because of Talon’s failure to pay costs orders in the Singh action and the Lee action.

c. Talon, a plaintiff in the Shah/Patel action, is ordered to provide security for costs in that action in the amount of $21,496.85.

d. The other motions for security for costs are dismissed.

Procedural Background

[8] The purchasers entered into agreements of purchase and sale with Talon, the developer of the Trump Tower, and paid purchase deposits that were placed in trust with Talon’s real estate lawyers.

[9] A number of actions were commenced against Talon and other defendants seeking rescission of the agreements of purchase and sale, repayment of the purchaser deposits and damages. Seventeen actions involve claims by 19 different purchasers or groups of purchasers who did not complete their agreements of purchase and sale and sought rescission of these agreements. The purchaser or purchasers were plaintiffs in 16 of these actions. Talon was the plaintiff in one of these actions, with the purchasers, Bharat Shah and Suresh Patel, counterclaiming for return of their deposit and damages. In addition, three actions were commenced on behalf of three purchasers of hotel units who did close their transactions.

[10] At a case conference in late 2014 or early 2015, the parties agreed that one action involving a purchaser who did not complete the agreement of purchase and sale, and one action involving a purchaser who did close the transaction, would be selected as test cases, and motions for summary judgment would be brought by the plaintiffs in those cases. The Singh action was selected as the test case for the purchasers who did not close their transactions and the Lee action was selected for those purchasers who did close.

[11] The motions for summary judgment in the Singh action and in the Lee actions were heard and decided by Perell J. and he dismissed the motions for reasons released on July 10, 2015. An appeal to the Court of Appeal was allowed, and the order of Perell J. was set aside and a substituted order was made, for reasons released on October 13, 2016.

[12] The Court of Appeal ordered that costs be paid to Singh and Lee for the motion for summary judgment in the amount of $180,000 inclusive of disbursements and taxes, and a further $35,000 inclusive of disbursements and taxes for the appeal. Talon sought leave to appeal to the Supreme Court of Canada which was not granted. Costs were awarded to Singh and Lee in the amount of $2,106.78. The costs orders are in the total amount of $217,106.78 which, including interest to July 26, 2018, aggregates $225,115.22.

[13] These actions are being case managed. Motions for summary judgment are scheduled to be heard in December 2018 over two days.

Analysis

[14] There are three issues raised on this motion:

a. Should I exercise my discretion pursuant to r. 6.01 of the Rules of Civil Procedure and make an order consolidating 19 of the actions into two consolidated actions?

b. If a consolidation order is made, should I make an order pursuant to r. 57.03(2) or r. 60.12 of the Rules of Civil Procedure requiring Talon to satisfy the costs orders within a specified period of time, failing which the statements of defence and counterclaims of Talon would be struck out?

c. Should an order for security for costs be made against Talon pursuant to r. 56.01 of the Rules of Civil Procedure?

Should I exercise my discretion pursuant to r. 6.01 of the Rules of Civil Procedure and make an order consolidating 19 of the actions into two consolidated actions?

[15] Rule 6.01(1) of the Rules of Civil Procedure provides:

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.

[16] The moving parties submit that they meet the tests in subparagraphs (a), (b), and (c) of r. 6.01(1) and that an order for consolidation should be made. They submit that it would be an abuse of process to allow Talon to continue to defend the actions in which no costs awards were made while, at the same time, failing to pay the costs orders that were made in the Singh action and in the Lee action. The moving parties also submit that a consolidation order with fresh and consolidated pleadings, as opposed to an order that the actions be heard at the same time or one immediately after the other, will allow the actions to proceed on a more streamlined basis.

[17] Accordingly, the moving parties submit that (i) 19 of the separate actions should be consolidated into two consolidated actions, and (ii) upon a consolidation order having been made, Talon’s failure to pay the outstanding costs orders will constitute a failure to pay a costs order in the two consolidated actions. The moving parties rely upon r. 57.03(2) and 60.12 and seek an order striking out Talon’s statement of defence and counterclaim in each of the two consolidated actions if Talon fails to pay the costs orders within 10 days of the consolidation order.

[18] Rule 57.03(2) provides that where a party fails to pay the costs of a motion, the court may dismiss or stay the party’s proceeding, strike out the party’s defence or make such other order as is just. Rule 60.12 provides that where a party fails to comply with an interlocutory order, the court may, in addition to any other sanction provided by the rules, (a) stay the party’s proceeding; (b) dismiss the party’s proceeding or strike out the party’s defence; or (c) make such other order as is just.

[19] The underlying policy of r. 6.01 of the Rules of Civil Procedure is to avoid a multiplicity of proceedings, to promote expeditious and inexpensive determinations of disputes, and to avoid inconsistent judicial findings. Courts apply a two-part test on a motion under r. 6. First, the court must determine whether any of the criteria under r. 6.01(1) has been met. If one or more of the criteria have been established, the court would then consider whether the balance of convenience favours such an order. See Marchand (Litigation Guardian of) v. RBC Dominion Securities Inc. (2013), ONSC 2042 at para. 11.

[20] The onus is on the party seeking an order for consolidation to show that such an order should be made. In Brown v. Matawa Project Management Group Inc., 2005 CarswellOnt 2283, Smith J. cited with approval the decision of Muldoon J. in Fruit of the Loom Inc., v. Chateau Lingerie Manufacturing Co. (1984), 79 C.P.R. (2d) 274 (Fed. Ct. T.D.) at p. 278 where he wrote:

A genuine onus rests in the applicant seeking to interfere with a plaintiff’s right to pursue a lawful cause of action. Such applicant must persuade the court that continuing the action would be an abuse of process in which the applicant would somehow be prejudiced and not merely inconvenienced.

[21] In Robert A. Cartier Inc. v. Stocking, 2015 ONSC 3242, R. Raikes J., in reference to this passage from Brown, observed that the Brown case and the other cases cited therein (which included the Fruit of the Loom case) dealt with motions for consolidation of two or more actions into a single action. R. Raikes J. held that the heavy onus described in Brown does not apply to a motion for an order that two actions be tried together or one following the other.

[22] It appears to me that the separate actions have a number of questions of law or fact in common, and that the claims arise out of the same transaction or occurrence or series of transactions or occurrences. The responding parties agree that the motions for summary judgment should be heard at the same time by the same judge. These motions are already scheduled to be heard together by the same judge over two days in December 2018.

[23] The moving parties submit that a consolidation order should be made instead of having the actions adjudicated by the same judge at a hearing of motions for summary judgment together, or through a trial process, if necessary, involving trials of the actions together or one after the other. The moving parties submit that having the statements of claim and the statements of defence and counterclaims in the 19 separate actions replaced by one set out pleadings in a consolidated action would promote efficiency, allow the actions to proceed on a more streamlined basis, and make the proceedings less complicated. The moving parties submit that an order for consolidation is also preferable because this would avoid the requirement for the plaintiffs to pay separate fees for filing motion materials in each of the separate actions and, therefore, there would be a cost savings for the plaintiffs. The moving parties also submit that a consolidation order providing for fresh pleadings would allow the plaintiffs to plead the material facts that constitute the causes of action upon which they rely, in particular, the claim founded in fraudulent misrepresentation, more clearly, and that this would be beneficial to the parties and the court.

[24] The plaintiffs chose to pursue their claims through separate actions. The costs awards against Talon were made only in the Singh action and in the Lee action. The plaintiffs acknowledge that there are many unique facts in each case. There are individual issues of reliance and damages. Pleadings have already been delivered in the separate actions. Given these circumstances, an order requiring fresh, consolidated, pleadings is, in my view, unlikely to result in a more expeditious and less expensive process and such an order may well result in unnecessary delay and significant additional expense because of the need to re-open pleadings and require the parties to deliver fresh and consolidated pleadings. The delivery of a fresh statement of claim may also result in a motion or motions challenging the fresh pleading, which would result in additional delay.

[25] Counsel for the moving parties fairly acknowledged in their factum and at the hearing of this motion that the principal reason for requesting a consolidation order instead of simply having the actions heard together by the same judge (which is how the actions are now proceeding under case management) is to provide a means for the moving parties to require payment of the costs orders in the consolidated actions because, if Talon failed to do so, it would be at risk of having its statements of defence and counterclaims struck out under rules 57.03(2) or 60.12. If Talon’s statements of defence and counterclaims were to be struck out, the plaintiffs would be in a position to seek default judgment against Talon.

[26] I do not agree with the moving parties’ submission that it would be an abuse of process to allow Talon to continue to defend the actions in which no costs awards were made while, at the same time, failing to pay the costs orders that were made in the Singh action and in the Lee action. The moving parties seek a tactical benefit through a consolidation order by putting pressure on Talon to pay the costs orders that were made in the Singh action and in the Lee action or risk having its statements of defence and counterclaims struck out in the other actions in respect of which a consolidation order is sought. I do not regard the moving parties’ desire to achieve this tactical benefit to be a valid reason for a consolidation order that should affect my analysis of the balance of convenience and lead me to exercise my discretion and make such an order.

[27] I conclude that the moving parties have failed to discharge their onus of showing that the balance of convenience favours a consolidation order that requires the parties to deliver fresh pleadings in two consolidated actions.

[28] The moving parties also submit that Talon agreed to have the motions for summary judgment in the Singh action and in the Lee action proceed as “test cases” and that Talon has resiled from this agreement by continuing to defend the claims made against it in the remaining 18 actions. The moving parties submit in the alternative that, given this agreement, if a consolidation order is not made, I should treat the costs awards made against Talon in the Singh action and in the Lee action as being costs awards in all of the actions, and make an order striking out Talon’s statements of defence and counterclaims in all of the 19 actions (in which it is a defendant and plaintiff by counterclaim) if it fails to pay the costs orders within 10 days.

[29] The moving parties rely on affidavit evidence from one of their lawyers that at a case conference with the case management judge in late 2014 or early 2015, it was decided that counsel for the plaintiffs would select one of the actions involving a purchaser who did not complete the agreement of purchase and sale and one of the actions involving a purchaser who did close the transaction, and these two actions would be the subject of a motion for summary judgment that would act as “test cases” with respect to the other actions, and that Talon agreed to this approach. In his decision on the motions for summary judgment in the Singh action and the Lee action, Perell J. described the motions in these two actions as “test cases”: Singh v. Trump, 2015 ONSC 4461 at para. 2.

[30] On the evidence before me, it is not open to me to find that by continuing to defend the other claims against it, Talon has resiled from an agreement that the motions for judgment in the Singh action and in the Lee action would be test cases. There is no evidence that Talon agreed that it would be bound in the other actions (involving other purchasers as plaintiffs) by the decisions in the Singh action and the Lee action, or that Talon would not continue to defend the other actions. The parties in the other 18 actions have the benefit of the decisions that were made in these two cases, and these decisions will be effective as test cases to the extent that the doctrine of stare decisis applies in other proceedings. The costs awards against Talon were made only in the Singh action and in the Lee action. In these circumstances, such costs awards should not be treated as having been made in the other actions.

[31] Talon has not paid the costs orders in the Singh action or in the Lee action. I consider it to be proper to make an order under r. 57.01(2) requiring Talon the pay the costs orders in full within 10 days of the release of my decision, failing which its statement of defence and counterclaim in each of the Singh action and the Lee action is struck out.

[32] Because I declined to make a consolidation order or to treat the costs orders in the Singh action and in the Lee action as costs orders in the other actions involving purchasers of units as plaintiffs, it is not necessary for me to decide the second issue.

Should an order for security for costs be made against Talon pursuant to r. 56.01 of the Rules of Civil Procedure?

[33] Talon is a plaintiff in one action, the Shah/Patel action. In the other 17 actions, Talon is a defendant and the plaintiff by counterclaim.

[34] The moving parties seek an order for security for costs against Talon in the proposed consolidated Singh action and in the Shah/Patel action. The moving parties rely upon r. 56.01(1) of the Rules of Civil Procedure. In particular, they submit that (i) there are costs orders against Talon in the same or another proceeding that have remained unpaid in whole or in part (r. 56.01(1)(c)); (ii) Talon is a corporation and there is good reason to believe that it has insufficient assets in Ontario to pay the costs of the purchasers (r. 56.01(1)(d)); and (iii) there is good reason to believe that Talon’s actions are frivolous and vexatious and that it has insufficient assets in Ontario to pay the costs of the purchasers (r. 56.01(1)(e)).

[35] The moving parties accept as a general proposition that where a counterclaim arises out of the same transaction or circumstances as the claim and the counterclaim is in substance a defence to the claim, security for costs will not be ordered. This is because where a defendant, in defending himself or herself, incidentally asks for relief arising out of the same transaction, this defendant ought not to be called upon to give security for costs: Toronto Dominion Bank v. Szilagyi Farms Ltd., 1998 CarswellOnt 429 (C.A.) at paras. 4, 21, 28 and 31, and Diversitel Communications Inc. v. Glacier Bay Inc., 2004 CarswellOnt 9 (C.A.) at para. 9.

[36] The moving parties submit that the nature of the counterclaim must be considered by the court when a determination is made as to whether an order for security for costs should be made, and that the existence of a counterclaim does not in itself automatically prevent a defendant/plaintiff by counterclaim from obtaining an order for security for costs. See ICC International Computer Consulting & Leasing Ltd. v. ICC Internationale Computer & Consulting GmbH, 1989 CarswellOnt 347 (ONSC) at para. 7.

[37] The moving parties submit that these actions are mature, and that judicial findings were made by Perell J. and by the Court of Appeal in their decisions in relation to the motions for summary judgment in the Singh action and the Lee action that expressed disapproval of Talon’s actions. The moving parties submit that I should take these expressions of disapproval into consideration, and that it is just in the circumstances to make an order for security for costs against Talon that is not limited to the Shah/Patel action in which Talon is the plaintiff. I do not agree that statements made by Perell J. or by the Court of Appeal in their decisions concerning the conduct of Talon are proper considerations for me to take into account on this motion in deciding whether an order of security for costs should be made.

[38] Talon submits that its counterclaims are in substance defences to the claims made by the purchasers, and that it seeks forfeiture of the deposits if the purchasers’ actions are unsuccessful and Talon succeeds on its counterclaims. Counsel for Talon stipulated at the hearing of this motion that other than claiming forfeiture of the deposits, Talon does not seek damages against the plaintiffs, defendants by counterclaim.

[39] I conclude that Talon’s counterclaims are in substance defences to the claims made by the plaintiffs. The jurisprudence is clear that in such circumstances security for costs will not be ordered. I see no reason to depart from this general rule on this motion, and I decline to award security for costs in the actions in which Talon is a defendant and a plaintiff by counterclaim.

[40] In the Shah/Patel action, Talon is the plaintiff. The evidence before me is that Talon entered receivership by order dated November 1, 2016 because of its inability to pay the first mortgagee of Trump Tower. The mortgage debt has priority over other indebtedness of Talon. As a result of the receivership, Talon’s only significant asset, the Trump Tower, was sold and a vesting order dated March 30, 2017 was made. The moving parties have shown that Talon is a corporation and that there is good reason to believe that Talon has insufficient assets in Ontario to pay the costs of the defendants in the Shah/Patel action.

[41] The moving parties presented a costs outline in support of their motion for security for costs. The moving parties submit, based upon this costs outline, that a reasonable estimate of the costs on a partial indemnity scale that will be incurred in the Shah/Patel action to the conclusion of the hearing of the motion for summary judgment is $21,498.85.

[42] Talon submits that the amount claimed is excessive, and that I should only award security for costs that will be incurred prospectively. I disagree with Talon’s submissions in this regard.

[43] I conclude that the amount of $21,498.85 is a reasonable estimate of the costs on a partial indemnity scale that Bharat Shah and Suresh Patel will have incurred in the Shah/Patel action until the conclusion of the motion for summary judgment, and that it is just to order Talon, as the plaintiff in this action, to post security for costs in this amount.

Disposition

[44] For these reasons:

a. The moving parties’ motion for an order consolidating 19 of the separate actions into two consolidated actions is dismissed.

b. If Talon fails to pay the costs awards that were made in the Singh action and in the Lee action within ten days of this decision, Talon’s statement of defence and counterclaim in each of the Singh action and the Lee action is struck out.

c. I order that (i) within 30 days Talon shall pay into court the sum of $21,496.85 as security for costs of the Shah/Patel action, and (ii) until the security required by this order has been given, Talon may not take any step in the Shah/Patel action, except an appeal from this order.

d. The other motions for security for costs are dismissed.

[45] If the parties are unable to agree on the costs of this motion, the defendants may make written submissions within 10 days and the moving parties may make responding submissions within 10 days thereafter. If so advised, the defendants may make brief written reply submissions within 5 days thereafter.

[46] Counsel for the Trump parties advised that he had experienced difficulties in filing Notices of Change of Lawyers in the court office. I request that the court office accept for filing the Notices of Change of Lawyers that have been served by new counsel for the Trump parties.

Cavanagh J.

Date: July 31, 2018