Smith v. GCAT Group Inc., 2019 ONSC 2889

Court File and Parties

Court File No.: CV-12-469769 Motion Heard: 8 May 2019 Superior Court of Justice - Ontario

Re: Henry Smith and Susyn Smith, Plaintiffs And: GCAT Group Inc., Danial Hadizadeh and Akbar Hadizadeh, Defendants

Before: Master Jolley

Counsel: Paul Starkman, Counsel for the Moving Party Plaintiffs Pavle Masic, Counsel for the Responding Party Defendants

Heard: 8 May 2019

Reasons for Decision

[1]

Overview

The plaintiffs bring two motions before me today. The first seeks an order that the defendants produce documentation in relation to the limestone it supplied to the plaintiffs’ property and to answer undertakings and a refusal. The second seeks an order varying my order of 13 February 2019 on the basis of false evidence allegedly tendered by the defendants at the motion and on new evidence not available at the motion.

[2]

First Motion: Undertakings and Refusals

Dealing with the first motion, Tab N of the plaintiffs’ motion record dated 29 April 2019 contains an updated undertakings and refusals chart. It appears that the defendants have answered their undertakings and what is sought is follow up. The defendants have agreed to answer the follow up questions requested for Undertakings 1 (Question 26-32), 5 (Question 220-223) and 6 (Question 239-240). I am satisfied that Undertaking 3 (Question 49-53) has been answered. The defendants answered that the documents at Exhibit E are not the only invoices related to the project but that all invoices have been produced. Undertaking 7 (Question 244-245) has been answered. There is no correspondence to be produced, as the defendants’ contact with RBC and HSBC was by telephone call and branch visit. Undertaking 8 (Question 246-247) has also been answered. The defendants have agreed, by way of follow up, to provide any information they have in their possession concerning a full corporate name for the customs broker and to provide the telephone number(s) they had on file. The defendants have agreed to attempt a more fulsome response to Undertaking 10.

3On the non-undertakings aspect of the motion, there was no evidence put before me that the list of documents sought in relation to the limestone were not either included in the various affidavits of documents or dealt with by way of undertaking or refusal. In any event, if documents such as a Canada Customs invoice for the shipped goods were not asked for during the examination for discovery of the defendants, they could have been. Further, that portion of the motion was not fully argued but pursued only in reply. That portion of the motion is dismissed.

[4]

Second Motion: Motion to Vary

On the second motion, the plaintiffs seek to set aside or vary my order of 13 February 2019 on the ground of fraud or of facts arising or discovered after the order was made. That order permitted the defendants to attend at the plaintiffs’ property and to take samples of certain stone to test its composition. To quote from the plaintiffs’ factum, in order to set aside an order under Rule 59.06(2) of the Rules of Civil Procedure, (a) the alleged fraud must be proved on a reasonable balance of probability, with the fact of fraud turning on a finding of whether the representation was done knowing it was not true or reckless or careless as to its truth; (b) the proved fraud must be material; (c) the evidence of fraud must not have been known to the moving party at the time of the original proceeding; (d) the moving party applied reasonable or due diligence at the original hearing; (e) the motion to set aside must be brought without delay; and (f) relief under Rule 59.06 is discretionary, thereby rendering the conduct of the moving party to be relevant (Unimac-United Management Corp. v. Canadian National Railway Co., 2016 ONSC 340, at paragraph 26).

5The plaintiffs do not meet any of these grounds.

6First, the alleged fraud is not proved on a reasonable balance of probability. The plaintiffs argue that the affidavit of Danial Hadizadeh (“Hadizadeh”) sworn 31 July 2018 was false. (As an aside, I note the date is confusing as the title of the affidavit indicates it was sworn 9 October 2018, the commissioner states that it was sworn 31 July 2017 and the cross examination on it references 10 October 2018.) In it Hadizadeh set out certain information about the source of the stone used at the plaintiffs’ site and he attached invoices to support the alleged purchases. The plaintiffs argue that the affidavit and the invoices are false and Hadizadeh knew or ought to have known they were false. A closer read of the Hadizadeh affidavit does not state unequivocally that the material came from the Ostuni site. Hadizadeh states that he believed that the Ostuni white stone was from Lecce and attached an invoice that he believed reflected at least some of the stone as Ostuni. He also deposed that GCAT purchased raw stone in bulk quantities and attached an invoice from 8 May 2011 showing the stone as Lecce. The plaintiffs argue this is fraudulent as this invoice predates their contract with the defendants. The plaintiffs cannot prove the alleged fraud on a reasonable balance of probability based on this evidence of the purchase date, in light of the defendants’ affidavit that they sometimes purchased bulk raw stone from the quarry in advance.

7Further, Hadizadeh does not unequivocally state the source of the stone. He deposed that he believed the stone was Ostuni stone from Lecce but that some stone was bought in bulk. He specifically stated:

“As I cannot be certain that all stone supplied to the Plaintiffs came in the shipment evidenced by the invoice attached at Exhibit C, for the sake of completeness I have attached at Exhibit “D” all other surviving invoices and shipping documents pertaining to shipments from Bianco to GCAT during the time frame May 8, 2011 to September 25, 2012. It is GCAT practice to order more stone than necessary to satisfy customer orders, to guard against supply shortage in the event of damage to stone during manufacture at GCAT or during faulty installation by GCAT customers. I recall that GCAT kept excess stone supplied by Bianco from orders in this time frame on GCAT premises. This excess stone was more than sufficient to supply all the replacement stone contemplated in the Minutes of Settlement, which was a small subset of the stone originally supplied by GCAT to the Plaintiffs prior to this litigation.”

8Second, even if the affidavit representation was proved to be fraudulent, I am not satisfied that the proved fraud would have been material.

9The plaintiffs argue that the defendants cannot demonstrate that the material came from the quarry they said it did and the defendants’ evidence as to its source is a fraud on the court. In reviewing the material, I am satisfied that the defendants have an explanation for the invoices they provided relating to the source of the material. There is insufficient information before me to satisfy me that the inspection order was granted based on fraudulent material. The plaintiffs argue that had the Hadizadeh affidavit been before me on the inspection motion, I would have had evidence of fraud and would not have made the order I did as I would have been satisfied that the defendants had failed “to establish that it purchased the white Italian limestone for [the plaintiffs’] residence.” (quoted from the correspondence from plaintiffs’ counsel to defendants’ counsel dated 28 March 2019.)

10My decision certainly did not turn on whether the defendants could demonstrate that they purchased the white Italian limestone for the plaintiffs’ residence. The allegation is that the defendants did not supply what was ordered. At trial there should be no misunderstanding about what product was installed at the plaintiffs’ property. My order permitted the defendants to attend at the plaintiffs’ site and take samples of the stone. The original source of the stone or discrepancies about the original location would not have impacted my decision, even if they had been before me. The defendants should be entitled to test the stone that is on the plaintiffs’ premises and the trial judge should have before him or her evidence of the composition of that stone that is the subject of this action.

11Third, all the information which the plaintiffs now argue is false was in their possession before I made my order on February 13. They had the Hadizadeh affidavit about the source of the stone, the defendants’ defence about the supply of the materials, the invoices attached to the Hadizadeh affidavit, and the transcript cross examining Hadizadeh on his explanation of those invoices. The plaintiffs now argue that at the inspection motion they intended to rely on material filed by the defendants in response to the plaintiffs’ undertakings and refusals motion, including the Hadizadeh affidavit. The plaintiffs’ undertakings and refusals motion was to have been before me on February 13 and was not because the plaintiffs failed to confirm it. The plaintiffs should have included the Hadizadeh affidavit in their responding record on the defendants’ motion for the inspection had they intended to rely on it and they did not do so. As noted above, I am not satisfied that my order would have been any different had I had this information on February 13.

12I am also not satisfied that if I had the “new” information, which is the answers to undertakings, it would have changed the outcome of the motion. The plaintiffs argue that the defendants’ failure to establish that GCAT purchased the natural limestone was not known until after 13 February 2019 based on the defendants’ non-compliance with their undertakings. This is incorrect. That information about the source of the limestone was available to the plaintiffs and had been since the fall of 2018. The only information that the plaintiffs did not have from the defendants is the answers to the undertakings concerning writing to the quarry for documents. That answer has now been given and it states that the defendants have written the quarry company and it has not responded. The Hadizadeh affidavit that was not before me is not “new” information.

13Fourth, I am not satisfied that the plaintiffs used reasonable or due diligence at the original hearing. As noted, they had all the information except the undertaking requiring the defendants to write to the quarry. They could have put that information before me in a responding record. When they realized that their motion on undertakings was not before the court and that they needed that material to respond to the defendants’ motion for an inspection order, they could have sought an adjournment and did not. Instead they consented to certain of the samples being taken and argued about the other samples being sought.

14Lastly, I am certainly not satisfied that the defendants’ failure to attend at the plaintiffs’ property by 30 April 2019, the date set out in my order, is some demonstration either that the defendants were not serious about the inspection or have waived their right to it. It was a precondition of the inspection that the defendants deliver to the plaintiffs an ISO certification concerning the lab which would do the testing. The defendants provided that information to the plaintiffs on 28 March 2019, in plenty of time to have the inspection done by April 30. The plaintiffs immediately wrote to say that they were going to seek to vary my inspection order based on the defendants’ “failure to prove they had purchased the limestone on the plaintiffs’ property”. I expect the plaintiffs would have taken a dim view had the defendants attempted to access their property in the face of that letter, even though the plaintiffs did not move to stay the order pending the hearing of this motion. The defendants are not to be faulted for not attempting to use my order to access the plaintiffs’ property after Mr. Starkman’s letter of 28 March 2019.

15As a result of the delay in the inspection caused by this motion, Mr. Vago, mentioned in the order, is now not available to attend at the site until some time in the fall. Accordingly my order is amended so that a qualified stonemason certified by the College of Trades with at least five years’ experience may attend in the place of Mr. Vago.

16The plaintiffs’ motion to vary my order of 13 February 2019 is dismissed.

[17]

Costs

The motion was ill conceived. It smacked of an attempt to appeal my order after the appeal period had expired. Further, the plaintiffs failed to pay the costs that were ordered as part of that order in the amount of $10,000, relying on this motion to vary. On this motion to vary, the defendants sought their full indemnity costs in the amount of $12,538.46. Given the unproven allegations of fraud levied at the defendants, I find this level of costs appropriate and the amount reasonable.

18I also award the defendants a portion of their costs on the undertakings motion as the evidence before me demonstrated that the undertakings were answered and the chart in the plaintiffs’ motion record confirmed that these were follow up questions, which the defendants agreed to answer. I find costs in the amount of $2,000 to be appropriate for that motion.

19The plaintiffs shall pay the defendants the costs of $10,000 from my 13 February 2019 order by 17 May 2019. The plaintiffs shall pay the defendants the costs of these two motions in the total amount of $14,538.46 within 30 days of today’s date.

Master Jolley