Court File and Parties

Court File No.: CV-11-44063700A1 Date: 2019-01-02 Superior Court of Justice - Ontario

Re: myNextCorporation, Plaintiff And: Pacific Mortgage Group Inc., Pacific NA Financial Group Inc., myNext Lending Corporation, Mortgage Architects Inc., myNext Mortgage Company Limited and Radius Financial Inc., Defendants

Before: Darla A. Wilson J.

Counsel: Matthew Lerner, Counsel for the Plaintiff and the Defendant to the Counterclaim, John Vogel George Karayannides, Counsel for the Defendants, Plaintiff by Counterclaim

Heard: By written submissions

Costs Endorsement

[1] This is an action commenced in 2011 by the Plaintiff, myNextCorporation (“myNext”), claiming payment on a promissory note in the sum of $600,000. The note was issued as part of a deal for the purchase of limited partnership shares sold by the Plaintiff to Pacific Mortgage Group (“Pacific”). The Plaintiff alleges the Defendant refused to pay the note and consequently, it issued this action. In response, Pacific launched a counterclaim alleging numerous undisclosed liabilities and misrepresentations made prior to the closing of the deal totalling $11 million.

[2] The counterclaim resulted in numerous additional parties being involved as defendants to the counterclaim and a Third Party was added. During the course of the litigation, Pacific admitted the promissory note was valid but it claimed a set off of the various liabilities such that nothing was owing on the note. The counterclaim alleges fraudulent and negligent misrepresentations against myNext and the other defendants to the Counterclaim.

[3] I presided at the pretrial of this action on October 10, 2018. The matter is fixed for trial for January 28, 2019 for three weeks. Alex Haditaghi (“Mr. Haditaghi”) is the controlling shareholder and principal of the Defendants, Plaintiff by Counterclaim. The pretrial was not completed on October 10, 2018 and, on consent, I arranged a continued pretrial for November 27, 2018, a date which I was advised was convenient to all parties and their counsel. It was agreed there would be further discussions at the continued pretrial about the possibility of resolving the claim or alternatively, completing the trial management necessary for the trial to proceed efficiently.

[4] Counsel for the Plaintiff was in attendance on November 28, as were the counsel for the various defendants to the Counterclaim and Third Party Claim. Mr. Haditaghi did not attend, nor did Mr. Karayannides. I was advised that Mr. Haditaghi had to attend to an ill member of his family and Mr. Karayannides had to go to India on short notice. Instead, Mr. Zacks, a lawyer at Clyde & Co attended along with Mr. Cilevitz, who is the CFO of Pacific.

[5] It quickly became apparent that there would be no settlement discussions at the second pretrial, and as a result, nothing was accomplished. I issued an endorsement on that date dealing with several issues and counsel for the Plaintiff and the Defendants to the Counterclaim and the Third Party requested an opportunity to make submissions on costs of the aborted second pretrial, which I agreed to receive and consider. Mr. Lerner submitted joint written materials on behalf of the Plaintiff and the Defendants to the Counterclaim and the Third Party. Mr. Karayannides provided written submissions on costs on behalf of Pacific.

[6] The Plaintiff and Defendants to the Counterclaim and Third Party ask for costs on a substantial indemnity basis in the amount of $12,000. Mr. Lerner submits that it was the conduct of Mr. Haditaghi that rendered the continued pretrial a waste of time and that counsel should have been notified of the inability of Mr. Haditaghi to attend the pretrial prior to the date so it could have been rescheduled. Since that did not happen, counsel prepared for and attended the pretrial with their clients expecting there would be continued settlement discussions, which never happened.

[7] Mr. Karayannides notes that the costs of a pretrial are generally included in the costs of a proceeding and they ought not to be fixed at the current time. Further, it is submitted that Mr. Haditaghi intended on going to the continued pretrial but his mother became ill unexpectedly and as a result, Mr. Cilevitz attended and he was familiar with the file and had authority to deal with matters at the pretrial.

Analysis

[8] Rule 50.12 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides a pretrial judge with the authority to award costs of the pretrial conference. A pretrial is a necessary and important step in an action; attendance at a pretrial is a mandatory step before the trial commences. It has two important functions: it provides the parties with an opportunity to canvass the prospects of settlement prior to embarking on intense trial preparation; and if settlement is not possible, the presiding judge will do trial management with the lawyers and the parties so the trial proceeds smoothly, in the most efficient manner possible. Pretrial judges spend significant amounts of time reading the memorandums that are prepared by counsel so that they are well informed of the issues in the action and the anticipated evidence at trial.

[9] At the initial pretrial on October 10, I met with counsel and then with the parties and discussed the Claim and the Counterclaim in some detail. I reviewed the evidence and had discussions about the possibility of resolution of the case without the necessity of proceeding through a trial. Because there was not sufficient time to complete the discussions, counsel requested a further attendance before me and I acceded to their request. The date of November 28 was fixed on consent.

[10] While I understand that personal matters arise and may preclude a party or a lawyer from attending a court mandated conference, the fact that I was not advised that Mr. Haditaghi was unable to attend the continued pretrial until everyone was already in attendance, is discourteous both to counsel and to the court. My brief discussion with Mr. Cilevitz was of no assistance and made it clear there would be no continued settlement discussions and thus, the continued pretrial was rendered a waste of time.

[11] I agree with the comments of D.G. Stinson J. in Prabaharan v. RBC General Insurance Co., 2018 ONSC 1186, where he noted that, “A PTC is an occasion and an opportunity for each side to develop a better understanding of their own and their opponent’s case. More importantly, it is also an opportunity for each side to receive guidance and feedback from the presiding PTC judge. Based upon the contents of the PTC memos and other evidence the presiding judge can discuss with a party the strengths and weaknesses of their case and assist them in re-evaluating their (and their opponent’s) position on settlement. Where one of both parties fail to follow the rules, the purpose of the PTC cannot be achieved. This is unfair to the opponent and the court, because the time of each is wasted and otherwise useful feedback cannot be provided.”

[12] The failure of the Defendants to advise counsel and the Court of the inability of Mr. Haditaghi to attend the pretrial resulted in wasted time of counsel and of the Court. The lawyers prepared for and attended the continued pretrial and their clients incurred fees as a result. I see no reason why the party responsible for this should not pay the costs of his “flagrant disregard of the rules.” Prabaharan, supra. On behalf of the Plaintiff and the Defendant to Counterclaim and the Third Party costs of $3000 each for a total of $12,000 are requested.

[13] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides as follows: Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent costs shall be paid.

[14] In my view, costs in the amount of $12,000 for the aborted continued pretrial is a reasonable sum, it is proportional and it takes into consideration the factors set out in Rule 57.01 of the Rules of Civil Procedure that the court may consider when exercising its discretion in fixing the appropriate sum of costs.

[15] I order the Defendants, Plaintiff by Counterclaim, to pay costs of the pretrial of November 27, 2018 to the other parties, fixed in the sum of $12,000 forthwith.

Darla A. Wilson J. Date: January 2, 2019