Court File and Parties

COURT FILE NO.: 08-005/18

DATE: 20190916

SUPERIOR COURT OF JUSTICE – ONTARIO

APPLICATION UNDER Rules 14.05 (3)(a), (b), (d), 74.16-74.18 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and Section 23 of the Trustee Act, R.S.O. 1990, c. T.23

RE: JIRIES NICHOLAS RABBA, Applicant/Responding Party

AND:

JACK RABBA, LIONG SHING LOA-WING FAT, JONATHAN FLEISHER, in their capacities as Trustees of the Rabba 1991 Trust, and personally, GISELLE BORGES, MICHELLE REALE, ANDREW RABBA, MATTHEW RABBA, CHRISTOPHER RABBA, JUSTIN RABBA, NICHOLAS RABBA, ANTHONY RABBA, RICHARD RABBA, JIRIES OLIVER RABBA, NICOLE RABBA, COLETTE RABBA-GILLIES, ISABEL GILLIES, THE ESTATE OF JOHN RABBA (DECEASED) and THE CHILDREN’S LAWYER on behalf of the minors, KAI BORGES, CRUZ BORGES, MILANA REALE, DANTE REALE, AIDEN RABBA, CHRISTIAN RABBA, JIRIES JR. RABBA, ISLA RABBA, VINCENT RABBA, ELIJAH RABBA, NOAH RABBA, JOSIAH RABBA, ELIANA RABBA, ARIANA RABBA, JACK RABBA (JR.), ISAAC RABBA, JACK ZERENIAH, ZOE GILLIES and on behalf of the unborn unascertained beneficiaries of the Rabba 1991 Trust, Respondents/Moving Parties

BEFORE: Dietrich J.

COUNSEL: Andrew Faith and Emma Carver, for the Applicant/Responding Party

Richard B. Swan and Tamara Ramsey, for the Respondents/Moving Parties Jack Rabba and Liong Shing Loa-Wing Fat

William Pepall and Jason Squire, for the Respondent Jonathan Fleisher

J. Wilkes, for the Respondents Matthew Rabba, Giselle Borges, Michelle Reale, Christopher Rabba, Justin Rabba, Nicholas Rabba and Anthony Rabba

HEARD: July 4, 2019

REASONS FOR DECISION

[1] This motion in the within Application is brought by Jack Rabba (“Mr. Rabba”) and Liong Shing Loa-Wing Fat (aka Robert Loa), in their capacity as trustees of the Rabba 1991 Trust (the “1991 Trust”).

[2] The Applicant, Jiries Nicholas Rabba, a nephew of Mr. Rabba, seeks an order: i) requiring the moving parties and the Respondent Jonathan Fleisher (the “Trustees”) to pass their accounts from the inception of the 1991 Trust to the present; ii) declaring that the Trustees breached their fiduciary duty by failing to comply with their July 2000 resolution regarding distribution of the trust property; and iii) declaring that Mr. Rabba’s son, Richard Rabba, holds all assets distributed to him by the Trustees on a constructive or resulting trust, subject to further order of the court.

[3] Some two years before the Applicant brought the Application, other Rabba family members commenced a complex proceeding. Their action concerns allegations of wrongful appropriation of ownership interests by Mr. Rabba in a variety of Rabba family businesses (the “Action”). There are conflicting claims to assets purportedly held in the 1991 Trust, among other business assets.

[4] The moving parties seek an order to have the Application heard together with, at the same time with, or heard immediately before or after, the Action. Alternatively, they seek a temporary stay of the Application.

[5] The plaintiffs in the Action are Mr. Rabba’s three brothers, each of whom was involved in businesses that Mr. Rabba claims to have built. The holding company for the Rabba businesses is Rabba Company Limited (“RML”). The businesses include grocery stores, known as Rabba Fine Foods, and several operating companies engaged in food distribution and other enterprises.

[6] Since 1991, when the 1991 Trust was created, Rabba family members have had a direct ownership interest in RML, or an indirect ownership interest as beneficiaries of discretionary trusts. In the Action, the plaintiffs claim an ownership or trust interest in all the assets of RML and the various related operating companies. Specifically, they claim that the reorganization of the Rabba businesses in 2000 and the subsequent distribution of the capital of the 1991 Trust, including the growth shares in RML, were void ab initio.

[7] The reorganization involved the dissolution of a partnership among the family members and the transfer of the partnership's assets to the defendants in the Action, RML and The J. Rabba Company Limited (“JRCL”), and possibly other entities controlled directly or indirectly by Mr. Rabba. The plaintiffs claim that all agreements purporting to give effect to the transfers are void and should therefore be set aside. Since the plaintiffs claim ownership of assets that were previously held by the 1991 Trust, they claim that the 1991 Trust is void ab initio or should be treated as such.

[8] Specifically, following the reorganization of the capital of RML in 2000, the 1991 Trust held the common shares in RML, which represented the future growth in the Rabba businesses. Subsequently, the common shares of RML were converted into Class A Preference Shares. In December 2011, all remaining assets in the 1991 Trust, including the Class A Preference Shares, the contents of two investment accounts, and the original $100 settlement amount, were distributed to Mr. Rabba’s son, Richard Rabba, and the 1991 Trust was terminated. The property distributed had a value of approximately 25 million dollars.

[9] Richard Rabba is one of more than 30 discretionary beneficiaries of the 1991 Trust. Seven of those beneficiaries have filed a Notice of Appearance in the Application.

[10] For the reasons that follow, I find that the Application should not be consolidated with the Action, or heard immediately before or after it, or stayed on a temporary basis. The motion does not raise any valid ground to delay or otherwise obstruct the Application. The Applicant and the other beneficiaries of the 1991 Trust will suffer substantial prejudice if the Application is delayed. A primary purpose of the Application is to preserve the assets held by the 1991 Trust until the beneficial ownership of those assets can be justly determined.

Positions of the Parties

[11] The moving parties assert that the plaintiffs in the Action intend to contest the validity of the 1991 Trust. They therefore question the necessity and utility of the passing of accounts sought by the Applicant, if the 1991 Trust could later be found to be invalid.

[12] The moving parties further assert that the Application and the Action ought to be heard together because: i) the two proceedings share common questions of fact and law that arise, in part, out of the same series of questions or occurrences; ii) the relief sought in the Application is in direct conflict with certain claims in the Action such that there is a real risk of inconsistent results; and iii) hearing the matters together, or temporarily staying the Application, avoids a multiplicity of proceedings, promotes an expeditious and inexpensive determination of disputes, and avoids inconsistent judicial findings. The Respondent Jonathan Fleisher supports the position taken by the moving parties.

[13] The Applicant asserts that the moving parties’ motion ought to be dismissed because: i) there are no common questions of fact or law arising from the proceedings, and the proceedings do not arise out of the same transaction, occurrence, or series of transactions or occurrences; ii) there is no risk of inconsistent findings should the matters proceed separately; iii) only two of the 36 parties to the Application and the 13 parties to the Action are common to both proceedings; iv) the Application is straightforward whereas the Action is very complex; v) the Application is scheduled to be heard on November 26, 2019, whereas the Action will take years to reach trial; vi) hearing the matters together would result in unwieldy, costly and inefficient proceedings; vii) the delay would serve no purpose other than to insulate the Trustees from sanction for their wrongdoing; and viii) the delay would defeat the purpose of preserving the allegedly improperly distributed assets. Those beneficiaries of the 1991 Trust who have filed a Notice of Appearance support the position taken by the Applicant.

Issue

[14] The principal issue in this matter is whether the Action and the Application have a question of law or fact in common or claim relief arising out of the same transaction or series of transactions or occurrences.

Law and Analysis

[15] Rule 6.01(1) of the Rules of Civil Procedure, governing the hearing and temporary stay of proceedings, states:

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] In addition to satisfying the criteria set out in rule 6.01 (a), (b) and (c), there are overriding policy considerations aimed at avoiding a multiplicity of proceedings, promoting the expeditious and inexpensive determination of disputes, and avoiding inconsistent judicial findings: Marchant (Litigation Guardian of) v. RBC Dominion Securities, 2013 ONSC 2042, at para. 11 (“Marchant”), citing Coulls v. Pinto, 2007 CarswellOnt 7050 (Ont. Master); and Hathro Management Property v. Adler, 2018 ONSC 1560, at para. 9 (“Hathro”).

[17] In Marchant, at para. 11, the court set out the following factors to consider with respect to hearing two matters together or one immediately after the other:

(a) Will the order sought create a savings in pretrial procedure?

(b) Will there be a real reduction in the number of trial days taken up by the trials being heard at the same time?

(c) What is the potential for a party to be seriously inconvenienced by being required to attend a trial in which that party may only have a marginal interest?

(d) Will there be real savings in experts’ time and witness fees?

(e) Is one of the actions at a more advanced stage than the other?

(f) Will the order result in delay in one of the actions?

(g) Are any of the actions proceeding in a different fashion?

[18] With respect to the granting of a temporary stay, in Hathro, at para. 12, the court considered the following factors: i) differences in the substantive scope and remedial jurisdiction of the two courts; ii) any juridical advantages associated with the plaintiff’s choice of jurisdiction; iii) the comparative progress of the two proceedings, including which proceeding started first; iv) whether the proceedings will proceed sequentially or in tandem; v) the effect of two proceedings about the same subject matter proceeding in tandem; vi) the ability of the defendant to adequately respond to both matters apart from just the financial burden or inconvenience of having to do so; vii) the possibility of inconsistent results; viii) the potential for double recovery; and ix) the effect of a stay in delaying or prejudicing access to justice; for example, by degradation in the evidentiary record for one or other of the proceedings.

Common Issues of Fact and Law

[19] I accept that the 1991 Trust arises out of the reorganization of capital that is at the centre of the dispute in the Action. However, I find that the relief sought in each of the Application and the Action is different and distinct. I do not find that the Application and the Action have common questions of fact or law or that the relief sought arises out of the same transaction or occurrence or series of transactions or occurrences. Accordingly, I find that the moving parties have not met the threshold test under rule 6.01(1).

[20] In the Action, the plaintiffs are principally concerned with Mr. Rabba's alleged appropriation of business interests. They seek to claim a larger interest in the value of the Rabba businesses. If successful, a potential result is a reallocation of the assets that were held by the 1991 Trust. By contrast, the Applicant seeks: a proper accounting by the Trustees of the 1991 Trust; a declaration on the conduct of the Trustees, that is, whether they breached their fiduciary duty when distributing the assets of the 1991 Trust; and an order preserving the assets that were distributed to a single beneficiary, pending further order of the court. If the Applicants are successful, that further order would likely be influenced by the result in the Action. The court would make such order as it deems just. It would be open to the parties to make submissions on that order based on the findings in the Action.

[21] The Applicant does not seek a determination of the ultimate beneficiary or beneficiaries of the property held by 1991 Trust. The Plaintiffs seek that determination.

[22] The Application is a discrete matter. It relates to the actions of the Trustees vis-à-vis the beneficiaries. The 1991 Trust issues in the Application are straightforward and do not overlap with the issues in the Action.

[23] The Applicant assumes that the 1991 Trust is valid and does not seek any declaration as to its validity. The plaintiffs in the Action claim that the transactions that led to the creation of the 1991 Trust are void ab initio or void. There is no evidence before this court to suggest that the 1991 Trust itself was improperly settled or is invalid. The evidence before this court is that a valid trust instrument was created for the 1991 Trust, and the persons appointed as trustees from time to time administered the 1991 Trust over a number of years. They kept a trust ledger, recorded their decisions regarding the ultimate distribution of the trust property in the July 2000 resolution, and, albeit after multiple requests, provided a form of trust accounting to the Applicant. There is no dispute between the Applicant and the moving parties on these facts. In the Action, Mr. Rabba himself asserts that the 1991 Trust is valid.

[24] I find that the issues in the two proceedings do not overlap. Therefore, the two proceedings will not result in inconsistent judicial findings. Accordingly, there is no reason to delay the Application. Further, there is merit to having the Application heard sooner rather than later, and prior to the Action. If the Trustees are found to have breached their fiduciary duty in distributing the assets to Richard Rabba, it would have been important to preserve the trust property he received. Depending on the outcome of the Action, the preservation order, if granted, would benefit the ultimate beneficiaries of the trust property, whether they include the plaintiffs in the Action, other beneficiaries named in the 1991 Trust, or both.

The Balance of Convenience

[25] The moving parties assert that the balance of convenience favours granting an order that the Application and the Action be heard together, or one after the other, because both the Action and the Application are at the pleadings stage. I disagree. The Applicant has served and filed his application record. A date, November 26, 2019, has been set for the Application. The Trustees are in breach of their undertaking to serve and file their applications to pass their accounts.

[26] The moving parties submit that hearing the matters together will save time in pretrial procedures. It is correct that the Applicant is a party to the Action and will be required to attend both the Application proceedings and the trial. However, the Applicant is only a defendant by counterclaim in the Action, arising out of his role as an independent contractor to JRCL. As such, he will have little control over the progress of the Action. I find that the allegations against him in the Action have nothing in common with the issues he raises in the Application.

[27] The moving parties further argue that there would be a reduction in the time spent on both the Application and the Action if they were heard together or one after the other, because the evidence relating to the history of the Rabba businesses and the creation of the 1991 Trust would not need to be repeated in both cases. It is doubtful that the time saved for this reason, if any, would be material. An in-depth review of the history of the Rabba businesses and the creation of the 1991 Trust is not essential to the determination of whether the Trustees are in breach of their fiduciary duties. The Application relates to the Trustees’ conduct vis-à-vis the beneficiaries of the 1991 Trust, only one of whom is a party to the Action. The validity of the 1991 Trust is not in issue in the Application and the relief sought would not result in findings incompatible or inconsistent with findings made in the Action. The Applicant seeks to preserve the trust property pending further court order.

[28] Of the 13 parties to the Action and the 36 parties to the Application, only the Applicant and Mr. Rabba are common to both. They will be the only witnesses who will need to provide evidence in both proceedings. Based on the record, the Applicant’s evidence will be distinct between the two.

[29] The proceedings are not equal in terms of complexity. The Action includes a counterclaim against third parties. The pleadings in the Action are over 100 pages. By comparison, the declatory relief sought in the Application is discrete and narrow and it is unlikely that there will be material facts in dispute regarding the Trustees’ July 2000 resolution, the description of the property distributed to Richard Rabba, and whether the actions of the Trustees complied with the July 2000 resolution and their fiduciary duties generally.

[30] The moving parties argue that if the plaintiffs in the Action prove that the 1991 Trust is invalid, there would be no trust to form the basis of the Application. I do not accept this argument. Regardless of the outcome of the Action, there is no evidence that the Trustees who administered the 1991 Trust considered it an invalid trust or considered themselves as anything other than trustees of the 1991 Trust property, who held the trust assets as fiduciaries for the benefit of the beneficiaries identified in the 1991 Trust agreement. The evidence is that Mr. Rabba, the original Trustee of the 1991 Trust, continues to take the position that it is a valid trust. If the 1991 Trust were found to be invalid, it would not alter the fact that the named trustees held themselves out as trustees and treated the property held and distributed by them as trust property, subject to the terms of a written trust agreement. Accordingly, they would have all the fiduciary obligations of trustees, including the fundamental duty to account to the beneficiaries.

[31] Further, the procedural advantage gained by the discretionary beneficiaries of the Trust, some of whom have recently filed a Notice of Appearance in the Application, would be lost if the Application were forced to be heard along with the complex Action. See: TKS Holdings Inc. v. Ottawa (City) [2009] O.J. No. 2094 (S.C.), at paras. 9 and 13. If the Application cannot be heard in advance of the Action, the Applicant and the other beneficiaries of the 1991 Trust would be prejudiced by having to wait while the Action proceeds through lengthy document production, examinations for discovery, preliminary motions (if any), and the trial phase. These processes could take years. A primary purpose of the Application, being the preservation of the trust assets, would be defeated.

[32] Requiring the proceedings to be heard together would also increase the costs for the parties to both proceedings, especially the 34 parties who are not common to both. Causing the beneficiaries of the 1991 Trust, who are not parties to the Action, to wait for lengthy document production and examinations for discovery in the Action would add to the costs as would keeping them apprised of developments in the Action. It is difficult to see how there could be any savings of costs, judicial resources, or court time in joining the proceedings or having them heard one after the other.

[33] Accordingly, I find that there is merit in allowing the Application to proceed independently of the Action. The beneficiaries of the 1991 Trust, especially those who are not parties to the Action, are entitled to a timely accounting from the Trustees and an opportunity to seek the preservation of the trust property that has been distributed to Richard Rabba pending the outcome of the Action.

Temporary Stay

[34] The moving parties argue that if the matters are not to be heard together, a temporary stay would be an expedient, convenient, and less prejudicial manner of proceeding. I agree that a temporary stay would be less prejudicial than requiring all the beneficiaries of the 1991 Trust, who are respondents on the Application, to participate in the Action. However, a temporary stay would not be without prejudice to those beneficiaries. In light of the factors considered above, which I find equally applicable to a temporary stay, there is no compelling reason why the Applicant and the other beneficiaries of the 1991 Trust should not be entitled to an immediate accounting by the Trustees of the 1991 Trust, as well as an adjudication of the Trustees’ conduct in their administration of the assets of that trust.

Conclusion

[35] In my view, joining the Application to the much more complex Action is inappropriate. A passing of accounts by the Trustees of the 1991 Trust, purporting to act as trustees, is appropriate. It should not be delayed pending the determination of the rightful beneficial owners of the trust property. The determination of whether the trust property distributed by the Trustees should be preserved pending a further court order is also appropriate and prudent because the beneficial ownership of that property has been called into question in both the Application and the Action. The Application is scheduled for a hearing in a few months. The Action could take years to proceed to trial. The passing of accounts is not an issue in the Action and the timely preservation of the 1991 Trust assets, if granted, causes far less inconvenience or prejudice than the prospect of an indefinite delay.

[36] I do not find that granting the motion would achieve any of the policy considerations under rule 6.01(1) of the Rules of Civil Procedure as stated in Riva Plumbing v. Ferrari et al, 2017 ONSC 3614, at para. 15. In the circumstances of this case, I find that granting the motion would not avoid a multiplicity of proceedings. The Application and the Action deal with discrete issues. I am not persuaded that having them heard together would result in a more expeditious or inexpensive determination of the disputes. I do not see a risk of inconsistent judicial findings if they are heard separately.

Disposition and Costs

[37] The moving parties’ motion is dismissed. The Applicant was successful on the motion and is entitled to costs pursuant to rule 57.01(1) of the Rules of Civil Procedure. I have reviewed the Applicant’s Bill of Costs and the Costs Outline of the moving parties. The Applicant seeks $11,162.26 including HST and disbursements on a partial indemnity basis. I find the hourly rates of the Applicant’s counsel and the disbursements to be within a reasonable range. The costs sought by the Applicant are not dissimilar to the costs the moving parties would have sought if successful.

[38] I therefore fix the costs at $11,162.26, payable to the Applicant by the moving parties. This quantum is fair and reasonable, within the reasonable expectation of the parties, and accords with the principles set out by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.).

Dietrich J.

Date: September 16, 2019