Court File and Parties

COURT FILE NO.: CV-19-617700 DATE: 20200331 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Mihrali Celik, by his litigation guardian, Bayram Celik, Plaintiff AND: TD Canada Trust, Canada Trust, TD Bank Financial Group, Toronto-Dominion Bank, Defendants

BEFORE: Pinto J.

COUNSEL: Rocco Giordano Scocco, for the Plaintiff James Riewald, for the Defendants

HEARD: March 9, 2020

Reasons for Decision

Introduction

[1] The plaintiff Mihrali Celik, a party under disability, by his litigation guardian Bayram Celik, commenced an action against the bank defendants for alleged mismanagement of funds.

[2] Three interrelated motions came before me:

(1) The plaintiff's motion for default judgment; (2) The defendants' motion to set aside the noting of default; and (3) The defendants' motion to strike out the claim on the grounds that it is res judicata or otherwise an abuse of process of the court.

[3] Previously, the matter came before Nakatsuru J. on August 23, 2019. He permitted the plaintiff's counsel to withdraw based on “ethical reasons” and with no objection from the plaintiff. The plaintiff was permitted a reasonable opportunity to retain new counsel. Nakatsuru J. granted the defendants leave to file materials supporting their motion to set aside the noting of default and their motion to strike the claim. All motions were to be heard together with costs reserved for the motions judge. The plaintiff's current counsel was retained on December 12, 2019.

[4] For the reasons that follow, I set aside the noting of default, dismiss the plaintiff's motion for default judgment, and grant the defendants' motion to strike out the claim. The claim is struck out without leave to amend. Costs are awarded to the defendants for the within and previous motions and for the action.

The Previous Application

[5] On May 19, 2016, the plaintiff, self-represented and acting without a litigation guardian, commenced an application against the bank defendants (minus Toronto-Dominion Bank) alleging mismanagement of funds he deposited with the defendants. He claimed damages of $240,000 USD plus interest. The application was dismissed on October 4, 2016 as per an endorsement by Hockin J. which explained the underlying factual dispute:

[1] This is an application by Mr. Celik to recover $240,000 USD, plus interest, which he alleges was wrongfully withdrawn from the account of a London resident, Homeira Mosalie on April 21, 1995. The documents point to the purchase of a bank draft by the applicant to the favour of Shahzad Barghi in that amount which was then deposited to the TD Bank account of Homeira Mosalie on March 13, 1995. The source of the funds was a letter of credit issued by a foreign company and drawn by Citibank, New York. On April 21, 1995 after Citibank was advised by the issuer of the letter that documents generated by a beneficiary of the letter were fraudulent, TD Bank acceded to Citibank's request to transmit funds in this amount to its credit in New York.

[2] On December 31, 2003, TD Bank was advised by correspondence from a solicitor retained by Mr. Celik that it was his intention to “take legal action” against TD Bank in the event the allegation of fraud went unexplained. The bank explained by correspondence to the solicitor dated January 8, 2004 that the complaint of fraud originated at Citibank, New York, directed him to Citibank and indicated any future contact was to be to the bank's legal department.

[6] On October 8, 2004, Ms. Mosalie assigned her rights under the account to the plaintiff. In the ensuing years, and following correspondence between the plaintiff and the legal department of the bank, the bank took the position that the plaintiff was statute barred. The plaintiff then commenced his application.

[7] Hockin J. dismissed the application as statute barred finding that, even under a liberal analysis of discoverability, the plaintiff was well out of time. The plaintiff appealed the application decision of Hockin J. to the Court of Appeal for Ontario, which dismissed the appeal on April 5, 2019: reported at Celik v. TD Canada Trust, 2019 ONCA 270. In an interim decision dated October 18, 2018, and reported at Celik v. TD Canada Trust, 2018 ONCA 835, the Court of Appeal had granted the plaintiff an adjournment so that counsel could submit a further factum on the issue of the plaintiff's mental disability. However, no such factum was ever filed.

The Present Action

[8] On April 8, 2019, the plaintiff commenced a new legal proceeding, this time an action by his litigation guardian. The timing was three days after the Court of Appeal upheld the dismissal of the 2016 application. In the action, the named defendants are the same, except that Toronto-Dominion Bank has been added as a defendant. The defendants served a Notice of Intent to Defend on April 24, 2019. On May 7, 2019, counsel for the defendants advised plaintiff's counsel that he had instructions to bring a motion to strike the claim. He also asked plaintiff's counsel to confirm that no steps would be taken to note the defendants in default prior to the hearing of the motion to strike. Plaintiff's counsel immediately confirmed via email “I will take no steps”.

[9] On May 10, 2019, the plaintiff nevertheless obtained a noting of default of the defendants from the Registrar. On May 24, 2019, the plaintiff then brought an ex parte motion before Cavanaugh J. seeking default judgment. Cavanaugh J. noted that, pursuant to Rule 19.02(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, a defendant who has been noted in default is not entitled to notice unless the court orders otherwise. However, under Rule 19.02, notice is in the discretion of the court and the best practice is for service of the motion materials on the party who has been noted in default: Elekta Ltd. v. Rodkin, 2012 ONSC 2062, at para. 10. Cavanaugh J. ordered that the plaintiff serve the default motion material on the defendants so that the default motion could be heard on the regular motions list.

[10] On July 10, 2019, the plaintiff's motion for default judgment was brought before a Master. The Master ruled that the defendants had been improperly served and that the motion had to be heard by a judge. The rescheduled default judgment motion and the defendants' motions came before Nakatsuru J. on August 23, 2019 and then before me.

Motions to Set Aside Noting of Default and for Default Judgment

[11] Plaintiff's current counsel submitted that the defendants had been noted in default and were not diligent in either filing their defence or bringing their motions in a timely manner. He submitted that the defendants only brought their motions after being notified twice by the plaintiff of the pending judgment. Defendants' counsel responded that the noting of default was improperly obtained, that at all times the defendants intended to defend against the action, and that the defendants had moved in a timely manner.

[12] I find, without difficulty, that the noting of default should be set aside.

[13] The action was commenced on April 8, 2019. Defendants' counsel served a Notice of Intent to Defend on April 24, 2019. Defendants' counsel then sent an email dated May 7, 2019 to plaintiff's previous counsel stating that he had “instructions to bring a motion to strike” and seeking confirmation that no steps would be taken to note the defendants in default prior to the hearing of the motion to strike. Plaintiff's previous counsel immediately confirmed “I will take no steps” but went on to state that while he drafted the claim, the litigation guardian proceeded to file the claim himself at the courthouse. Defendants' counsel replied that he was somewhat confused by the response and was simply looking for confirmation that his clients would not be noted in default before the motion to strike was adjudicated. Prophetically, he concluded “Are you suggesting there is a risk that your client's litigation guardian will somehow note my client in default?” Previous counsel replied “If I sound confused, I am. I will try to get clarification. I personally undertake not to note in default but want to get confirmation from the celik(s) (sic) that they will not take steps either.”

[14] How the defendants ended up being noted in default by the Registrar on May 10, 2019 was the subject of debate between counsel. The defendants submitted that the plaintiff, or the plaintiff's litigation guardian, went behind previous counsel's back to obtain the requisition for default by using the back sheet of previous counsel's materials. Plaintiff's current counsel candidly acknowledged that he could not say, one way or another, whether plaintiff's previous counsel had sanctioned the noting in default. Plaintiff's current counsel submitted that previous counsel had acted precipitously by agreeing to not note the defendants in default without first checking with the plaintiff.

[15] I disagree that the defendants were notified twice of the pending motion for default judgment. The May 24, 2019 appearance before Cavanaugh J. was ex parte, and the July 10, 2019 appearance before the Master was preceded by inappropriate service since the plaintiff mailed the motion material to the last known corporate address of the defendants, and not via service on defendants' counsel.

[16] The evidence is uncontradicted that the plaintiff never demanded that the defendants provide their defence after previous counsel's May 7, 2019 undertaking to not note the defendants in default. Further, the defendants were not advised of the noting in default until the plaintiff delivered motion material on or about August 15, 2019 at which time defendants' counsel promptly contacted plaintiff's previous counsel and exchanged emails. The upshot of the emails was that plaintiff's previous counsel reconfirmed his previous undertaking. Of course, previous counsel then withdrew as counsel of record effective August 23, 2019.

[17] It is important to remember that a party who is under disability or acts in a representative capacity shall be represented by a lawyer: Rule 15.01(1) of the Rules of Civil Procedure. Accordingly, to the extent that the plaintiff or his litigation guardian purported to deal with these motions without legal counsel, it was inappropriate.

[18] In any event, even if plaintiff's previous counsel had sanctioned the defendants being noted in default, that would have been inappropriate since no notice was given to the bank defendants' counsel: Western Steel and Tube Ltd. v. Technoflange Inc., 2017 ONSC 2697, at para. 25:

[25] Noting a party in default without notice to opposing counsel violates The Principles of Civility for Advocates, endorsed by the Advocates' Society and the Court of Appeal. Male v. The Business Solutions Group, 2013 ONCA 382. Para. 19 of Principles of Civility for Advocates provides:

Subject to the Rules of Practice, advocates should not cause any default or dismissal to be entered without first notifying opposing counsel, assuming the identity of opposing counsel is known.

[19] The Court of Appeal for Ontario has set out tests for setting aside a noting of default and default judgment: Intact Insurance Company v. Kisel, 2015 ONCA 205, at paras. 12-13:

[12] Rules 19.03(1) and 19.08(1) provide the basis for setting aside a noting of default and a default judgment, respectively. Both rules give the court discretion to set aside the default “on such terms as are just.” This court has held that the tests to be met under these rules are not identical. See Metropolitan Toronto Condominium Corp. No. 706 v. Bardmore Developments Ltd. (1991), 3 O.R. (3d) 278 (Ont. C.A.), at pp. 284-85.

[13] When exercising its discretion to set aside a noting of default, a court should assess “the context and factual situation” of the case: Bardmore, at p. 285. It should particularly consider such factors as the behaviour of the plaintiff and the defendant; the length of the defendant's delay; the reasons for the delay; and the complexity and value of the claim. These factors are not exhaustive. See Nobosoft Corp. v. No Borders Inc., 2007 ONCA 444, 225 O.A.C. 36, at para. 3; Flintoff v. von Anhalt, 2010 ONCA 786, [2010] O.J. No. 4963, at para. 7. Some decisions have also considered whether setting aside the noting of default would prejudice a party relying on it: see e.g. Enbridge Gas Distribution Inc. v. 135 Marlee Holdings Inc., [2005] O.J. No. 4327, at para. 8. Only in extreme circumstances, however, should the court require a defendant who has been noted in default to demonstrate an arguable defence on the merits: Bardmore, at p. 285.

[20] Here, without going through each component of the test, I find that it is just that the noting of default be set aside since:

(a) it was always the defendants' intention to defend against the action; (b) it was entirely reasonable for the defendants to rely on plaintiff’s previous counsel's undertakings to not note them in default prior to the hearing of their motion to strike the claim; (c) the plaintiff never sent a demand to the defendants that they file their defence; (d) the plaintiff (or his litigation guardian) appear to have acted in person and obtained the noting of default contrary to Rule 15.01.(1) of the Rules of Civil Procedure requiring counsel to act on behalf of the plaintiff under disability and by his litigation guardian; and (e) the defendants moved with reasonable dispatch after being notified of being noted in default.

[21] Accordingly, I grant the defendants' motion to set aside the noting of default of the defendants. This disposes of the plaintiff's motion for default judgment which is hereby dismissed.

Defendants' Motion to Strike the Plaintiff's Claim

[22] The defendants move to strike out the plaintiff's claim on the basis of it being res judicata as per Rule 21.01(1)(b) – “to strike out a pleading on the ground that it discloses no reasonable cause of action or defence”; or as per Rule 21.01(3)(d) – “the action is frivolous or vexatious or is otherwise an abuse of the process of the court.”

[23] The defendants submit that the plaintiff is simply trying to relitigate the subject matter of the application that was dismissed by Hockin J., which dismissal was affirmed by the Court of Appeal.

A. Res Judicata

[24] The defendants rely on the two branches of res judicata: (a) cause of action estoppel; and (b) issue estoppel.

[25] In Perodeau v. TD Canada Trust et al., 2020 ONSC 1542, Corthorn J. summarized the relevant law as follows:

[57] Res judicata has two main branches: (1) cause of action estoppel, and (2) issue estoppel. In their evidence treatise, authors Lederman and Bryant summarize the two branches or principles addressed by the doctrine of res judicata: see The Law of Evidence in Canada, 5th ed (Markham: LexisNexis Canada Inc., 2018), at §19.92-§19.95.

[58] The first principle is the prevention of a “contradiction of that which was determined in the previous litigation by prohibiting the re-litigation of issues already addressed”: ibid, at §19.92. Issue estoppel precludes the re-litigation of issues previously decided in court by another proceeding.

[59] At paragraph 23 of Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, the Supreme Court of Canada set out the three criteria to be met for issue estopped to be invoked:

1. The issue in the present action must be the same as the issue decided in the prior proceeding,
2. The judicial decision in the prior proceeding must be a final one, and
3. The parties to both proceedings must be the same or be privies of the same parties.

[60] The second principle requires parties to bring forward in the first proceeding all of the claims and defences with respect to the cause of action at issue. If a party fails to do so, they will be barred from asserting those claims and defences in a subsequent action: ibid, at §19.93. The second principle specifically addresses cause of action estoppel.

[26] Dealing first with issue estoppel, the defendants submitted that the requirements of the doctrine were met:

(1) The same question had been decided in a previous judicial proceeding: (a) The application sought recovery of personal property in the amount of $240,000 USD which was allegedly “illegally confiscated” in violation of the Canadian Bank Act and contrary to the Criminal Code of Canada. (b) The Action seeks payment of $240,000 USD “in mismanaged funds from an unauthorized bank transaction” and $240,000 USD “in accumulated expenses as damages for mismanaging monies.” (c) The application was dismissed as being statute barred. (d) The defence in the action raises the same issue. (2) The judicial decision in the prior proceeding is final: (a) The application was dismissed as was the subsequent appeal. In fact, on the appeal, Celik agreed that the application ought to have been dismissed, only on different grounds. (3) The parties to the prior proceeding, or their privies, are the same parties as the parties to the proceeding in which the estoppel is raised: (a) With the exception of the Toronto-Dominion Bank, the named parties to this Action are the same as the parties to the application. Nevertheless, the Toronto-Dominion Bank was the party that responded to the application and the Notice of Appearance in the application clarified that the proper respondent was the Toronto-Dominion Bank.

[27] The defendants addressed a fourth element that is said to be included in the issue estoppel test, namely that the determination of the issue giving rise to the estoppel was fundamental to the decision in the prior proceeding: Banque Nationale de Paris (Canada) v. Canadian Imperial Bank of Commerce (2001), 52 OR (3d) 161 (C.A.). The defendants identified the fundamental issue as the matter being statute barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.

[28] The defendants argued that, in any event, cause of action estoppel would prevent the action from proceeding since it not only covers the claims that were raised in the prior proceeding, but also all claims that could have been raised in the prior proceeding but were not.

[29] The plaintiff, in his factum, refuted the applicability of res judicata on the following bases:

(a) The application judge made his ruling based on the formalities of the Limitations Act, which formalities were called into question in the appeal since the appeal judges permitted the plaintiff to tender fresh evidence regarding the plaintiff's mental capacity. “The issue of mental incapacity was never ruled upon as former counsel failed to obey the court order made by the appeal judges on October 18, 2018. Accordingly, there has never been a final order made on the basis of the plaintiff's mental incapacity, nor based on the evidence tendered regarding the money which the defendant removed from the Account without notice, reimbursement, or fulsome explanation.” (b) The test for action estoppel is not met as the original application was regarding the enforcement of PPSA liens imposed on the defendants. Thus, the cause of action is different and escapes the ire of action estoppel.

[30] I find that both branches of res judicata apply and would strike out the plaintiff's claim on that basis. Issue estoppel applies since all three elements of the test are met for the reasons identified by the defendants; and there is no doubt that the limitations issue was fundamental to the disposition of the application, and now to the action. A comparison of the application and the action reveals that the underlying claim is about the defendants' alleged mismanagement of the plaintiff's funds on or about April 21, 1995. While the application sought an order “declaring that the Applicant holds security interests which was registered, under the PPSA”, this claim is derivative of, and simply another way of expressing that funds were allegedly mismanaged by the defendants.

[31] I also find the plaintiff's argument untenable that the action should be allowed to proceed because the application and appeal did not address the plaintiff’s alleged mental disability.

[32] The plaintiff commenced his application self-represented and without a litigation guardian. The application appeared to be self-represented at the time of Hockin J.'s endorsement and at the time he filed his Notice of Appeal on February 17, 2017. The appearances listed on the Court of Appeal's interim ruling dated October 18, 2018 are “Mihrali Celik, in person” and “[previous counsel], for the appellant” which seems inconsistent. However, this is explained in the interim ruling:

[1] [Previous counsel] appeared today for the first time, having been contacted this morning by Mr. Celik and asked to assist with the appeal. He asked for an adjournment of 45-60 days to review the file and to prepare a new factum focusing only on the mental impairment issue depending on his review of the transcript.

[33] The defendants' motion materials included a Notice of Motion to Introduce Fresh Evidence dated March 15, 2019 that appears to have been prepared by previous counsel. However, there was no evidence before me as to the disposition of the motion.

[34] Plaintiff's previous counsel was listed as counsel of record on the final appeal decision which stated at para. 2:

[2] The appellant argues that the application judge should have dismissed the application because the claim was improperly constituted as an application and not an action. The appeal is from the judgment, not the reasons. The appeal is dismissed.

[35] Plaintiff's present counsel asserted that “the issue of mental incapacity was never ruled upon as former counsel for the plaintiff failed to obey” the court's interim ruling. And, in his affidavit, the plaintiff states that his previous counsel “was ineffective as counsel in every facet of my case” and did not submit a factum on time.

[36] I disagree that the Court of Appeal ordered that the plaintiff's previous counsel must file a factum regarding the plaintiff's mental disability. The interim ruling makes it clear at para. 3 that “[previous counsel] may file a further factum as advised within 30 days of today”, and this was dependent on previous counsel’s review of the file and the transcript.

[37] While a Notice of Motion to Introduce Fresh Evidence was included in the defendants' motion materials, there was no evidence from the parties about its disposition. Ultimately, there was no reference to fresh evidence in the Court of Appeal's final ruling. Instead, there is specific mention of plaintiff's previous counsel raising the issue of the matter proceeding as an application rather than an action. Accordingly, while the plaintiff's alleged mental incapacity was before the appeal court (see the interim ruling), the reason why it was not the focus of the appeal court's final decision could have been due to a number of factors including previous counsel's considered decision to not advance the argument and instead focus on the difference between an application versus an action.

[38] Accordingly, I find the doctrine of res judicata applies since, inter alia, the present action is duplicative of the previous application that was dismissed, as affirmed by the Court of Appeal.

B. Abuse of Process

[39] I also find, pursuant to Rule 21.01(3)(d) of the Rules of Civil Procedure, that the plaintiff's action should not be allowed to proceed as doing so would represent an abuse of process of the court.

[40] The Court of Appeal described the abuse of process doctrine in Lilydale Cooperative Limited v. Meyn Canada Inc., 2019 ONCA 761, at paras. 34 and 42:

[34] The doctrine of abuse of process is a flexible doctrine unencumbered by the specific requirements of issue estoppel, and can be applied where the requirements of issue estoppel may not be met to prevent what is essentially the relitigation of an issue that has already been determined: C.U.P.E. at paras. 35-37.

[42] The court explained that abuse of process focuses on the integrity of the adjudicative process rather than on the interests of the parties to the attempted relitigation of an issue. For example, in the C.U.P.E. case itself, the court found that the relitigation of the issue whether the employee sexually assaulted the child amounted to a blatant abuse of process. It undermined the integrity of the criminal process.

[41] Here, permitting the plaintiff's action to proceed 24 years after the dispute arose would undermine the integrity of the civil litigation process. I note that the application judge stated the following at para. 7:

[7] It is not in dispute, however, that Mr. Celik received Mrs. Mosalie's interest in the account by assignment October 8, 2004, but more importantly he had retained a solicitor to prosecute his claim by December 31, 2003; he had been advised by the bank's solicitor March 2, 2006, his complaint was out of time; and he was instructed by the solicitor August 9, 2006 that, the claim was statute barred. As noted, this proceeding was not commenced until May 19, 2016.

[42] In his responding affidavit to the defendants' motion to strike out the claim the plaintiff stated, “From December 31, 2003 until the end of 2014 I wrote several letters each year to TD Bank asking for a fulsome explanation for why my money was removed from the bank account number 110-0752298, at that time in the name of Mosalie Homeira.”

[43] The plaintiff's affidavit confirms that, for many years while he considered there to be a lis, he did not commence any legal proceeding until the 2016 application. Accordingly, even if the requirements of res judicata are somehow not satisfied, I find that the action should be struck out as an abuse of process.

Effect of Limitations Act

[44] I add, for the sake of completeness, that neither party made submissions before me concerning the effect, if any, of section 7 of the Limitations Act which suspends the normal two-year limitation period from running in respect of incapable persons:

Incapable persons

7 (1) The limitation period established by section 4 does not run during any time in which the person with the claim,

(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and (b) is not represented by a litigation guardian in relation to the claim. 2002, c. 24, Sched. B, s. 7 (1).

Presumption

(2) A person shall be presumed to have been capable of commencing a proceeding in respect of a claim at all times unless the contrary is proved. 2002, c. 24, Sched. B, s. 7 (2).

[45] The onus of establishing that a party making a claim is “incapable” within the meaning of s. 7(1) rests with the claimant (in this case the plaintiff). It is not necessary for the claimant to demonstrate serious mental incapacity to commence an action, but a claimant is still required to establish that he or she is incapable of commencing a proceeding in respect of the claim because of a physical, mental or psychological condition: Landrie v. Congregation of the Most Holy Redeemer, 2014 ONSC 4008, 120 O.R. (3d) 768, at para. 32.

[46] A claimant’s incapability to commence a proceeding in relation to a claim must have existed at the time the claim was discovered: Bisoukis v. Brampton (City) (1999), 46 O.R. (3d) 417 (C.A.), at para. 40. Even giving the plaintiff the benefit of every possible doubt, on the evidence before the court it is clear that the claim would have been discovered by no later than 2003 (it will be recalled that by December 31, 2003, Mr. Celik, through a solicitor, was threatening legal action against TD Bank, and on October 8, 2004, Ms. Mosalie formally assigned her rights under the account to the plaintiff).

[47] In the plaintiff's motion materials responding to the defendants’ motion to set aside the noting of default, he included his family physician's report dated January 21, 2019. The physician has been his family doctor since March 19, 2004. The physician states that the plaintiff “was apparently functioning normally before” a motor vehicle accident (MVA) on July 8, 2004 and that, as the physician only saw the plaintiff once before the MVA, he could not confirm that any of his symptoms go back as far as 2001. The report concludes “I am not qualified to offer a legal opinion as to Mr. Celik's diagnosis and Dr. Bhatnagar [a geriatric psychiatrist who the family doctor referred the plaintiff to] is also not able because he is not a forensic psychiatrist.”

[48] Accordingly, even now, the plaintiff's evidence falls far short of establishing that he was incapable of commencing a proceeding, whether in 2003, or at any other time material to this matter.

[49] The plaintiff’s claim is struck out on the basis of Rule 21.01(1)(b) (res judicata), and Rule 21.01(3)(d) (abuse of process) without leave to amend.

Costs

[50] The defendants seek costs of $7,000 inclusive of fees, disbursements, and taxes for their successful motions and the action. Based on the defendants’ Costs Outline submitted and costs submissions of the parties, I find the defendants’ costs request eminently reasonable, especially in light of the plaintiff’s unreasonable refusal to consent to the setting aside of the noting in default. I award the defendants costs of these motions and the action, payable by the plaintiff, fixed in the amount of $7,000.00, all inclusive.

Pinto J. Date: March 31, 2020