COURT FILE AND PARTIES

COURT FILE NO.: 19-70823

DATE: 2020/01/30

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1527995 ONTARIO LTD. o/a WESTDALE JEWELLERS and 960222 ONTARIO INC., Plaintiffs

AND:

STERLING RENTALS CORP., Defendant

BEFORE: Justice D.A. Broad

COUNSEL: Kaush Parameswaran, for the Plaintiffs

Ari Lokshin, for the Defendant

HEARD: January 8, 2020

ENDORSEMENT

[1] The plaintiff, 960222 Ontario Inc. (“960” or the “tenant”), has brought a motion against the defendant, Sterling Rentals Corp. (“Sterling” or the “landlord”), for the following relief:

(a) an order permitting re-entry to and relief from forfeiture from premises located at 1061 King Street, Hamilton, Ontario (the “1061 Property” or the “premises”);

(b) an interim and interlocutory injunction restraining the landlord from restricting access to, blocking out, retaining or otherwise preventing the tenant and its agent from entry and access to the premises; and

(c) an order for leave to issue a Certificate of Pending Litigation in respect of the 1061 Property.

[2] Sterling has brought a cross-motion against 960 for the following relief:

(a) that 960 provide security for costs in respect of the Action;

[3] The parties have advised that the following issues in the plaintiffs’ Notice of Motion and the defendant’s Cross-Motion have been resolved and are no longer being pursued:

(a) the claim by 1527995 Ontario Ltd. o/a Westdale Jewellers (“152” or “Westdale”) for an interim and interlocutory injunction in respect of the premises at 2 Newton Avenue, Hamilton Ontario;

(b) the claim that 960 provide security for its undertaking as to damages made in respect of its claim for an interim and interlocutory injunction; and

(c) the claim that the action on behalf of 960 be dismissed on the ground that it lacks legal capacity to commence and maintain the action.

[4] At the commencement of the hearing of the motions counsel for Sterling brought an oral motion seeking to have certain paragraphs in the reply affidavit of Daniel Upsdell, sworn on November 4, 2019, filed on behalf of 960 (the “Reply Affidavit”) struck out on the following grounds:

(a) in respect of paragraphs 4, 5, 7-17, 19, 28, 29, 31, 33, 48, 49, 50 and 63-66 on the ground that they are not the proper subject of a reply affidavit; and

(b) in respect of paragraphs 35 (and exhibit referenced), 42 (and exhibit referenced) and 48-50 on the ground that they constitute inadmissible hearsay, opinion evidence or are irrelevant, vexatious and scandalous.

[5] Counsel for 960 did not oppose the right of Sterling to bring its motion to strike the impugned paragraphs of the Reply Affidavit orally as it had been provided with notice of Sterling’s intention to do so and the issue was thoroughly canvassed in Sterling’s Factum. 960 acknowledged that it has been afforded ample opportunity to prepare a response to the oral motion.

[6] The parties agreed that I should rule on Sterling’s oral motion to strike portions of the Reply Affidavit but not remain seized of the motion and cross-motion, which would be adjourned to the week of February 18, 2020.

Background

[7] The dispute centres on whether there exists a binding lease agreement between the landlord Sterling and the tenant 960 in respect of the premises.

[8] The premises consist of a 600 square foot retail unit located in a building owned by Sterling. Costakis Mouskos (“Mouskos”) is the principal of Sterling. The premises are situated adjacent to a retail unit, known municipally as 2 Newton Avenue (the “Newton Premises”), which is leased by the plaintiff 152 as tenant. The 1061 Property and the Newton Premises are in the same building owned by Sterling. Daniel Upsdell (“Upsdell”) is the principal of both 960 and 152.

[9] It is agreed that no written lease or agreement to lease was entered by 960 and Sterling in respect of the premises.

[10] 960 relies on what it asserts is an oral agreement to lease entered into by Upsdell on behalf of 960 and Mouskos, on behalf of Sterling, which it claims contains all of the invariable criteria required for the formation of a valid agreement to lease, as well as other material terms.

[11] Sterling denies that Upsdell and Mouskos entered into an agreement with respect to all of the terms required to support the existence of a valid lease. In particular, Sterling denies that Upsdell and Mouskos agreed upon the identity of the tenant, the commencement date of the lease, the duration of the term and the rent. In the alternative, it says that, if there was a meeting of the minds respecting all the material terms, the lease is void and unenforceable by the operation of the Statute of Frauds and is not saved by the exception in s. 3 of the Statute of Frauds or by the equitable doctrine of part performance.

[12] Upsdell entered the premises and undertook various renovations and alterations during the period from June to September 12, 2019. Upsdell says that he carried out renovations to the premises, with the agreement and acquiescence of Mouskos, and by virtue of what he asserts was a valid lease agreement.

[13] Mouskos says that he gave permission to Upsdell to carry out certain limited renovations of a cosmetic nature as negotiations towards a lease agreement were proceeding, but did not give Upsdell permission to carry out extensive renovation work, including work of a structural nature, prior to a valid lease being concluded.

[14] Mouskos attended at the premises on September 12, 2019 and discovered that Upsdell had carried out and was continuing to carry out extensive renovation work to the premises, the scope of which exceeded what he says he permitted Upsdell to perform.

[15] Upsdell instructed Sterling’s solicitor to formally demand that Upsdell cease all further work and to vacate the premises. Sterling thereafter changed the locks. The plaintiffs commenced the action by issuance of the Statement of Claim shortly thereafter and their motion for relief from forfeiture and related relief was brought on October 7, 2019.

Paragraphs in the Reply Affidavit sought to be struck on the grounds that they constitute impermissible hearsay, opinion evidence or are irrelevant, scandalous and vexatious

[16] Dealing firstly with the provisions of the Reply Affidavit which Sterling seeks to strike out on the ground that they constitute impermissible hearsay, opinion evidence or are irrelevant, scandalous and vexatious, the impugned paragraphs are follows:

Paragraph No.

Content of Paragraph

Basis of Objection

35

“35. On November 1, 2019, Mr. Savage advised me that wall was not a load bearing wall or fire wall. Attached as Exhibit “H” is a copy of Mr. Savage’s quote and statement dated November 1, 2019.”

Exhibit “H” contains the following statement:

“This partition wall is not a load bearing wall or a fire wall according to code.”

The paragraph and Exhibit “H” represent opinion evidence which does not comply with sub-rule 39.01(7) of the Rules of Civil Procedure

42

“42. At the time of our meeting, one of my former employees, Mr. Dan Stewart, was working in the same room where Gus and I were meeting. Mr. Stewart was privy to our entire conversation. On November 1, 2019, Mr. Stewart confirmed to me that Gus had allowed me to proceed my way. Attached as Exhibit “J” is a copy of a signed hand written statement from Mr. Stewart dated November 1, 2019 confirming the same.

The paragraph and exhibit “J” represent impermissible hearsay evidence.

48-50

“48. I believe that Gus instructing his lawyers to send me a letter threatening to lock me out of the 1061 Property and the 2 Newton Property had nothing to do with his “concerns” as set out in his affidavit.

49. Instead, I believe it was motivated by his bruised pride and some perceived slight in front of Brittany. Further, I believe Gus’ actions are also driven by his desire to get higher rents for the 1061 Property and his efforts to lease the property to another tenant even though he had already leased the property to me.

50. I believe that Gus’ behaviour is consistent with his attempts to strong-arm and drive out many of the long-term tenants of the building so that he can re-lease the properties to new tenants at higher rents.”

[17] With respect to paragraph 35, it is noted that sub-rule 39.01(7) of the Rules of Civil Procedure provides that opinion evidence provided by an expert witness for the purposes of a motion or application shall include the information listed under sub-rule 53.03 (2.1). This information includes, inter alia, the expert’s qualifications, the instructions provided to the expert in relation to the proceeding, the expert’s opinion, the reasons for his or her opinion, and an acknowledgement of expert’s duty (Form 53).

[18] An expert's function is to provide a ready-made inference for the trier of fact which the judge or jury, due to the technical nature of the facts, could not formulate alone (see R. v. Abbey (1982), 1982 25 (SCC), [1982] 2 S.C.R. 24 (S.C.C.).

[19] It is evident that whether a determination of whether a particular wall in the premises is a load-bearing or fire wall “according to the code” (presumably the Ontario Building Code) is not an inference which the court is able to formulate alone without expert opinion evidence.

[20] In my view, paragraph 35 of the Reply Affidavit and the referenced Exhibit “H” do not comply with sub-rule 39.01(7) and should therefore be struck from the Reply Affidavit.

[21] Paragraph 42 seeks to elicit evidence from a bystander, Dan Stewart (Stewart”), by means of a written statement, which is not under oath or affirmation, that he heard Mouskos make a certain statement to Upsdell. The purpose appears to be to seek to corroborate Upsdell’s statement at paragraph 41 of the Reply Affidavit that “at the conclusion of our meeting, Gus agreed that I could proceed with installing the door using the method I proposed.”

[22] Sub-rule 39.01(4) provides that an affidavit for use on a motion may contain statements of the deponent’s information and belief, if the source of the information and the fact of the belief are specified in the affidavit.

[23] In my view, sub-rule 39.01(4) does not permit the introduction of double or triple hearsay evidence. In this case the evidence consists of Upsdell quoting Stewart quoting Mouskos saying something to Upsdell. For Stewart to give evidence of what he heard Mouskos say, it would be necessary for him to provide his own sworn or affirmed affidavit to that effect.

[24] I note that in the case of Jafine v. Mortson (2000), 2000 29036 (ON SCDC), 52 O.R. (3rd) 135 (Div Ct.) it was stated at para. 11 that “the practice of attaching copies of affidavits to an affidavit to support evidence in the affidavit based on information and belief is one that should be discouraged.”

[25] Even more so, the practice of attaching an unsworn or unaffirmed statement to an affidavit to support evidence in the affidavit should also be discouraged.

[26] Paragraph 42 and the referenced Exhibit “J” should therefore be struck from the Reply Affidavit.

[27] In submissions, counsel for 960 acknowledged that the content of paragraphs 48-50 is irrelevant and that those paragraphs should be struck from the Reply Affidavit.

Paragraphs in the Reply Affidavit sought to the struck on the ground that they constitute improper reply evidence

(a) Guiding Principles

[28] In the recent case of Johnson v. North American Palladium Ltd., 2018 ONSC 4496 (S.C.J.) Perrell, J. reviewed the principles concerning the rule against case-splitting in the context of the delivery of reply affidavit material at paras. 12-15, and 45-53. In doing so he referenced the relevant authorities including the case of Lockridge v. Director, Ministry of the Environment, 2013 ONSC 6935 (Div. Ct.).

[29] The relevant principles which may be derived from Johnson include the following:

(a) the law against case-splitting regulates the delivery of a reply affidavit as well as the argument at the hearing of the motion or the application;

(b) where the parties or the Court set a timetable for the exchange of affidavits for a motion or application, the reply evidence should generally be limited to proper reply, that is, with evidence that complies with the rule against case-splitting;

(c) the rule against case-splitting restricts reply evidence to matters raised by the defendant and does not permit the plaintiff to deliver new evidence;

(d) the rationale for the rule against case splitting is that the defendant is entitled to know and to respond to the case being made against him or her and therefore the plaintiff should not split his or her case and take the opponent by surprise and without an opportunity to respond;

(e) reply evidence is admissible only when the defendant has raised a new matter that could not have been reasonably anticipated by the plaintiff or where the reply evidence is in response to an issue enlarged by the opponent in a manner that could not have been reasonably foreseen;

(f) the standard for permissible reply evidence is less strict on a motion than the standard applied at trial. When the reply evidence for a motion is introduced before the cross-examination and the hearing on the merits, a less rigorous standard applies;

(g) the court has a discretion on a motion to admit the improper reply evidence and to allow the opponent to respond with a sur-reply affidavit;

(h) ultimately the question is a balancing exercise with the goal of ensuring that each party has a fair opportunity to present its case and to respond to the case put forward by the other party;

(i) where the parties have agreed to a timetable for delivery of materials on a motion, they are taken to have agreed to the rules that govern reply evidence;

(j) the plaintiff should not be permitted to set a “litigation trap” in making the defendant respond to a case they thought they had to meet and then, by means of new reply evidence, make them respond to a different case;

(k) reply evidence should not be used to correct deficiencies in the plaintiff’s case in-chief;

(l) each case of determining whether to permit a reply affidavit that may amount to case-splitting must be decided in accordance with its own circumstances and exigencies. In some cases, it will be appropriate to admit the reply evidence and to allow a sur-reply or to impose terms.

(b) Position of the Defendant

[30] Sterling submits that the parties specifically negotiated a timetable, which was incorporated in the consent order made by Justice Milanetti on October 17, 2019, for delivery of materials following service by 960 and 152 of their Motion Record. It submits that, if 960 believed that its motion materials were incomplete, it was open to it to request that it be permitted to deliver supplementary materials prior to delivery of materials by the defendant. Plaintiff did not do so, and the timetable only provided for the delivery of reply materials after the defendant had delivered its materials. Any such reply materials ought therefore to be limited to evidence that is the proper subject of reply.

[31] Sterling points out that 960 seeks a finding that it and Sterling orally agreed to all of the material terms for a lease of the premises and seeks various relief on the basis of the existence of such lease. Sterling also points out that 960 was aware as early as September 13, 2019 that it denied that the terms of a lease had been agreed to and that there is a lease in place. It was therefore incumbent on 960 to set forth in chief of what it alleges are the terms of the lease orally agreed to and the circumstances in which the oral agreement was reached.

[32] Sterling submits that all the evidence in the impugned paragraphs was available to 960 prior to delivery of its Motion Record and it has offered no explanation as to why it was not used.

[33] Specifically, although 960 adduced evidence as to the description of the premises, the parties to the lease, and the rent, Sterling submits that it did not produce any evidence respecting the commencement date of the lease, the duration of the term, the manner in which rent was to be calculated or the circumstances in which it was agreed to.

[34] Sterling submits that, in leaving evidence respecting the foregoing issues to reply and by waiting for Sterling to commit to its position with respect to the issues, it set a “litigation trap” which allowed it to confirm or deny Sterling’s position in a manner that suited its case.

[35] Sterling acknowledges that it delivered a Sur-reply Affidavit by means of the supplementary affidavit of Mouskos sworn November 5, 2019. However, it asserts that its sur-reply was restricted to new allegations in the Reply Affidavit and did not address issues relating to the alleged formation of an oral lease agreement.

(c) Position of the Plaintiff 960

[36] 960 submits that the Reply Affidavit is legitimate and proper in its entirety on the basis that it addresses an issue enlarged by Sterling in the responding affidavit of Mouskos, namely that there was no oral lease.

[37] 960 denied that it laid a “litigation trap” for Sterling and notes that Sterling submitted a Sur-reply Affidavit in response to the Reply Affidavit by means of the Supplementary Affidavit of Mouskos delivered prior to the cross-examinations of the parties.

[38] Moreover, 960 submits that Sterling has failed to identify any prejudice it has suffered as a result of the Reply Affidavit. Any prejudice that may have arisen was rectified by the fact that Sterling delivered further supplementary affidavit evidence and had the opportunity to test the truth and veracity of the statements deposed to in the Reply Affidavit through cross- examination.

Analysis

[39] As pointed out by 960, Sterling did not move to strike out the impugned paragraphs of the Reply until the return of the motion, following delivery of the Supplementary Affidavit of Mouskos and completion of cross-examinations. Counsel for Sterling acknowledged in submissions that he cross-examined Mr. Upsdell on the Reply Affidavit at pages 129 to 168 of the transcript. In oral argument he submitted that, if the impugned paragraphs are struck out, those pages of the cross-examination transcript may also be struck, although this suggestion was not made initially and was not referred to in Sterling’s Factum.

[40] Perell, J. noted in Johnson, as indicated above, that where a timetable is set for the exchange of affidavits for a motion, the reply evidence should generally be limited evidence that complies with the rule against case-splitting. However, he also emphasized that, where an issue of case-splitting is raised, the court’s determination will depend upon the particular circumstances and exigencies of the case, and it may be found to be appropriate to admit the reply evidence and to allow a sur-reply or to impose terms.

[41] In the present case, due to the failure of defendant to move to strike the impugned provisions of the Reply Affidavit before taking further steps, the court was not afforded an opportunity, to consider, prior to the cross-examinations, whether to strike the impugned sections of the Reply Affidavit or to admit them on terms, including a term granting leave to Sterling to deliver a sur-reply.

[42] Rule 2.02 of the Rules of Civil Procedure is instructive in stipulating that motions to attack irregularities must be made promptly or before a further step is taken in the proceeding. The rule provides as follows:

2.02 A motion to attack a proceeding or a step, document or order in a proceeding for irregularity shall not be made, except with leave of the court,

(a) after the expiry of a reasonable time after the moving party knows or ought reasonably to have known of the irregularity; or

(b) if the moving party has taken any further step in the proceeding after obtaining knowledge of the irregularity.

[43] 960 did not rely upon rule 2.02 in response to Sterling’s motion to strike paragraphs 35, 42 and 48-50 on the grounds that they constitute impermissible hearsay, opinion evidence or are irrelevant, scandalous and vexatious. However, it effectively did rely on the rule in reference to the paragraphs it seeks to strike on the ground that they represent improper reply evidence, by pointing to the fact that Sterling delivered a Sur-reply Affidavit and cross-examined Upsdell on the Reply Affidavit.

[44] It is noted that Sterling did not seek leave, as required by rule 2.02, to bring its motion to strike the impugned provisions of the Reply Affidavit on the basis that they do not constitute proper reply evidence, notwithstanding that it had taken further steps in the proceeding after obtaining knowledge to the irregularity.

[45] In the case of Ontario Federation of Anglers & Hunters v. Ontario (Ministry of Natural Resources), [2001] O.J. No. 86 (Div. Ct.), reversed on other grounds at 2002 41606 (ON CA), [2002] O.J. No. 1445 (C.A.), the court at para. 24 cited Holmstead and Watson, Ontario Civil Procedure, Vol. 2 (Toronto, Carswell, 1993) at p. 2-15 for the following explanation of the principle behind the rule as follows:

Rule 2.02 requires a party to exercise reasonable diligence in raising objections to an opponent's failure to observe procedural requirements. Inordinate delay before objecting or the taking of further steps after obtaining knowledge of an irregularity are generally indicative of a lack of seriousness about the objection, will likely lull the opponents into a false sense of security, or simply represent dilatory tactics which are to be discouraged. The sanction imposed is waiver unless leave of the court is obtained

[46] As Perell, J. observed in Johnson, ultimately the question is a balancing exercise with the goal of ensuring that each party has a fair opportunity to present its case and to respond to the case put forward by the other party.

[47] In my view, Sterling, by delivering a Sur-reply Affidavit and cross-examining on the Reply Affidavit before moving to strike, has created something of a procedural quagmire. In accordance with rule 2.02, the proper time to have brought the motion was immediately following the delivery of the Reply Affidavit and before further steps were taken.

[48] In carrying out the balancing exercise I find that each party has had a fair opportunity to present its case and to respond to the case advanced by the other party. I am reinforced in this view by the principle that the standard for permissible reply evidence is less strict on a motion than the standard applied at trial and that when the reply evidence for a motion is introduced before the cross-examination and the hearing on the merits, a less rigorous standard applies.

[49] Sterling’s motion to strike the impugned paragraphs of the Reply Affidavit on the ground that they do not constitute proper reply evidence is dismissed.

Disposition

[50] On the basis of the foregoing, it is ordered that paragraphs 35, 42, 48, 49 and 50 of the Reply Affidavit of the plaintiff 960 are struck out.

[51] The balance of the defendant’s oral motion to strike provisions of the Reply Affidavit of the plaintiff 960 is hereby dismissed.

[52] On consent of the parties, and as endorsed on the Motion Record of the plaintiffs, the costs of the defendant’s oral motion are reserved to the judge hearing the motion of the plaintiff 960 for relief from forfeiture and other relief and the motion of the defendant for security for costs.

D.A. Broad, J.

Date: January 30, 2020