SUPERIOR COURT OF JUSTICE - ONTARIO

RE: HELIOTROPE INVESTMENT CORPORATION, Plaintiff

AND:

1324789 ONTARIO INC., JONATHAN GARY BEACH and MARTHA LORRAINE BEACH, Defendants

BEFORE: Justice Patrick Hurley

COUNSEL: Denise Sayer and Charles L. Merovitz, for the Plaintiff

Charles Hammond, for the Defendants

HEARD: December 9 and 10, 2019

ENDORSEMENT

[1] This is a motion by the defendants to consolidate this action with several others that involve the same parties and were precipitated by a breakdown in the business relationship between Gavin Marshall and Gary Beach. All of the lawsuits, with one exception, are debt enforcement actions which involve either mortgages or demand loans. The defendants have defaulted in payment of the mortgages and loans. They have made counterclaims in each of these actions which duplicate the claims made in a lawsuit commenced by 1324789 Ontario Inc. (“132 Ontario”) against Mr. Marshall and companies controlled by him including the plaintiff in this action.

[2] I heard this motion along with seven others in December 2019. These included motions for summary judgment in three of the mortgage actions. I allowed those motions and granted summary judgment. I have concluded that the remaining debt enforcement actions should not be consolidated with the lawsuit commenced by 132 Ontario.

The facts

[3] The relevant background is set out in my decision 1324789 Ontario Inc. v. Marshall, 2019 ONSC 517.[^1] The findings which I made in that decision will apply to this one as will those made in my decision granting summary judgment in the three mortgage actions.

[4] Mr. Beach and Mr. Marshall have been involved in the development of four properties known as Applewood Lane (“AWL”), Johnson Point (“JP”), Pine Point (“PP”) and Cranberry Cove (“CC”) since 2014. There are two joint venture agreements between 132 Ontario and Magenta Waterfront Development Corporation (“MWDC”) which cover AWL, JP and PP. There is no written agreement with respect to CC. Mr. Beach maintains that it was also to be jointly developed but Mr. Marshall disputes this.

[5] Mr. Beach was the project manager and Mr. Marshall the financier. Through various companies controlled by him, Mr. Marshall loaned several million dollars to the Beaches and their companies, 132 Ontario and 1073650 Ontario Inc. Most of the loans were secured by mortgages but there were also loans made by way of unsecured promissory notes payable on demand. The money was used by the Beaches to pay personal debt and also fund 132 Ontario’s share of the development costs.

[6] The development costs turned out to be much greater than expected and none of the projects were completed as planned. The relationship between Mr. Marshall and Mr. Beach seriously deteriorated in 2018. The litigation started when Heliotrope commenced this action on May 11, 2018 with respect to the demand loans. 132 Ontario soon followed suit, commencing its action on May 21, 2018. The remaining lawsuits were started later that year and in 2019.

[7] The defendants in the lawsuit commenced by 132 Ontario have brought a third party claim against Michael Keene and Fotenn Planning and Design. They provided professional services to the joint venture.

[8] Except for the actions in which I have granted summary judgment, the litigation remains at the pleadings stage. Affidavits of documents have not been exchanged. Nor does it appear that either side has tried to move the litigation forward in the usual manner. Rather, they have focused their efforts on interlocutory motions.

[9] I will refer to the moving parties as the “Beaches” and the various companies and individuals responding to this motion as the “Marshall parties”. The third party will be “Fotenn”.

The law

[10] Rule 6.01 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.

(2) In the order, the court may give such directions as are just to avoid unnecessary costs or delay and, for that purpose, the court may dispense with service of the notice of listing for trial and abridge the time for placing an action on the trial list.

[11] The applicable legal principles were summarized by Master Glustein (as he then was) in Coulls v. Pinto, 2007 CanLII 46242 (ON SC) at paras. 18 – 20:

The parties agree that the underlying policy of Rule 6 is to avoid a multiplicity of proceedings, to promote expeditious and inexpensive determination of disputes and to avoid inconsistent judicial findings (Pilon v. Janveaux, [2000] O.J. No. 4743 (S.C.J.) at para. 6).

The parties also agree that if I find that there is either (i) a question of law or fact in common (under Rule 6.01(1)(a)), or (ii) the relief arises out of the same transaction or occurrence or series of transactions or occurrences (under Rule 6.01(1)(b)), or (iii) another reason why an order under Rule 6 ought to be made (under Rule 6.01(1)(c)), the court must still consider whether the balance of convenience favours such an order (Drabinsky v. KPMG, [1999] O.J. No. 3630 (S.C.J.)).

Consequently, I first must determine whether any of the criteria under Rule 6.01(1) have been met. If so, I would then consider whether the balance of convenience favours such an order, pursuant to the discretionary factors which include: (i) will the order sought create a saving in pre-trial procedures, and in particular, pre-trial conferences; (ii) will there be a real reduction in the number of trial days taken up by the trials being heard at the same time; (iii) what is the potential for a party to be seriously inconvenienced by being required to attend a trial in which that party may have only a marginal interest; (iv) will there be a real saving in experts’ time and witness fees; (v) is one of the actions at a more advanced stage than the other, and (vi) will the order result in a delay of the trial of one of the actions, and if so, does any prejudice which a party may suffer as a result of that delay outweigh the potential benefits a combined trial might otherwise have (Shah v. Bakken, 1996 CanLII 2522 (BC SC), [1996] B.C.J. No. 2836 (S.C.) at paras. 14-15 (“Shah”); adopted by O’Neill J. in McKee v. Thistlethwaite, [2003] O.J. No. 2850 (S.C.J.) (“McKee”) at para. 11).

The positions of the parties

[12] The Beaches submit that the lawsuits have questions of law and fact in common as they all arise from the joint venture and the breakdown in the relationship between Mr. Beach and Mr. Marshall. They involve the same parties and identical allegations are made in all of the lawsuits. Consolidation is the most efficient manner of proceeding and, if that does not happen, there will not only be unnecessary duplication of interlocutory proceedings and added cost but there is also a real risk of inconsistent findings at trial.

[13] The Marshall parties contend that there are no material facts and issues in common. The debt enforcement actions are straightforward and can be summarily determined. The counterclaims in these actions rely on the same allegations as those made in 132 Ontario’s lawsuit and this consolidation motion is a transparent attempt to delay the payment of overdue debt. There will be significant prejudice to the Marshall parties because the Beaches take the position that, if the actions are consolidated, the litigation must advance as a whole, precluding any final determination of the Beaches’ liability for the outstanding loans until trial. This is not likely to happen for many years.

[14] Fotenn opposes the motion because, if the actions are consolidated, it will inevitably be caught up in lengthy and costly litigation despite being a party to a single lawsuit.

Analysis

[15] If the pleadings were the sole consideration, I would agree that there appear to be common factual and legal issues which would tend to support a consolidation order. But this motion comes more than 18 months after the litigation was commenced and the evidentiary record demonstrates that the most expeditious and inexpensive determination of the disputes between the parties is to order that the debt enforcement actions proceed separately from the action commenced by 132 Ontario. I am also satisfied that there is no risk of inconsistent judicial findings in doing so.

[16] Based on my assessment of the evidence to date, the debt enforcement actions are capable of a summary determination. In all of them, the loan agreements and debt instruments were negotiated at arm’s length with legal advice, the monies were advanced and the loans remain unpaid.

[17] There is no need for examinations for discovery in the debt enforcement actions nor any other pretrial procedures besides summary judgment motions. An adjudication of them at trial would simply add unnecessary time and expense.

[18] If 132 Ontario is successful in its action, it would be entitled to an award of damages. None of the claims made by it would have to be re-litigated in the debt enforcement actions. The counterclaims in each of those actions, because they duplicate the ones made in 132 Ontario’s lawsuit, would not have to be tried. Rather, the trial in 132 Ontario’s action would proceed first and the result of that trial would dictate the outcome for each of the counterclaims.

[19] There is no risk of inconsistent judicial findings. The debt enforcement actions can be determined expeditiously. The real issue in them, when this litigation is considered as a whole, is not whether judgment should be granted to the plaintiffs but whether the enforcement of the judgment should be stayed pending the adjudication of 132 Ontario’s lawsuit. In the three motions that I just decided, I found that the enforcement of the judgments should not be stayed but, because it is a discretionary decision, I or another judge could come to a different conclusion with respect to the remaining debt enforcement actions.

[20] I have also concluded that the balance of convenience does not favour a consolidation order. Without ascribing blame to either side, the litigation has not moved beyond the pleadings stage. Although judicial case management could advance it at a swifter pace, it would still be years for a consolidated lawsuit to be completed. This would be prejudicial to the Marshall parties because they would not receive any payment on the substantial loans they made until after the trial. The Beaches received significant personal benefit from the loans. There would be no prejudice to the Beaches if the actions are not consolidated because, if 132 Ontario is successful in its lawsuit, the Marshall parties would be able to pay the judgment.

[21] I also take into account the merits of the case. I have sufficient evidence to make this assessment and, as I have indicated in my decision in the motion for injunctive relief and the three summary judgment motions, 132 Ontario faces evidentiary and legal difficulties in its lawsuit. This does not mean that it will be unsuccessful but in exercising my discretion, I find that it is in the interest of justice that the Marshall parties be able to proceed with their actions independently of 132 Ontario’s lawsuit.

[22] It would make sense, from a practical perspective, for the debt enforcement actions to be consolidated into one court file but neither side has specifically requested that relief. I am prepared to make that order but would only do so on consent or after further submissions. If the parties wish to make submissions, that can be done by a telephone conference or in writing.

Disposition

[23] The motion is dismissed subject to any order made by me about consolidation of the debt enforcement actions. The responding parties are presumptively entitled to their costs. As I indicated in the other motions, I intend to deal with costs on a global basis as between the Beach and Marshall parties and will provide further direction to them when the final motion is decided. Counsel for the third parties, if they are seeking costs, can deliver written submissions to the Kingston trial coordinator with a copy to my assistant Mary-Ann Valiquette at Mary-Ann.Valiquette@ontario.ca that are not to exceed two pages within 30 days of the release of this decision. The Beach parties will have 10 days in which to reply to the submissions.

HURLEY, J.

Date: February 5, 2020

[^1]: A motion for leave to appeal this decision was dismissed by the Divisional Court on November 29, 2019