Court File and Parties

COURT FILE NO: CV-19-629030 DATE: 20210216 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

HAZELTON HOMES CORPORATION Plaintiff – and – MORTEZA KATEBIAN, PAYAM KATEBIAN, HOME TRUST COMPANY, IVAN TERZIEV, ELENA MECHTCHERIAKOVA Defendants

Counsel: Eric Sherkin, for the Plaintiff Peter Smiley, for the Defendants, Morteza Katebian and Payam Katebian Amanda Jackson, for the Defendant, Home Trust Company F. Scott Turton, for the Defendants, Ivan Terziev and Elena Mechtcheriakova Dihim Emami, for the Ontario Securities Commission

HEARD: February 1, 2021

M. D. FAIETA J.

REASONS FOR DECISION

[1] The Defendants Morteza Katebian and Payam Katebian (the “Katebians”) bring this motion for an order dismissing this action on account of:

• the plaintiff’s failure to post additional security for costs in the amount of $20,000, in respect of the Katebians, as required by an Order dated June 3, 2020;
• the plaintiff’s failure to pay to the Katebians its partial indemnity costs of the security for costs motion in the amount of $7,147.06 as required by Order dated August 24, 2020; and
• the plaintiff’s failure to pay to the Katebians its costs of $2,000.00 in respect of the Divisional Court’s dismissal of the plaintiff’s request for leave to appeal the order for the payment of security for costs.

[2] There is no dispute that the plaintiff has failed to post the required security for costs and has failed to comply with the two costs orders. In this decision, the three orders are collectively referred to as the “Costs Orders”.

ANALYSIS

[3] Rule 56.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, states:

Where a plaintiff or applicant defaults in giving the security required by an order, the court on motion may dismiss the proceeding against the defendant or respondent who obtained the order, and the stay imposed by rule 56.05 no longer applies unless another defendant or respondent has obtained an order for security for costs.

[4] Similarly, Rule 57.03(2) states:

Where a party fails to pay the costs of a motion as required under subrule (1), the court may dismiss or stay the party’s proceeding, strike out the party’s defence or make such other order as is just.

[5] In applying these rules, the court shall make orders that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding: Rule 1.04(1.1).

[6] Whether an action should be dismissed for failure to post security for costs, or costs of a motion, as ordered, requires a balancing of the competing interests: Whitty v Wells, 2019 ONCA 397, para. 12; Tarion Warranty Corp. v. 1486448 Ontario Inc., 2012 ONCA 288, para. 6. The interests of justice are advanced by having potentially meritorious claims adjudicated on their merits. However, the administration of justice is undermined if litigants fail to comply with this court’s orders: Rana v Unifund Assurance Company, 2016 ONSC 250, para. 50. Striking out a pleading is a severe remedy and, as a result, it ought not be a remedy of first resort without at least providing the defaulting litigant an opportunity to cure the default: Bell ExpressVu Ltd. Partnership v. Torroni, 2009 ONCA 85, para. 35.

[7] On this motion, the plaintiff relied on the affidavit of Troy Wilson. He states that is the plaintiff’s “authorized representative”. The plaintiff submits that this action should not be dismissed because: (1) this action has “considerable merit”; (2) the plaintiff is impecunious; (3) funds that the plaintiff might have used to comply with the Costs Orders are “currently frozen and disputed in the extensive litigation with the Katebians”.

[8] The plaintiff submits that the Katebians have been found by the Ontario Securities Commission to have been involved in fraudulent mortgage activities. However, it is unclear how those findings inform whether Hazelton or the Katebians were the beneficial owners of the two residential properties that are the subject of this action. These allegations are not new. See my earlier decision in Hazelton Homes Corporation v. Katebian, 2019 ONSC 4015, para. 15, which references these allegations as well as allegations of criminal conduct by the plaintiff’s alleged directing mind, Arash Missaghi. As I noted in that decision, given the conflicting evidence, a trial is required to ascertain the merits of this case given its peculiar circumstances. Accordingly, I do not share the plaintiff’s view that its case has considerable merit.

[9] The plaintiff asserts that it is impecunious however it did not advance this position on the Katebian’s motion for security for costs.

[10] Finally, the plaintiff alleges that it is one of many companies in which Laila Alizadeh is the sole shareholder and which are involved in various lawsuits with the Katebians. There is also a receivership in respect of several companies in which both the Katebians and Laila Alizadeh and/or Arash Missaghi claim ownership. There is no dispute that Morteza Katebian remains in default of a costs order, dated June 12, 2020, in the amount of $20,000.00. A mini-trial concluded in October, 2020 in respect of the ownership of these companies. The affidavit of Troy Wilson, states that he is an authorized representative of the plaintiff, and further states that the court’s decision is expected imminently and that the group of companies owned by Laila Alizadeh will be in a position to satisfy the Costs Order if it is successful. I place little weight on this assertion as Mr. Wilson does not explain the basis for his belief. Given that Ms. Alizadeh is the plaintiff’s sole shareholder, officer and director, this assurance should have come from her or at least been expressly stated to have come from information provided by her.

[11] In all the circumstances, I find that it is just to grant the plaintiff a final opportunity to comply with the Costs Orders.

[12] The plaintiff is granted until April 1, 2021 to comply with the Costs Orders. If by 4:00 p.m. EST on April 1, 2021, counsel to the plaintiff has not provided proof that the plaintiff has complied with the Costs Orders, then the Katebians may move before me in writing and without notice to the plaintiff to dismiss this action with costs.

[13] Any party claiming costs of this motion may deliver their costs submissions by February 22, 2021. Responding costs submissions shall be delivered by March 1, 2021. Any reply costs submissions shall be delivered by March 5, 2021. All costs submissions shall be no more than three pages exclusive of any settlement offers and outline of costs.

Mr. Justice M. D. Faieta

Released: February 16, 2021