Court File and Parties

Court File No.: CV-16-566472 Motion Heard: 2021-06-02 Superior Court of Justice - Ontario

Re: Typhoon Capital B.V. and Typhoon Offshore B.V., Plaintiffs And: Sasha Jacob, Jacob Securities Inc., Jacob Capital Management Inc., Jacob Securities Holdings Inc., Jacob Trading Corp. and Jacob & Company Securities Inc., Defendants

Before: Master Jolley

Counsel: Michael Beeforth, Counsel for the Moving Party Plaintiffs Ron Lachmansingh, Counsel for the Responding Party Defendants

Heard: 2 June 2021

Reasons for Decision

[1] The plaintiffs bring this motion for an order striking the defendants’ statement of defence as a result of their consistent failure to abide by multiple court orders.

[2] For the reasons set out below, the motion is granted.

Background

[3] The plaintiffs have two unpaid costs orders against the defendant Jacob Securities Inc. (“JSI”) in the amount of $480,000 plus accrued interest. As noted below, one was granted on the consent of JSI as costs of a failed arbitration that JSI commenced against the plaintiffs. The second was ordered as the costs of JSI’s failed judicial review application of that arbitration decision. In this action, the plaintiffs seek to enforce those orders against all six defendants.

[4] Despite commencing this action in 2016 and despite its assignment to case management, the plaintiffs have been unable to complete their examination for discovery of the defendants and have been unable to proceed to mediation.

[5] As a result of the defendants’ multiples breaches of various court orders over the last three years, the plaintiffs seek an order striking the defendants’ defence.

The Parties

[6] The claim alleges that the defendant Jacob Capital Management Inc. (“JCM”) is the successor in interest to JSI and that Jacob Securities Holdings Inc., Jacob Trading Corp. and Jacob & Company Securities Inc. are all affiliated or related to JSI. They further allege that the defendant Sasha Jacob (“Mr. Jacob”) is the sole director, officer and controlling mind of each of the corporate entities.

[7] JSI provided investment banking advisory and related services. At the time it met the plaintiffs, JSI was a dealer member of the Investment Industry Regulatory Organization of Canada. Its membership was suspended in 2015.

[8] The plaintiffs allege that in March 2012 JSI agreed to arrange equity project financing for the plaintiffs and the parties signed an engagement agreement. A disagreement arose over the fees owed under that agreement. JSI commenced an arbitration claiming that the plaintiffs owed it €10,310,000 in fees. In September 2014, the arbitrator dismissed JSI’s claim.

The Costs Award and the Costs Order

[9] As a term of the arbitration, each party agreed that it would pay any costs awarded if it were the unsuccessful party. When JSI lost the arbitration, the parties agreed to settle the costs at $425,000 and JSI agreed to a payment schedule starting in November 2014 and ending in March 2015. The settlement of the costs was incorporated into the arbitration award made 20 October 2014. JSI did not pay the first tranche or any subsequent portion of the award and it remains outstanding in its entirety.

[10] JSI then brought an application for judicial review to set aside the arbitration award on the basis of undisclosed bias. The same day that Mew, J. heard the application, IIROC suspended JSI’s membership and ordered it to immediately cease dealing with the public. Mr. Jacob alleges that JSI ceased doing business on 31 December 2015 and that the other defendants carry on separate unregulated businesses.

[11] Mew, J. dismissed the judicial review application, finding that it was a “thinly disguised attempt to avoid the consequences of an adverse decision on the merits.” His Honour ordered JSI to pay the plaintiffs costs of $55,000 plus 2% per annum commencing 26 January 2016.

[12] JSI did not pay that costs award either.

[13] A day after the decision was released, according to the plaintiffs, JSI issued a press release announcing that it was transitioning to become the defendant JCM in order to “continue its investment banking and advisory services”.

[14] The plaintiffs brought this action in December 2016 for payment of the agreed upon arbitration costs award of $425,000 and the application costs order of $55,000.

[15] They allege that, unbeknownst to them at the time, JSI was insolvent or on the brink of insolvency when it signed the engagement agreement in March 2012 and when it agreed in January 2014 that the arbitrator could fix the costs of the arbitration and that those costs would be borne by the unsuccessful party. It is alleged that Mr. Jacob allowed JSI to enter into those agreements when he knew JSI was insolvent and could not meet those financial obligations. They further allege that Mr. Jacob siphoned the funds from JSI, both before and after the arbitration award, leaving JSI unable to pay any of the costs.

Case Management

[16] On 30 April 2018, on motion by the plaintiffs and with the consent of the defendants, I assigned this action to case management and took on the role of case management master.

[17] Case management is a limited resource and not every case qualifies. It must be dedicated to where it can do the most good both for the parties and for the administration of justice as a whole. Case management is designed to assist cases that may otherwise take a disproportionate amount of judicial resources due to their complexity, difficulty or importance and to manage those cases so they can resolve or most effectively reach trial.

[18] In exchange for receiving a scarce judicial resource, the parties who request case management and who consent to it should be expected to work cooperatively, keep the bargains they agree to during the process and act in good faith to move their dispute forward.

The First Order - 30 April 2018

[19] In conjunction with ordering case management, I also set a timetable, on consent, that set 30 June 2018 as the date for completion of examinations for discovery, 31 August 2018 as the date for delivery of answers to undertakings, refusals and questions taken under advisement and 30 November 2018 as the date for mediation (the “30 April 2018 order”). The 30 April 2018 order was peremptory on the defendants, a term to which they consented.

[20] Examinations for discovery were conducted in accordance with the 30 April 2018 order. The plaintiffs answered their undertakings in accordance with the order but the defendants did not.

[21] In his responding affidavit, addressed below, Mr. Jacob advised that he gave 96 undertakings at the examination and the two months provided for in the 30 April 2018 order did not give him enough time to provide all the answers. I note that he delivered no answers at all for four and a half months after the examination, and two and a half months after the deadline and then, provided only partial answers. A number of further answers were provided between 19 November 2018 and 6 March 2019. By that date (now more than six months from the date provided in the 30 April 2018 order, answers to seven of the defendants’ undertakings and all their refusals were outstanding.

The Second Order - 15 May 2019

[22] The plaintiffs brought a motion to compel the defendants to answer their undertakings and a number of their refusals. The motion was heard over two days and resulted in two orders, one made 11 April 2019 and the second made 15 May 2019 (together, the “15 May 2019 order” for ease of reference).

[23] In total, 59 questions were ordered answered, with answers to be provided between 27 May 2019 and 14 July 2019.

[24] Mr. Jacob deposed on this motion that he provided answers on 13 May 2019 (in respect of the 11 April 2019 order) and further answers on 25 June 2019, 16 July 2019 and 9 September 2019. Not all the answers were provided as ordered and, indeed, some remained outstanding as of the date of the motion. (Counsel for the defendants delivered voluminous materials to the plaintiffs one or two days before this motion was heard and argued that a number of the answers that were to have been provided by 14 July 2019 were now answered. Given the late delivery, the plaintiffs did not review the 900+ pages to determine if this were now true.)

[25] In addition, I was required to amend the timetable, such that all follow up examinations for discovery of the defendants were to be completed by 2 August 2019 and answers from that discovery provided within 60 days of the examination. Mediation was now delayed a year from the 30 April 2018 order, i.e. from 30 November 2018 to 22 November 2019. These dates were again made peremptory on the defendants.

[26] Pursuant to the endorsement, the plaintiffs reached out at the end of June to schedule the further examination date before the 2 August 2019 deadline. In response the defendants advised that the schedule of counsel and of Mr. Jacob did not permit them to attend the court-ordered examination until after 4 September 2019. Although the order was made in May 2019, defendants’ counsel advised that he was on vacation until the third week of July and Mr. Jacob was unavailable throughout all of July and August 2019.

The Third Order - 25 July 2019

[27] The defendants’ advice that they would not meet the peremptory court-ordered schedule resulted in the plaintiffs scheduling a further case management conference on 25 July 2019. At that case management conference, I made a further order peremptory on the defendants (the “25 July 2019 order”). The order provided that Mr. Jacob’s continued discovery would take place by 11 September 2019, the defendants would answer undertakings arising from that examination by 28 October 2019 and the mediation would remain to be held by 22 November 2019.

[28] The examination did start but could not be concluded due to the defendants’ failure to provide answers to earlier ordered questions that had been due by 31 August 2018 under the 30 April 2018 order.

[29] According to the plaintiffs’ records, on that examination for discovery the defendants undertook to provide “a list of cheques, wire transfers, credit memos and deposits from JSI’s bank statements from March 2012 to June 2014 (Q1831); a list of expenses from JCM’s expense ledger from 2016-2018 for which particulars and supporting documentation will be produced (Q2112-2114); a list of travel expenses from JCM’s expense ledger for which particulars will be provided, including the individuals who travelled, the destination, the length of stay, and the companies or investors who Mr. Jacob or other travelers met with during the trip (Q2204); and a list of Visa reconciliation entries from JCM’s expense ledger, for which supporting statements will be provided (Q2209).”

[30] I am advised that the defendants did not answer these undertakings by the 28 October 2019 peremptory court ordered deadline. As a result, the plaintiffs scheduled a further case management case conference for 19 November 2019.

The Fourth Order - 19 November 2019

[31] The defendants’ defaults required a further amendment to the timetable. I ordered the defendants to deliver answers to their undertakings from the June refusals motion by 21 November 2019 (a date agreed to by the defendants in respect of six of the undertakings, as they advised they now had the information from CIBC to answer the questions) and deliver answers to their undertakings, refusals and questions taken under advisement from the continued discovery by 5 December 2019 (previously due 28 October 2019) (the “19 November 2019 order”). The completion of the continued examination was then set for 30 January 2020, answers from that examination to be provided by 16 March 2020 and mediation pushed back again to be held by 30 April 2020 (from 30 November 2018 to 22 November 2019).

[32] In an attempt to bring home the seriousness of any continued failure to comply, I reminded Mr. Jacob in the endorsement that he should be aware that if these deadlines were missed a further time, the plaintiffs may bring a motion before me for an order striking his defence.

[33] In his responding affidavit on this motion, Mr. Jacob advised that the lawyer working with Mr. Quance and with whom Mr. Jacob had been working to answer his undertakings left the firm in December 2019 and this caused delay in him providing answers. This does not explain why the answers were not provided by the 21 November 2019 date to which the defendants had consented, having told the court they had all the materials at the ready or why they did not answer the balance of the questions, as ordered, by 5 December 2019, well before the assisting lawyer’s departure. Further, in the letter advising the plaintiffs of the assisting lawyer’s departure, there is no indication that this was expected to delay any of the timetable matters. The note provided was purely informational, to notify the plaintiffs that she would not be at the scheduled 30 January 2020 discoveries and that Mr. Quance would be in attendance.

[34] Pursuant to 19 November 2019 order, the plaintiffs served the defendants with a notice of continuation of examination for 30 January 2020, giving two months’ notice of the examination date. Nine days before the examination, counsel for the defendants advised that they would be seeking an order to be removed as counsel of record as a result of the non-payment of their accounts. They further stated that Mr. Jacob would not be attending the examination. To the date of this motion, that continued examination – first set for 2 August 2019, then 11 September 2019, then 30 January 2020, has not been completed.

[35] The defendants’ lawyers, Himelfarb Proszanski, obtained an order on 10 February 2020 removing them from the record. The defendants did not appoint new counsel until 30 April 2021, at which time they re-retained Himelfarb Proszanski, with Mr. Lachmansingh replacing Mr. Quance. Mr. Jacob stated that he tried to find another lawyer but gave no details about whom he approached or when.

[36] The parties had set 29 April 2020 for the mediation. That date was rescheduled by both parties to 29 October 2020 due to the pandemic. The plaintiffs served their mediation brief on 15 October 2020. On 27 October 2020, two days before the scheduled mediation, Mr. Jacob, who was at that time self-represented, requested a week’s adjournment as he had not been able to find counsel since the removal order eight months earlier. The plaintiffs granted his request.

[37] The week came and went. Plaintiffs’ counsel followed up with Mr. Jacob on 9 November 2020 and 24 November 2020 for a new mediation date. Mr. Jacob responded to plaintiffs’ counsel on 25 November 2020 that his father had passed away on the weekend and that he would get back to him shortly. Plaintiffs’ counsel sent condolences and advised that Jacob should focus on his family and the firm would wait to hear from him. Just over two weeks later, on 9 December 2020, the plaintiffs wrote Mr. Jacob to follow up and sent further emails on 16 December 2020 and 18 December 2020.

[38] On 21 December 2020, the plaintiffs advised Mr. Jacob that if he did not respond and did not agree to mediate on 29 January 2021, (the mediation date having been originally set on consent for 30 November 2018), they would bring a motion to strike the defendants’ defence. In response the next day, Mr. Proszanski advised that he was considering going back on the record and would call. The plaintiffs followed up later that evening when they didn’t hear further. It appears that some communication took place between counsel which resulted in the plaintiffs sending a follow up correspondence on 22 December 2020 asking if Mr. Proszanski was available on 29 January 2021 for the mediation and asking for confirmation that the defendants would pay half the mediator’s costs.

[39] There was no answer so they followed up again on 29 December 2020 and were told that Mr. Proszanski was still waiting for “proper retainer arrangements”. Having had no response to a further email sent 6 January 2021, they emailed on 11 January 2021 to advise that if they did not have confirmation that Mr. Jacob would attend the 29 January 2021 mediation, they would arrange a further case conference. Having no response, the plaintiffs wrote Mr. Jacob again seeking confirmation that he would be attending on the set date (a date for which he had been given more than a month’s notice). On 12 January 2021, the plaintiffs advised:

Mr. Jacob – I sent the email below [11 January 2021] to Mr. Proszanski yesterday morning but inadvertently did not copy you on it. I am sending this again to you to give you an opportunity to respond. Please confirm by end of day today that you will attend mediation on January 29th, with or without counsel and will be responsible for half of the mediator’s fees. If we do not hear from you, we will be writing to Master Jolley as discussed below [referencing their email of 11 January 2021 to Mr. Proszanski, which had received no response]. Thank you.

[40] Mr. Jacob responded the next day as follows:

Your threat has been received. Hopefully you don’t always stoop to the tactics of your corrupt client. Looking forward to sharing more details with an un-conflicted judge. We will respond shortly.

[41] By way of response on 13 January 2021, Mr. Jacob advised that Mr. Proszanski’s mother passed away suddenly on 12 January 2021. On this motion, he also advised that Mr. Proszanski’s aunt also passed away later in January and a backlog accumulated during this time.

The Fifth Order – 12 February 2021

[42] In light of the defendants’ lack of commitment to a mediation date, the plaintiffs requested another case conference, which took place before me on 12 February 2021. Although they were aware of the date, neither Mr. Jacob nor Mr. Proszanski participated. Mr. Jacob had previously advised he was available and Mr. Proszanski had advised that any retainer he took would be limited to attending the mediation.

[43] In my endorsement (the “12 February 2021 order”), I stated:

The plaintiffs have been stymied in moving this matter forward as the defendants have not responded to numerous attempts to attend a mediation. As I have advised Mr. Jacob earlier, if he does not comply with court orders, it is very likely his defence could be struck on a motion to do so.

[44] I ordered the plaintiffs to provide the defendants with a draft consent timetable which was to include deadlines for them to answer the outstanding undertakings, to serve a notice of intention to act in person or notice of appointment of lawyer (which was to have been served by 10 March 2020) and for mediation before 30 March 2021. If the defendants did not consent to the order by 25 February 2021, I noted that the plaintiffs were at liberty to bring a motion to strike the defendants’ statement of defence. I further ordered costs of $750 payable by the defendants by 15 March 2021. As of 12 May 2021, the date of the affidavit in support of this motion, those costs remained unpaid. In his responding affidavit Mr. Jacob deposed that a cheque was delivered to plaintiffs’ counsel’s office on 11 May 2021.

[45] As acknowledged by Mr. Jacob in his responding affidavit on this motion, the intention of the 12 February 2021 order was to provide the defendants with “one final opportunity” to comply. Pursuant to the 12 February 2021 order, on 18 February 2021 the plaintiffs sent both Mr. Jacob and Mr. Proszanski a draft consent timetable. Neither approved it. Mr. Proszanski advised that he expected the firm to be retained to attend the mediation proposed for 23 March 2021 and that Mr. Jacob would consent to the order “shortly”. He also asked for a list of the outstanding undertakings which were provided.

[46] The defendants did not confirm the timetable order or the mediation and it did not proceed. There was no explanation from the defendants at the time. On this motion, Mr. Jacob deposed that he was advised by Mr. Proszanski that he intended Mr. Quance to attend the mediation but he took ill and retired. There is no explanation as to why Mr. Proszanski did not attend or why this was not conveyed to the plaintiffs.

[47] On 22 April 2021 Mr. Proszanski asked the plaintiffs to contact him about a mediation date, to which they responded they intended to bring this motion. They had waited long enough.

[48] On 29 April 2021, the defendants advised that they would serve a notice of appointment of lawyer (which was due more than a year before), that they would pay the outstanding costs (which were due 1.5 months before), that they would answer undertakings soon (some of which had been due since October 2019), would attend the continued examination (which was ordered to take place by 30 January 2020) and would attend a mediation. Mr. Jacob concluded his affidavit by stating that he would comply with any deadlines imposed in a new timetable.

[49] The defendants did not file their responding materials for this motion on time. There were no materials in the court record, filed in OneDrive. The evening before the hearing, they uploaded to Caselines a 979 page responding record, a 60 page supplementary record and a factum.

[50] As for the list of outstanding undertakings, a number of documents have not been produced. The defendants say they are in the hands of third parties. They advised that they wrote CIBC on 5 December 2019 for the banking records. Nothing had been provided as of the date of the plaintiffs’ affidavit. Further, no follow up requests were made between December 2019 and 12 May 2021, when a request was renewed in the face of this motion.

[51] In his responding affidavit, Mr. Jacob appended a chart with what he says are answers to the outstanding undertakings. The answer given to most questions was that a request for the documents had been made.

[52] What is indicated for a number of key undertakings involving CIBC is that the records which were to be produced in 2019 are no longer available. All that can be produced for the companies is the statements from June 2014 to June 2018 and for Mr. Jacob, from August 2015 to June 2018. In its email of 19 May 2021, CIBC stated “Please be [advised] the years from 2012-2014 are no longer available for retrieval and we can only retrieve back 6 years to 2015…. Associate, Maggie Chan [CIBC] also spoke to Katherine Lee [defence counsel] at the law firm to advise we can only retrieve back 6 years.” Ms. Lee sent an email to CIBC confirming a later conversation that stated: “You are unable to provide any requested documents relating to transactions/accounts from 2015 and prior.”

[53] There is some suggestion from the defendants that CIBC sent these documents, or some documents to the defendants’ law firm and they were not received. I am asked to infer that the package has gone missing. I cannot draw that inference based on the correspondence between the defendants’ counsel and CIBC. The letter from the defendants’ lawyer did not state that a package was missing but that items were missing from the package that was received. The lawyer’s letter dated 20 November 2019 said they “were recently provided with a package containing the requested banking information, however, the package was missing certain information”, namely Mr. Jacob’s personal bank and brokerage accounts from 1 March 2012 to 29 June 2018. Further, while I have been asked to take into account that CIBC may be able to search down the courier slip, there is no indication the slip refers to anything other than the package that was received, no indication what documents were in the allegedly missing package or that the documents can be reproduced if the package cannot be located one and a half years after it was sent. It appears, to the contrary, that they cannot be reproduced as they predate 2015.

[54] During his examination in September 2019, Mr. Jacob undertook to provide his Amex statements from March 2012 to June 2018. The defendants asked Amex for the statements in November and December 2019 and received no response. They next followed up just prior to the return of this motion, on 12 May 2021. Nothing was produced by the hearing of this motion.

[55] Information from another third party, Mr. Boltyansky is also apparently not available.

[56] In his responding affidavit, Mr. Jacob stated that he recognizes that the orders requiring to him answer his undertakings and refusals must be answered and that “the Defendants have failed to comply with deadlines for doing so and for completing other timetable steps as established by Court Orders. I accept that responsibility for non-compliance with those Orders rests with the Defendants, including myself.” However, he states that there were mitigating circumstances including the removal of his lawyers, COVID-19 and personal tragedies around the time of the last chance order.

[57] He deposes that he is prepared to complete discoveries and attend mediation and that he “intend[s] to comply with all Court Orders going forward”. Each of the three proposed mitigating circumstances are examined in turn.

Departure of the defendants’ lawyers

[58] Mr. Jacob deposed that the defendants are now “represented by new counsel at the firm that previously represented the Defendants” and that his lawyers are “moving expeditiously to satisfy the remaining undertakings” of which he says there are 23.

[59] This explanation fails to acknowledge three significant factors. First, and importantly, these undertakings are not the undertakings of Mr. Jacob’s lawyers. They are his undertakings. When his lawyers decided to remove themselves from the record for non-payment of fees, Mr. Jacob knew or should have known that he continued to be personally responsible for obtaining answers to court-ordered undertakings and refusals.

[60] Second, the answers have been outstanding since September 2019, if not earlier. The lawyers did not remove themselves until February 2020.

[61] Third, this is not a situation where a change of counsel resulted in some delay for a file to be transferred or a firm to get up to speed. This is the very same firm that had acted for the defendants since January 2017, but for their hiatus between February 2020 and April 2021. This included attending with Mr. Jacob on his various examinations and continued examinations for discovery. While I accept that Mr. Lachmansingh was new to the firm and new to the matter, the file was available to him.

COVID-19

[62] There is no real indication as to how this matter is said to have been impacted by the pandemic, other than the inability of CIBC to locate the courier slip from 2019, lately requested in May 2021.

[63] The pandemic caused the mediation to be adjourned from 29 April 2020 to 29 October 2020. The plaintiffs do not complain about that delay, which was consensual. They complain about the mediation delays from the first deadline of 30 November 2018 to 30 April 2020 and then from 20 October 2020 to date.

[64] Although Mr. Jacob did not provide any details that suggested he tried to arrange meetings with potential counsel and that those meetings were cancelled due to the pandemic and could not be later rescheduled, I do accept that the pandemic may have made it more difficult for Mr. Jacob to find a lawyer after February 2020.

Personal Tragedies

[65] I do recognize that both Mr. Jacob and Mr. Proszanski had deaths in their families between November 2020 and January 2021.

The Law

[66] There are few arrows left in the judicial quiver after issuing multiple peremptory case management orders over a span of three years. During that period, the plaintiffs have not concluded their discovery of the defendants, let alone obtained answers to undertakings or proceeded to mediation.

[67] The defendants’ statement that they are willing to comply with a new timetable is nothing different from what I have been told on each occasion that this matter has been before me and on the precipice of having the defence struck. There is no change in circumstances that would cause me to believe that Mr. Jacob is more serious about fulfilling his obligations this time than he was any of the other five times, including the number of times when the peremptory orders were made with his consent.

[68] Further, based on his past experience, if Mr. Jacob failed to comply once again, he would have no reason to expect anything more than another peremptory order extending the deadlines.

[69] The plaintiffs note the following breaches by the defendants, any one of which provides the court with discretion to strike out their statement of defence:

(a) failure to comply with a timetable (Rule 3.04(4)(b));

(b) failure to appoint new counsel for the defendants within 30 days of a court order to do so (Rule 15.04(7)(a));

(c) failure to produce a document ordered produced (Rule 30.08(2));

(d) failure to attend a scheduled examination for discovery (Rule 34.15); and

(e) failure to comply with an interlocutory order (Rule 60.12(b)).

[70] The balance to be considered on a motion such as this was aptly set out by Gray, J. in Broniek-Harren v. Osborne [2008] O.J. No. 1690 (S.C.J. at paragraph 28 et seq:

The Rules reflect a balance. The litigant does not have an untrammelled right to have his or her case heard. In order to be heard, a case must be processed in accordance with the Rules. By the same token, adherence to the Rules must not be slavish in all circumstances. They are, after all, designed to ensure that cases are heard. Throughout the Rules, the principle is reflected that strict compliance may be dispensed with where the interests of justice require it: see, for example, Rules 1.04(1), 2.01, 2.03, 3.02, and 26.01. The difficult issue, in any particular case, is to determine when noncompliance reaches the point that it can no longer be excused. The Court, and society as a whole, have an interest in ensuring that the system remains viable. If the Rules can be ignored with impunity, they might as well not exist.

[71] The court in Starland Contracting Inc. v. 1581518 Ontario Ltd., 2008 30449 (ON SCDC) considered the decision of Master Albert to strike the defendant’s defence as a result of its failure to comply with numerous court orders, including a last chance order. The court concluded at paragraph 34:

Where an order is made by a court on a “last chance” basis, the defaulting party is given fair warning as to the possible consequences of a failure to comply with its terms. Unless the court has the authority to follow through with the threatened sanction, its ability to control its process will be undermined.

[72] In Starland, supra, the appellate court found that there had been substantial compliance by the time the motion was brought, a point conceded by the plaintiff on that appeal. On that basis, the Divisional Court set aside the order striking the defence. I cannot say the same here. The defendants advised that they have answered most of the refusals and there are only 23 undertakings outstanding. When the defendants state that they have answered their undertakings, a review of the chart shows that the majority of those answers are that the documents are not available. Letters to third parties were either recent or there had been a gap of more than a year since an earlier request was made. There is evidence to suggest that the CIBC documents are no longer available, having been requested late, and little more than speculation that some missing package from 2019 might be located and have some of the relevant documents.

[73] Further, there has not been completion of the defendants’ discovery and no mediation has taken place.

[74] The Starland Divisional Court noted the particular importance of the court’s ability to control the litigation process in case managed matters. It stated at paragraph 26:

The ability of the court to control the litigation process is particularly important in matters that are case managed, such as construction lien actions. The authority to dismiss proceedings for repeated failure to comply with court orders and flagrant disregard for the court process is an essential management tool. A case management judge or master who has a continuous connection with an action, the parties and their counsel is well-positioned to monitor the conduct of the participants throughout the proceedings, and to determine whether anyone is deliberately stalling, showing bad faith or abusing the process of the court when deadlines are missed and defaults occur under procedural orders. A decision to dismiss an action or strike a pleading because of such defaults is entitled to deference, unless that decision is shown to have been exercised on wrong principles or based upon a misapprehension of the evidence such that there is a palpable and overriding error.

[75] Having carefully reviewed the substance of the defendants’ defaults and the impact on the ability of the court to do justice, as directed to do in Tizard Estate v. Ontario [2003] O.J. No. 3010, I am satisfied that these are not mere technical breaches, but have resulted in a situation where it would not appropriate to have the defendants continue their defence. I agree with Master MacLeod, as he then was, that “open disregard for court orders and failure to enforce them with appropriate sanctions will bring the system of case management into disrepute and undermine confidence in the civil justice system.” (Tizard Estate, supra at paragraph 21).

[76] Having flouted multiple peremptory court orders, including orders to which they consented, and having similarly ignored the last chance order, I find the defendants’ breaches to have become “contumelious such as to demonstrate an utter disregard by the defaulting party for the court’s orders” (Eloro Resources Ltd. v. Sovereign Capital Group (Ont.) Ltd. 2004 14047 (ON SC), 2004 CarswellOnt 544 at paragraph 6).

[77] If needed, I would have been satisfied that the plaintiffs have demonstrated prejudice as a result of these breaches. Had the defendants sought the documentation from CIBC after their June 2018 examination, documents dating back some six years would still have been in existence. This is relevant as the plaintiffs plead that there were numerous withdrawals from the JSI business account during the years for which statements are now missing that had the effect of judgment proofing JSI. Further, it was in the fall of 2014 that JSI agreed to pay costs if it was unsuccessful at the arbitration. Because the request was not made in a timely manner, it seems the documents were purged under the bank retention policy. I am not prepared to accept that the situation may be remedied by the possible location of a package of unknown contents sent by CIBC in December 2019. The record does not support, in my view, that any package is in fact missing.

[78] Like Vacca v. Banks [2005] O.J. No. 147 (Div. Ct.), the decision here to strike the defence is not made because of the defendants’ failure to answer their undertakings, although, to be clear, they have not answered their undertakings. It is as a result of their repeated breaches of court orders.

[79] The court in Vacca, supra emphasized the purpose of case management, stating:

Case Management Masters have significant powers under the Case Management Rules. These rules and the powers they afford are designed to reduce the expense and delay of civil actions. The purpose of case management is stated in rule 77.02:

77.02 The purpose of this Rule is to establish a case management system throughout Ontario that reduces unnecessary cost and delay in civil litigation, facilitates early and fair settlements and brings proceedings expeditiously to a just determination while allowing sufficient time for the conduct of the proceeding.

Repeated delays and failures to comply with procedural orders affect not only the parties to the action. They significantly increase the cost of the administration of justice due to the impact on administrative and judicial resources. Repeated breaches of orders must attract significant sanctions otherwise the Case Management Rules will become ineffectual and the ultimate goal of the rules will be unattainable.

The rules must not be rendered nugatory by failure to impose appropriate sanctions in cases of breach of orders.

[80] In upholding the dismissal of the action, the court went on to state:

There comes a time when this court is obliged to meet its responsibility for the effective administration of justice through case management by dismissing an action. Such is the case when the plaintiff repeatedly fails to comply with orders of the court whether or not there has been prejudice to the defendants.

In the circumstances of four breached orders, including the “last chance” order, the Master realistically had only two options – one was to give the plaintiffs yet another chance – the other was to dismiss the action.

Not only am I unable to find error in the exercise of discretion by the Master [to dismiss the action], I am of the view that her decision was correct.

[81] The defendants note in their factum that the critical question for the court on this motion is “whether or not there is an appropriate and practical remedy short of dismissal that will ensure compliance with the outstanding obligations and also ensure future compliance with orders and the rules”. I am satisfied that all efforts short of dismissal have been tried and have not succeeded in ensuring the defendants met their obligations to comply with orders made. The court has tried costs awards, peremptory orders, warnings and ultimately a last chance order. I am satisfied that there is no other appropriate and practical remedy short of dismissal that would ensure compliance going forward.

[82] The parties have uploaded their costs outlines. If they cannot agree on costs by 30 July 2021, they may each file costs submissions no more than three pages in length to my assistant trial co-ordinator at Christine.Meditskos@ontario.ca.

Master Jolley

Date: 24 June 2021