COURT FILE NO.: CV-15-534439
MOTION HEARD: 20220328
REASONS RELEASED: 20220629
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
INTEGRATED BUSINESS CONCEPTS INC., STUDENT HOUSING CANADA INC., and RV INC.
Plaintiffs
- and-
TRENT AKAGI, TERRY CORSIANOS, J.P. GRACI & ASSOCIATES, JIM PATTERSON, RUTH PROMISLOW and BENNETT JONES LLP
Defendants
BEFORE: ASSOCIATE JUSTICE McGRAW
COUNSEL: R. Chapman
Email: ronaldchapman@lawchambers.com
-Counsel for the Plaintiffs
P. Kolla
Email: pkolla@goodmans.ca
-Counsel for the Defendants Jim Patterson, Ruth Promislow and Bennett Jones LLP
C. Di Carlo
Email: carlodc@stockwoods.ca
- Counsel for the Defendant J.P. Graci & Associates
J. Campbell
Email: jcampbell@casscampbell.com
- Counsel for the Defendant Terry Corisanos
G. Roberts
Email: greg.roberts@roblaw.ca
- Counsel for the Defendant Trent Akagi
REASONS RELEASED: June 29, 2022
Reasons for Endorsement
I. Introduction
[1] The Plaintiffs brought a Rule 48.14(5) motion for a status hearing to extend the time to set this action down for trial. Five days before the initial return date, almost 8 months after scheduling the status hearing, the Plaintiffs abandoned their motion and served a trial record. The Defendants subsequently brought their own cross-motions requesting that the status hearing proceed.
II. Background and History of The Proceedings
[2] This action arises from the receivership of Synergy Group (2000) Inc. (“Synergy”) and related companies and the Plaintiff Integrated Business Concepts Inc. (“IBC”). Synergy marketed an alleged tax allocation scheme from 2009 to 2013 which was administered by IBC. Funds were collected from investors and transferred to a holding company which transferred funds to small private businesses which assigned 5% of their profits and 100% of their losses back to the holding company. The pooled losses were then assigned to investors on a pro rata basis so that investors could claim the losses as income tax deductions. However, the Canada Revenue Agency (“CRA”) disallowed the deductions and reassessed investors’ tax liabilities resulting in estimated total losses of $13,000,000 for approximately 3,800 investors.
[3] The Plaintiffs Student Housing Canada (“SHC”), a client of SHC which builds student housing and RV Inc. (“RV”), which provided funding to SHC, both received funds under the alleged scheme. Vincent Villanti is the principal of IBC and an officer of SHC and RV. Synergy shares the same registered office as IBC and RV.
[4] In 2009, the Defendant Trent Akagi, one of the investors, brought an action against Synergy and four of its principals. On April 24, 2013, Mr. Akagi obtained judgment in the amount of $163,578.98 which was upheld by the Court of Appeal.
[5] On June 14, 2013, Mr. Akagi brought an ex parte application seeking the appointment of a receiver over the assets, property and undertakings of Synergy and IBC. The Defendant Tony Corisanos was Mr. Akagi’s counsel on the application. By Order of C. Campbell J. dated June 14, 2013 (the “Appointment Order”), the Defendant J.P. Graci & Associates (“JPG”) was appointed Receiver. The Defendants Jim Patterson and Ruth Promislow of the Defendant Bennett Jones LLP (the “Bennett Jones Defendants”) acted as JPG’s counsel. Further orders expanding the scope of the receivership to, among other things, conduct investigations and freeze assets, were granted on June 24, June 28 and August 2, 2013 on an ex parte basis (collectively with the “Appointment Order”, the “Receivership Orders”).
[6] On September 16, 2013, the court dismissed a motion by the Plaintiffs and other parties to set aside the Receivership Orders. On May 22, 2015, the Court of Appeal allowed their appeal setting aside the Receivership Orders. The Court of Appeal held that the Receivership Orders stood “on a fundamentally flawed premise and are unjustifiably overreaching in the powers they grant” (Akagi v. Synergy Group (2000) Inc., 2015 ONCA 368 at para. 59).
[7] In March 2013, Mr. Villanti and others were criminally charged with respect to their involvement in the alleged tax scheme. Mr. Villanti was charged with fraud and conspiracy to commit fraud in excess of $5,000. He was committed to trial in November 2016 which was scheduled to begin in September 2017. However, Mr. Villanti brought two successful s. 11(b) Charter applications in 2017 and 2018 staying the criminal proceedings due to unreasonable delay. The Crown appealed but delayed in perfecting the appeal for 9 months. Mr. Vallanti brought an successful application in July 2020 to have the Crown’s appeal dismissed. The Crown’s appeal of the s. 11(b) stay was dismissed by the Court of Appeal on November 30, 2020.
[8] The Plaintiffs commenced this action by Statement of Claim issued on August 14, 2015 claiming $40,000,000 in general damages and $5,000,000 in punitive damages. The Plaintiffs allege that the Defendants used the Receivership Orders to improperly investigate and interfere with assets of the Plaintiffs and numerous other parties in order to assist the RCMP and the CRA and enable Bennett Jones LLP to commence class action proceedings on behalf of the investors.
[9] All of the Defendants except JPG have delivered Statements of Defence: Mr. Corsianos on September 18, 2015; the Bennett Jones Defendants on October 15, 2015; and Mr. Akagi on November 13, 2015. JFG delivered a Notice of Intent to Defend on September 16, 2015. On October 19, 2015, JPG’s counsel wrote to Plaintiffs’ counsel advising that JPG intended to bring a motion to strike for the Plaintiffs’ failure to seek leave to lift the stay of proceedings in favour of the Receiver under the Appointment Order. No response was ever received. In his affidavit sworn January 15, 2022 (the “Villanti Affidavit”) filed on this motion, Mr. Villanti acknowledges that the Plaintiffs require leave to proceed against JPG as Receiver and undertakes on the Plaintiffs’ behalf to bring a motion as soon as the current motion is completed.
[10] After August 2015, the Plaintiffs took no steps in this action and did not communicate with the Defendants until January 21, 2021 when they served a Notice of Change of Lawyer. Plaintiffs’ counsel filed a motion confirmation form on February 1, 2021 unilaterally scheduling a status hearing motion on June 1, 2021 and advised that materials would be delivered shortly. On April 15, 2021, the Plaintiffs served another Notice of Change of Lawyer appointing their current counsel who submitted a requisition form on May 20, 2021 for a 30-minute motion. After Defendants’ counsel advised that this was insufficient, counsel canvassed additional dates. On June 17, 2021, Plaintiffs’ counsel canvassed 2-hour dates in February 2022. On June 29, 2021, the Plaintiffs served their Notice of Motion for a status hearing on February 22, 2022.
[11] On February 14, 2022, Plaintiffs’ counsel confirmed that the motion was proceeding. On February 17, 2022, Plaintiffs’ counsel advised that the Plaintiffs were abandoning the status hearing and served a trial record. On February 18, 2022, the Plaintiffs served a Notice of Abandonment and the Defendants served Notices of Cross-Motion for a status hearing.
[12] As set out in my Endorsement dated February 22, 2022, I was advised by the motions office that based on the Plaintiffs’ amended confirmation form, the motion had been withdrawn on consent. It remained on my list as an urgent matter for 20 minutes. However, counsel advised that the withdrawal was not on consent and that the Defendants had served Notices of Cross-Motion for a status hearing and wished to proceed. There was insufficient time to hear the motion and it was adjourned to today.
III. The Law and Analysis
Status Hearings Generally
[13] Rule 48.14 states:
(1) Unless the court orders otherwise, the registrar shall dismiss an action for delay in either of the following circumstances, subject to subrules (4) to (8):
- The action has not been set down for trial or terminated by any means by the later of the fifth anniversary of the commencement of the action and January 1, 2017.
(5) If the parties do not consent to a timetable under subrule (4), any party may, before the expiry of the applicable period referred to in subrule (1), bring a motion for a status hearing.
(6) For the purposes of subrule (5), the hearing of the motion shall be convened as a status hearing.
(7) At a status hearing, the plaintiff shall show cause why the action should not be dismissed for delay, and the court may,
(a) dismiss the action for delay; or
(b) if the court is satisfied that the action should proceed,
(i) set deadlines for the completion of the remaining steps necessary to have the action set down for trial or restored to a trial list, as the case may be, and order that it be set down for trial or restored to a trial list within a specified time,
(ii) adjourn the status hearing on such terms as are just,
(iii) if Rule 77 may apply to the action, assign the action for case management under that Rule, subject to the direction of the regional senior judge, or
(iv) make such other order as is just.
[14] Although this action has not been dismissed by the Registrar, the five-year anniversary to set it down for trial has passed. The five-year anniversary of this action would have been August 14, 2020. However, pursuant to the Reopening Ontario (A Flexible Response to COVID-19) Act, 2020 (Ontario), time periods were suspended for 26 weeks from March 16, 2020 to September 14, 2020. This extended the fifth anniversary until approximately February 14, 2021.
[15] The test on a motion for a status hearing is two-fold and conjunctive. The plaintiff bears the onus of demonstrating that: i.) there is an acceptable explanation for the delay; and ii.) that if the action were allowed to proceed, the defendant would not suffer non-compensable or actual prejudice (Faris v. Eftimovski, 2013 ONCA 360 at para. 32; 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 at para. 32; Kara v. Arnold, 2014 ONCA 871at para. 9; Carioca’s Import & Export Inc. v. Canadian Pacific Railway Limited, 2015 ONCA 592 at para. 43).
[16] The plaintiff bears the onus to show cause why the action should not be dismissed for delay (Faris at para. 33). The focus of the court’s inquiry is on the conduct of the plaintiff who, as the party who commenced the proceeding, bears primary responsibility for its progress (Faris at para. 33; 1196158 Ontario Inc. at para. 29). The conduct of the defendant may be relevant, such as where a plaintiff who tries to move an action along is faced with some resistance or tactics that are not consistent with a willingness to see a relatively straightforward case proceed expeditiously (1196158 Ontario Inc. at para. 29).
[17] Although the court must be guided by the applicable two-part test, the determination as to whether to allow an action to proceed is discretionary and determining whether it would be unfair for the action to be dismissed requires a consideration of the circumstances and a balancing of the parties’ respective interests (Koepcke v. Webster, 2012 ONSC at para. 22; Carioca’s at para. 43). While Rule 48.14 was designed to have some “teeth”, the court should not take a rigid or purely formalistic approach to the application of timelines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits (Kara at para. 10). The court must apply a contextual approach weighing all of the relevant factors to determine the order which is just in the circumstances (Kara at paras. 12-14; Cobalt Capital CA Textile Investments, 2017 ONSC 4664 at para. 46).
[18] The Court of Appeal has identified two competing principles which arise from Rule 1.04(1) within the context of a disposition without trial: the public interest in timely justice and discouraging delay versus permitting actions to be determined on their merits (Faris at para. 24; Koepecke at para. 23):
“ Dismissals for delay involve a careful balance between two competing values. On the one hand, the Rules of Civil Procedure need to be enforced in a way that ensures timely and efficient justice, in the interests of plaintiffs, defendants, and society in general. On the other hand, society in general, and the parties, have an interest in the resolution of disputes on their merits and in the availability of flexibility to avoid potentially draconian results, by providing the opportunity for parties to offer a reasonable explanation for delay when it takes them beyond established timelines.” (Kara at para. 9)
[19] There is a preliminary issue with respect to the Plaintiffs’ abandonment of their motion. As set out above, 5 days before the initial return date the Plaintiffs served a trial record and advised that they were abandoning the status hearing and served a Notice of Abandonment on February 18, 2022. The Defendants served Notices of Cross-Motion for a status hearing on February 18, 2022.
[20] In my view, the status hearing should proceed. Rule 48.14(5) permits “any party”, including the Defendants, to bring a motion for a status hearing. Further, it is clear that this action is not ready for trial. In this regard, the present case is similar to Shabbir Khan v. Sun Life, 2011 ONSC 455; aff’d 2011 ONCA 650, where the plaintiff served a trial record 3 days before the status hearing, an affidavit of documents 2 weeks later and took the position that the passage of a trial record stopped the status hearing process. Parayeski J. concluded that the matter was not ready for trial, the plaintiff had passed the trial record in order to avoid the status hearing and the onus to show just cause and that it was appropriate to deal with the issue of delay in the context of a status hearing as requested by the defendants (Khan at paras. 2-6).
[21] I reach similar conclusions here. It is clear that this action is not ready for trial. Given that JPG has not defended the action and the Plaintiffs’ lift stay motion remains outstanding pleadings have not closed. Further, affidavits of documents have not been exchanged, examinations for discovery have not been scheduled and mandatory mediation has not been conducted (which in itself prohibits the filing of the Plaintiffs’ trial record). Accordingly, I am satisfied that the delivery of the trial record could have no other purpose than to attempt to avoid the status hearing. Although the Plaintiffs have abandoned their status hearing, it is reasonable and appropriate that the status hearing as requested by the Defendants proceed.
Have the Plaintiffs Provided An Acceptable Explanation For the Delay?
[22] For the reasons that follow, I conclude that the Plaintiffs have not met their onus of providing an acceptable explanation for the delay.
[23] Whether an explanation for delay is “acceptable” depends on the circumstances of each case (Koepecke at para. 22). “Acceptable” does not mean that the explanation must be “good”, only “adequate” or “passable” and “cogent” and the terms “acceptable”, “satisfactory” and “reasonable” are interchangeable in this regard (2046085 Ontario Inc. v. Raby, 2014 ONSC 774 at para. 6; Greenwald v. Ridgevale Inc., 2016 ONSC 3031 at para. 17; Carioca’s at para. 45; Postmedia Network Inc. v. Meltwater Holding B.V., 2017 ONSC 6036 at paras. 13-15). The progress of an action does not have to be ideal and the court should not conduct a week by week or month by month analysis (Goldman v. Pace, 2017 ONSC 1797 at para. 5; Greenwald at para. 17; Carioca’s at para. 46). A plaintiff may have to give a more a robust explanation to explain delay after five years than was the case after two years under the previous rule (Erland v. Her Majesty the Queen in Right of Ontario, 2019 ONSC at paras. 9 and 31; aff’d 2019 ONCA 689).
[24] After the Plaintiffs commenced this action in August 2015, they did not take any steps until January 21, 2021, a period of almost 5.5 years. During this time, the Plaintiffs did not attempt to communicate with Defendants’ counsel which included not responding to JPG’s counsel’s inquiries regarding the motion to strike. There is no discovery plan, affidavits of documents have not been delivered, examinations for discovery have not been scheduled and mandatory mediation has not been conducted.
[25] The Plaintiffs’ primary submission is that they were unable to move the action forward because, as set out in the Villanti Affidavit, Mr. Villanti was advised not to proceed with the claim because it would not be prudent as he would be exposed to cross-examination by Defendants’ counsel which would jeopardize his defence in the criminal proceedings. Once the criminal proceedings were dismissed in November 2020, he instructed counsel to proceed with this action.
[26] In my view, this explanation is not acceptable. The Plaintiffs unilaterally held this action in abeyance for over 5 years. A party is not permitted to hold an action in abeyance without the other parties’ knowledge and consent or by court order (Koepcke at paras. 28-30). Even if I accept the Plaintiffs’ explanation that it was reasonable to not to take any steps while Mr. Villanti’s criminal proceedings were ongoing, I cannot accept that it was reasonable for the Plaintiffs to not communicate at all with the Defendants for over 5 years. The Plaintiffs could have advised the Defendants of their intention and reasons not to move forward and discussed an agreement to hold the action in abeyance. It was also open to the Plaintiffs at any time to bring a motion to stay the action. The Plaintiffs did not even respond to the correspondence from JPG’s counsel regarding the motion to strike. In this respect, I adopt the reasoning of Master Muir in Business Development Bank of Canada v. I Inc., 2013 ONSC 1749 where one of the reasons provided for 2 years of inaction was that the plaintiff did not want to prejudice or adversely impact criminal prosecutions:
“17 However, even if I accept all of that as being a reasonable approach to dealing with these claims, it remains my view that it was nevertheless unacceptable for the plaintiff to simply let this action sit without doing anything. A number of options were available to the plaintiff. It could have attempted to reach an understanding with Papagni that this action would be held in abeyance while the plaintiff's other issues were dealt with. If Papagni resisted such an approach, the plaintiff could have sought a stay of this action from the court pursuant to section 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The plaintiff did neither of those things. Instead, it made a unilateral decision to hold this matter in abeyance without ever advising Papagni of its intention to do so. I agree with Master Dash's observations in Koepcke at paragraph 30 where he states as follows:
[T]he decision whether to hold the action in abeyance is one that must be made with the knowledge of the defendant and either with the defendant's consent or by order of the court.
18 In my view, it was not reasonable for the plaintiff to make the deliberate decision to hold this action in abeyance without as much as advising Papagni of its intention to do so. The party who commences litigation bears the primary responsibility under the Rules for the progress of the action. "The initiating litigant generally suffers the consequences of a dilatory regard for the pace of the litigation". See Wellwood v. Ontario (Provincial Police), 2010 ONCA 386 at paragraph 48. It was incumbent upon the plaintiff to at least do something to advance this claim or otherwise keep Papagni apprised of why the action remained in a holding pattern. The plaintiff is a very sophisticated organization represented by capable counsel. There is simply no excuse for its two years of inaction.”
[27] Given the Plaintiffs’ complete absence of any communication and “radio silence” for 5-plus years, it was reasonable for the Defendants to believe that this action was “dead on the vine” (1196158 Ontario Inc at paras. 27-30; Unlimited Motors Inc. v. Automobili Lamborghini Spa, 2019 ONSC 142 at paras. 10-12).
[28] The Plaintiffs’ explanation also fails to address why some steps in the litigation could not have been taken during this time period. Mr. Villanti’s reason for not proceeding was to avoid exposing himself to cross-examination which could have jeopardized his criminal defence. However, this does not explain why the Plaintiffs could not have worked on a draft discovery plan, delivered their affidavits of documents or responded and dealt with JPG’s proposed motion to strike and the stay of proceedings. These steps would not have required Mr. Villanti to be examined. In considering what steps the Plaintiffs might have taken, it is important to remember that although Mr. Villanti’s personal involvement with the Plaintiffs was central to the criminal proceedings, he is not a Plaintiff and his interests are separate from the Plaintiffs which are all corporations.
[29] I also reject the Plaintiffs’ argument that the Defendants’ failure to contact Plaintiffs’ counsel or request that the Plaintiffs “get on with the proceeding” supports their explanation. The Plaintiffs bear primary responsibility for advancing the litigation, not the Defendants. There is no evidence or suggestion that the Defendants did anything to impede the Plaintiffs from moving the action forward. Therefore, there is no basis to focus on the conduct of the Defendants who should not be expected to spend time and money on an action which they could have reasonably presumed was no longer proceeding (1196158 Ontario Inc at paras. 27-30).
Have the Plaintiffs Established that the Defendants Would Not Suffer Non-Compensable Prejudice?
[30] Having concluded that there is no acceptable explanation for the delay, it is not necessary for me to consider non-compensable prejudice. However, I also conclude that the Plaintiffs have not met their onus of establishing that the Defendants would not suffer actual prejudice if this action is permitted to proceed (1196158 Ontario Inc. at para. 32).
[31] Actual prejudice is any prejudice which would impair the Defendants’ ability to defend this action resulting from the Plaintiffs’ delay, not due to the sheer passage of time (Carioca’s at para. 57; H.B. Fuller Company et al. v. Rogers (Rogers Law Office), 2015 ONCA 173 at para. 37). It is a long-held principle that prejudice is inherent in long delays as memories fade and fail, witnesses become unavailable, and documents and other potential exhibits are lost giving rise to a presumption of prejudice due to concerns of trial unfairness (Langenecker v. Sauvé, 2011 ONCA 803, at para. 11; DK Manufacturing Group Ltd. v. MDF Mechanical Limited, 2019 ONSC 6853 at para. 28; 1196158 Ontario Inc. at para. 42). The longer the delay, the stronger the inference of prejudice to the defence flowing from that delay (Langenecker at para. 11). The plaintiff is not required to adduce affirmative evidence rebutting the presumption of prejudice, rather the court must consider all of the circumstances in evaluating the strength of the presumption (1196158 Ontario Inc. at para. 6(b); DK Manufacturing at para. 29).
[32] Given the significant period of inactivity of over 5 years, I conclude that a strong presumption of prejudice arises. The Plaintiffs’ submissions that there is no prejudice are limited to two sentences in the Villanti Affidavit: that the Statement of Claim was properly served and any investigation would have been done at that time; and the Defendants did not send emails or letters asking the Plaintiffs to proceed.
[33] In my view, this is insufficient to rebut the presumption of prejudice which arises here. I have already rejected the Plaintiffs’ argument regarding the Defendants’ failure to request that the Plaintiffs proceed with the action in the context of their explanation. It is an equally unhelpful argument with respect to prejudice. Similarly, citing proper service does not add anything here. More significantly, the Plaintiffs have not provided any evidence regarding the preservation of documents or the availability of witnesses as is reasonably expected of any plaintiff on a status hearing particularly in the context of the strong presumption of prejudice that arises here due to the long delay (Unlimited Motors at paras. 20-26; DK Manufacturing at para. 43-44). The only submission by the Plaintiffs regarding documents is their bald assertion that the Defendants already possess all of the relevant documents due to the receivership. This too is inadequate, particularly without any further particulars or explanation.
[34] Given how long this significant, inactive claim has lingered, Sharpe J.A.’s comments in 1196158 Ontario Inc. are relevant to balancing the parties’ respective interests:
“Another harm that flows from delay, properly relied on by the status hearing judge, is that it leaves the litigant with the claim hanging over its head in a kind of perpetual limbo. Fairness requires allowing parties to plan their lives on the assumption that, barring exceptional or unusual circumstances, litigation timelines will be enforced. "Litigants are entitled to have their disputes resolved quickly so that they can get on with their lives" and "[d]elay multiplies costs and breeds frustration and unfairness": Marché, at para. 25; see, also, Hamilton, at para. 21.” (1196158 Ontario Inc. at para. 44).
[35] Having considered all of the relevant factors and circumstances, I conclude that the Plaintiffs have not shown cause that the time to set this action down for trial should be extended. In the circumstances and the overall context of inactivity, the failure to explain it and the failure to demonstrate an absence of actual prejudice, I conclude that the result which properly balances the parties’ interests and is consistent with Rule 1.04(1) is to dismiss this action for delay pursuant to Rule 48.14 (7)(a).
IV. Disposition and Costs
[36] Order to go dismissing this action for delay.
[37] If the parties cannot agree on the costs of this motion, they may file written costs submissions not to exceed 3 pages (excluding Costs Outlines) on a timetable to be agreed upon by counsel.
Released: June 29, 2022
Associate Justice McGraw