COURT FILE NO.: CV-21-668061
DATE: 2022 12 30
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: QIU XIE as the trustee of XIE 2018 FAMILY TRUST, YUN ZUO in her personal capacity and as the trustee of THE XUEZHANG FAMILY TRUST, JIAN MING XU and XING WAN, Plaintiffs
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MARK GROSS, SHELDON GROSS, FAUSTO CARNICELLI, DENNIS DIVALENTINO, ALLEN GREENSPOON, GROSS PROPERTIES INC., GROSS CAPITAL INC., 800 PRINCESS STREET HOLDINGS LIMITED, PORTAGE ROAD HOLDINGS LIMITED, MORRISON STREET HOLDINGS LIMITED, 132 SECOND STREET HOLDINGS INC., 132 SECOND STREET PURCHASER LIMITED, 2478658 ONTARIO LTD., 2009 LONG LAKE HOLDINGS INC., GT SUDBURY HOLDING INC., 2771841 ONTARIO CORP., 2771840 ONTARIO LTD., 2771837 ONTARIO INC., 2771839 ONTARIO LIMITED, 65 LARCH HOLDINGS INC., 2753703 ONTARIO INC., 86 ANGELINE STREET HOLDINGS INC., 100 COLBORNE HOLDINGS INC., GT ORILLIA HOLDING INC., 249 ONTARIO STREET HOLDINGS INC., SOUTHMOUNT HEALTHCARE CENTRE INC., 240 OLD PENETANGUISH HOLDINGS INC., GT PORT HOPE HOLDING INC., VICTORIA AVENUE LP and VICTORIA AVENUE NORTH HOLDINGS INC., Defendants
BEFORE: Associate Justice Todd Robinson
COUNSEL: M. Armstrong and P. Waldmann, counsel for the plaintiffs
J. Figliomeni and A. Kwok, counsel for the defendants, 2753703 Ontario Inc., 2771837 Ontario Inc., 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp.
J. Wadden, counsel for the defendant, Mark Gross
D. Marr, counsel for the defendant, Fausto Carnicelli
HEARD: September 9, 2022 (by videoconference)
REASONS FOR DECISION (Set aside order, validate service, and set aside noting in default)
[1] Three service and pleadings-related motions were argued before me, with my decision reserved, as follows:
(a) a motion by the defendant, Mark Gross, seeking to set aside the prior order that extended the time to serve and validating service of the statement of claim on him and dismissing the plaintiffs’ request for that relief; and
(b) the balance of a motion by the plaintiffs seeking an order (i) validating service of the statement of claim and the materials and order from the plaintiffs’ ex parte motion for certificates of pending litigation against certain defendants, and (ii) for substituted service on the defendant, Sheldon Gross; and
(c) a motion by the defendants, 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp., seeking to set aside their noting in default by the plaintiffs.
[2] I am granting both set aside motions. I am also validating service on the numbered company defendants and Allen Greenspoon, with a requirement that they deliver defences within thirty days. I am otherwise dismissing the plaintiffs’ motion, without prejudice.
Analysis
Motion to set aside extension and validation of service
[3] Service of the statement of claim on Mark Gross was previously extended and validated by my colleague, Josefo A.J., when the plaintiffs’ motion to validate service of the statement of claim and motion materials and for substituted service on Sheldon Gross was originally heard in writing. Mark Gross seeks an order setting aside that order on the basis that the filing of his responding factum was erroneously rejected by the court and, as a result, his opposing arguments were not before my colleague or addressed. Mr. Gross further seeks an order dismissing the plaintiffs’ motion to extend and validate service against him.
[4] Mark Gross’ responding factum was served by fax and email. It was thereafter submitted for filing through the JSO Civil Submissions Online portal. Civil intake staff rejected the filing on the basis that the option of service by fax under the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) had been repealed. That rejection was in error, since the responding factum was validly served by email as reflected in the affidavit of service submitted with the factum. That valid form of service was apparently overlooked. As a result of that error, Mr. Gross was denied the right to have his opposing arguments heard.
[5] The plaintiffs do not dispute that Mark Gross was (and is) entitled to oppose their motion and should be afforded the right to argue against it. However, they submit that I should not set aside the prior order on a purely procedural basis. Rather, they argue that the order should stand unless there is a reason to interfere with the substantive result.
[6] In my view, it is appropriate that the order be set aside and that I address the parties’ arguments as a de novo hearing. Even if I were to reach the same result, the prior order was granted in circumstances that were procedurally unfair to Mark Gross (albeit unknown to my colleague when making the order). The order cannot stand on that basis alone. Mr. Gross is entitled to a fresh determination that considers his arguments without any risk of possible deference to the prior assessment or the decision made at the original return.
[7] Mark Gross does not dispute that he was served with the statement of claim on March 10, 2022, just beyond the expiry of the six-month period for service provided in subrule 14.08(1) of the Rules. Mr. Gross also does not argue that he suffered any prejudice from the 9-day late service. Instead, he argues that an extension should be denied because the statement of claim was improperly issued contrary to insolvency stays of proceedings and, further, because the factors generally considered on a motion to extend the time for service of a statement of claim militate against an extension in this case.
[8] I agree that this action appears to have been issued against Gross Capital Inc. and several of the other corporate defendants contrary to stays of proceedings under s. 69.3(1) of the Bankruptcy and Insolvency Act, RSC, 1985, c B-3, the receivership order of Dunphy J. made on June 29, 2021 in Court File No. CV-21-00664273-00CL, and the receivership order of Koehnen J. made on August 3, 2021 in Court File No. CV-21-00665375-00CL. Gross Capital Inc. has made an assignment into bankruptcy and the remaining corporate defendants (other than the numbered companies) appear subject to the receivership orders. No leave to commence this action against those defendants was sought or obtained.
[9] Mr. Gross is not himself bankrupt nor does he appear to be captured personally by the stay of proceedings in either receivership order. I am not convinced by Mr. Gross’ arguments that any liability he faces are derivative claims. Some may be, but not all. The statement of claim alleges liability of Mark Gross in his personal capacity on several bases, including that he assumed direct fiduciary duties to beneficial owners of the subject properties (including the plaintiffs) and breached those fiduciary duties, that he (and Sheldon Gross) used Gross Capital Inc. and Gross Properties Inc. as fraudulent sham corporations, and that he personally made fraudulently misrepresentations to the plaintiffs. These are claims by the plaintiffs in their own capacities as investors against Mr. Gross himself. They are not the type of derivative claim discussed in Rea v. Wildeboer, 2015 ONCA 373, to which I was referred in argument.
[10] Mr. Gross argues that the claims against Mark Gross are interwoven with the claims against the insolvent defendants. He submits that whether or not this claim may proceed is a matter that is more properly addressed on the commercial list in the insolvency proceedings. He points to the decision in Mundo Media Ltd. (Re), in which the Court of Appeal addressed the single proceeding model that applies to insolvency proceedings. That model favours litigation concerning an insolvent company being dealt with in a single jurisdiction rather than fragmented across separate proceedings. It is a judicial construct used to group all claims against a debtor with the objective of bringing efficiency to the insolvency process and maximizing returns for the benefit of all creditors: Mundo Media Ltd. (Re), 2022 ONCA 607 at paras. 6 and 40-41.
[11] There is no dispute that the plaintiffs are pursuing claims against corporate defendants that are subject to insolvency proceedings. Mark Gross’ role as a principal of the insolvent debtor corporations is indeed intertwined with the bases of personal liability alleged by the plaintiffs. If this action does proceed as against Mark Gross, it seems likely that findings will need to be made involving the insolvent debtor corporations. Such findings may be precluded by the stays of proceedings.
[12] A creditor who is not a “stranger to the bankruptcy” has the burden of demonstrating “sufficient cause” to have proceedings against a debtor fragmented across multiple jurisdictions: Mundo Media Ltd. (Re), supra at para. 6. The plaintiffs do not appear to be “strangers” to the insolvency proceedings.
[13] In my view, given the interrelationship of the allegations against Mark Gross personally and against the insolvent debtor corporations, the plaintiffs require a determination on the extent to which their claims against Mark Gross may proceed independently from the claims stayed by operation of the Bankruptcy and Insolvency Act and the receivership orders. That is particularly the case if the plaintiffs will not be seeking an order lifting the stay of proceedings and authorizing issuance of the statement of claim against the insolvent debtor corporations nunc pro tunc.
[14] Having regard to the single proceeding model for insolvency proceedings and my lack of jurisdiction to make a lift-stay order, there is good reason to have a commercial list judge in the insolvency proceedings address whether the claim against Mark Gross may proceed. It is thereby appropriate that this dispute be addressed in that forum, unless a judge of that court directs that the issue may be decided by an associate judge.
[15] For these reasons, I need not address the arguments on the factors applicable to extending the time for service of a statement of claim. The order of Josefo A.J. is hereby set aside. The plaintiffs’ request to extend the time for serving the statement of claim on Mark Gross and validating service on March 10, 2022 is dismissed, without prejudice to bringing the motion again on the commercial list for directions or a determination on the extent to which the action against Mark Gross may proceed.
Motion to validate service and for substituted service
[16] As noted above, the plaintiffs’ service-related motion was originally brought in writing. It sought various relief to validate service of the statement of claim on a number of the defendants, to extend the time to serve Mark Gross and Sheldon Gross with the statement of claim, and for substituted serviced on Sheldon Gross. Josefo A.J. only granted the relief extending the time to serve Sheldon Gross and extending the time to serve and validating service of the statement of claim on Mark Gross (the latter of which gave rise to Mark Gross’ motion addressed above). The balance of relief was adjourned to an oral hearing.
[17] The outstanding relief from that motion still sought by the plaintiffs is an order validating service of the statement of claim and motion materials on each of Fausto Carnicelli, Allen Greenspoon, Dennis DiValentino, 2753703 Ontario Inc., 2771841 Ontario Corp., 2771840 Ontario Ltd., 2771837 Ontario Inc., and 2771839 Ontario Limited and substituted service of the statement of claim on Sheldon Gross by email.
(a) Proper forum
[18] The position taken by Mark Gross on the single proceeding model was not taken by any of the other responding defendants. Mr. Gross’ counsel submitted that it was open to me to consider the impact of this action proceeding against any of the defendants on the civil list outside of the insolvency proceedings, including the potential impact on creditors of the corporations subject to those insolvency proceedings.
[19] In my view, I need not address that issue at my own initiative. No other defendant has taken the position that this action cannot proceed against them. As discussed above, this is not a situation where the plaintiffs clearly cannot pursue Mark Gross without leave of the court. That is an issue that, in my view, requires consideration and direction from the commercial court. The circumstances of the remaining defendants against whom relief is sought on this motion are different than those of Mr. Gross.
(b) Validating service
[20] Rule 16.08 of the Rules provides that, where a document has been served in a manner other than one authorized by the Rules or an order, the court may make an order validating the service where the court is satisfied that (a) the document came to the notice of the person to be served; or (b) the document was served in such a manner that it would have come to the notice of the person to be served, except for the person’s own attempts to evade service. The focus on a validation motion is thereby notice to the party being served.
[21] The validation motion as against Fausto Carnicelli was withdrawn on agreement that Mr. Carnicelli’s counsel had accepted service and that Mr. Carnicelli would be delivering a defence. I accordingly make no order with respect to Mr. Carnicelli.
[22] None of 2753703 Ontario Inc., 2771841 Ontario Corp., 2771840 Ontario Ltd., 2771837 Ontario Inc., or 2771839 Ontario Limited oppose the validation relief. I am accordingly validating service of the statement of claim on those parties as requested and granting thirty (30) days for them deliver a defence.
[23] With respect to Allen Greenspoon and Dennis DiValentino, there is no evidence of any attempts to serve them directly with the statement of claim and motion materials. There is accordingly no evidence supporting any evasion of service by either of them. Validation is sought on the basis that the corporate defendants in which they are directors and officers have notice of the action.
[24] The addresses listed for Dr. Greenspoon and Mr. DiValentino in the various corporate profile reports for the numbered company defendants are the same addresses at which personal service of the documents was attempted on those corporations. They are also addresses to which copies of the documents were mailed. However, subrule 16.08(a) requires that I am satisfied that the documents came to the notice of Dr. Greenspoon and Mr. DiValentino, not that they were mailed to an address that may be associated with them.
[25] Dr. Greenspoon confirmed during an examination for a motion by the numbered company defendants to discharge the plaintiffs’ certificates of pending litigation (for which my reasons are being released concurrently) that he had seen and reviewed the statement of claim. I am satisfied from Dr. Greenspoon’s admission of having reviewed the statement of claim that it has come to his attention. I am also satisfied from his examination evidence that the materials for the plaintiffs’ motion for certificates of pending litigation and the order granting leave to issue them have come to the attention of Dr. Greenspoon. I am validating service of those documents and granting a similar thirty (30) days to defend.
[26] Mr. DiValentino is different. Unlike Dr. Greenspoon, he was not examined. Based on the affidavit of attempted service on the numbered company defendants, he does not reside at the addresses listed in the corporate profile reports. Mr. DiValentino was ultimately served with the motion record at an address in Stoney Creek that also happens to be one of the properties in which the plaintiffs’ allege they invested. There is nothing in the record connecting that address to Mr. DiValentino, such as a driver’s licence search or skip tracer report. Mr. DiValentino has not responded to the motion, but that may be because he is not on notice of it.
[27] The plaintiffs submit that, as a director and officer of some of the corporations who are represented by counsel, Mr. DiValentino is likely aware of the claim and prior motion materials. However, the threshold in subrule 16.08(a) is not that the documents “likely” came to the attention of Mr. DiValentino. Since there is no evidence that Mr. DiValentino has evaded service, I must be satisfied that he has actual notice of the served documents, notably the statement of claim.
[28] The plaintiffs’ argument for implied notice to Mr. DiValentino is not without merit. However, I am not prepared to infer that the statement of claim, motion materials, and order came to the notice of Mr. DiValentino based solely on the fact that companies in which he is (or was) a director or officer do have notice. There is no evidence supporting that Mr. DiValentino has been provided with a copy of the statement of claim or the motion materials. Cross-examination evidence of Stephen Foxall on his affidavit in the motion to discharge the plaintiffs’ certificates of pending litigation is not clear about what, if anything, was discussed with Mr. DiValentino about this litigation or the prior motion.
[29] I am not satisfied on the limited record before me that Mr. DiValentino has actual notice of this claim. I am thereby declining to validate service via the corporations. The plaintiffs have made no real efforts to locate and serve Mr. DiValentino. Either they must do so or they must put forward better evidence supporting actual notice. Because there is no evidence of any efforts to serve Mr. DiValentino, I am not extending the time for service, but simply because there is no evidentiary basis to make such an order. It is without prejudice to seeking such relief or other service-related relief on further and better evidence.
[30] Since validation on the corporations has been granted on an unopposed basis, it may well be that the issue of formally serving Mr. DiValentino becomes moot. He is, or at least was at the time the validation motion was brought, a principal of some of the corporations. Certainly, if Mr. DiValentino does have a copy of the statement of claim, there is little to be gained by him forcing the plaintiffs to the costs of technical compliance with the service requirements of the Rules. Doing so could expose Mr. DiValentino to a potential adverse costs award if it is demonstrated that he did, in fact, have actual notice and took an unnecessary and overly technical course of action that only served to drive up costs.
(c) Substituted service
[31] I am not granting the relief for substituted service on Sheldon Gross. I am also declining to further extend the time for service.
[32] Subrule 16.04(1) of the Rules provides that, where it appears to the court that it is impractical for any reason to effect prompt service of an originating process or any other document required to be served personally or by an alternative to personal, the court may make an order for substituted service.
[33] At the original return of this motion in writing in April 2022, Josefo A.J. extended the time to serve Sheldon Gross to August 31, 2022, but declined to grant relief for substituted service. That relief was adjourned.
[34] There is no evidence of any genuine efforts to locate and serve Sheldon Gross between the order on April 25, 2022 and the extended service deadline on August 31, 2022. The only evidence before me is an affidavit of service confirming that a copy of the statement of claim and the motion materials for this motion were served Sheldon Gross by email to his grosscapital.ca email address on August 25, 2022. That was four business days before the extended deadline. There is no explanation for why service efforts were not made in the prior four months.
[35] In addition, there is no evidence that the email address at which Sheldon Gross was purportedly served and the proposed email for substituted service is active. The most recent evidence of that email address being active is from August 2020, which pre-dates this litigation and both the bankruptcy and receivership proceedings. No responses have been received from Mr. Gross to emails sent to that address and nothing before me supports that it continues to be monitored post-insolvency.
[36] Put simply, there is nothing before me supporting that it was (or is) impractical to effect prompt service of the statement of claim on Sheldon Gross by personal or alternative to personal service. The record suggests that not even basic reasonable efforts have been made to locate and serve Sheldon Gross. There is also no basis upon which to validate service by email, since there is no evidence supporting actual notice to Mr. Gross via that email address. I am accordingly dismissing the motion insofar as it seeks substituted service on Mr. Gross by email, without prejudice to moving for another form of substituted serviced on further and better evidence supporting reasonable efforts to locate and serve Mr. Gross and the impracticality of effecting prompt personal service.
[37] Since the plaintiffs have failed to explain the delay in service after Josefo A.J.’s extension, I decline to further extend the service deadline. However, that is without prejudice to the plaintiffs moving for a further extension on evidence explaining what (if any) steps were taken to serve Sheldon Gross during the extended period. Given my decision above with respect to Mark Gross, the plaintiffs may also wish to seek similar clarification/relief on the commercial list with respect to their claim against Sheldon Gross.
Motion to set aside noting in default
[38] 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. seek an order setting aside their noting in default by the plaintiffs. In my view, the plaintiffs’ opposition to their motion is meritless.
[39] Subrule 19.03(1) of the Rules provides that the noting of default of a defendant may be set aside by the court on such terms as are just. Setting aside a noting in default is a discretionary decision. In exercising that discretion, the court must consider “the context and factual situation” of the case: Intact Insurance Company v. Kisel, 2015 ONCA 205 at para. 13.
[40] Although not cited by either party, the Court of Appeal has more recently addressed applicable considerations on a motion to set aside a noting in default. In Franchetti v. Huggins, the Court of Appeal confirmed that there is a strong preference for deciding civil actions on their merits, as well as a desire to construe rules and procedural orders non-technically and in a way that gets the parties to the real merits: Franchetti v. Huggins, 2022 ONCA 111 at para. 8.
[41] The Court of Appeal reiterated the discretionary nature of whether to set aside a noting in default and restated a non-exhaustive list of relevant factors that may be considered when deciding whether to set aside a noting in default. They include the parties’ behaviour; the length of the defendant’s delay; the reasons for the delay; the complexity and value of the claim; whether setting aside the noting of default would prejudice a party relying on it; the balance of prejudice as between the parties; and whether the defendant has an arguable defence on the merits: Franchetti v. Huggins, supra at paras. 9-10.
[42] It is open to me to consider whether the defendant numbered companies have an arguable defence on the merits. However, the Court of Appeal has made clear that, unlike in a motion to set aside a default judgment, it is only in an extreme circumstance that a defendant is required to demonstrate an arguable defence on the merits, particularly where the motion is brought early in the litigation process: Intact Insurance Company v. Kisel, supra at para. 13; Franchetti v. Huggins, supra at para. 10.
[43] The plaintiffs submit that I should view the factual circumstances of this case as supporting a deliberate or tactical decision by 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. not to defend. I give no effect to that submission.
[44] The plaintiffs’ motion seeking validation of service of the statement of claim was brought on notice to 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. It was adjourned to an oral hearing. Josefo A.J.’s endorsement and order were provided to counsel now acting for those defendants. Notwithstanding that the motion remained pending, the plaintiffs pursued having the numbered companies noted in default and, after several rejections by the court, were ultimately successful. At no point was a demand made to the numbered companies for their defence. There was no indication or warning given to the numbered companies that they would be noted in default despite an outstanding motion to validate service on them. In addition, having secured a noting in default, the plaintiffs did not withdraw the still-pending validation relief.
[45] Subsequent to the noting in default, starting in mid-June 2022, counsel for the numbered companies began seeking availability from plaintiffs’ counsel for a motion to discharge the certificates of pending litigation obtained by the plaintiffs. There should have been no doubt by July 11, 2022 that 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. were represented. That is when a link to the motion record to discharge the certificates of pending litigation was sent with an email that expressly confirmed counsel were acting for all of 2753703 Ontario Inc., 2771837 Ontario Inc., 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp.
[46] Notwithstanding further communications, including service of a factum by defence counsel, plaintiffs’ counsel did not advise of the noting in default until July 20, 2022, and even then only in response to receiving a draft confirmation of motion form.
[47] Having been served with the validation motion, 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. had no reason to believe that they would be noted in default pending disposition of that motion. Validity of service on those parties had been placed before the court and the plaintiffs provided no notice of any intention to pursue a separate track. In my view, such notice ought to have been given. In these circumstances, I find no material delay in 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. defending.
[48] 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. sought consent to set aside the noting in default promptly after being advised of it. Consent was refused. The defendants thereafter brought this motion without delay.
[49] This is a complex claim for $5 million in damages, involving allegations of fraud, oppression, conversion, breach of trust, and unjust enrichment. Serious allegations of fraud are advanced against the numbered company defendants and certificates of pending litigation have been registered against their properties. There is clear prejudice to 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. from denying their motion to set aside the noting in default. There is, in my view, no prejudice to the plaintiffs. The action remains at the pleadings stage. It remains mired in procedural problems, including the various insolvency matters already discussed in these reasons.
[50] Although not strictly necessary to my decision, the draft statement of claim submitted for the five defendant numbered companies supports a number of arguable defences on the merits. Those are consistent with the positions taken in the related motion to discharge the plaintiffs’ certificates of pending litigation.
[51] For these reasons, the relevant factors all favour setting aside the noting in default for each of 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. I am accordingly making that order.
Costs
[52] If successful in their motion, the plaintiffs sought their costs of their validation and extension motion in the amount of $15,000 on a partial indemnity basis, with $7,500 payable by Mark Gross and $7,500 payable by 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. At best, the plaintiffs have had divided success on their motion.
[53] Mark Gross succeeded in setting aside the service order and successfully opposed an extension and validation. He is entitled to costs of his motion and opposition in the de novo hearing. He seeks his partial indemnity costs of $15,000, including HST and disbursements. In my view, given the importance of the issues to Mr. Gross, the materials filed, the arguments made, the reasonable rates claimed, and the result, the requested partial indemnity costs are fair, appropriate, and within the reasonable expectations of the plaintiffs. I am accordingly awarding those costs.
[54] With respect to the plaintiffs’ costs of their motion claimed against the numbered companies, in my view, there should be no costs. The motion became necessary to effect service, but it was not limited to validating service on the numbered company defendants. It also included relief against Fausto Carnicelli, Allen Greenspoon, Dennis DiValentino, Mark Gross, and Sheldon Gross, on which time was spent and on which there was divided success. The record does not support any evasion of service by the defendants that might warrant an adverse costs award. It also does not support earnest efforts in the six-month service period to locate and effect service on any of the individual defendants.
[55] The numbered company defendants were not clear about whether they were opposing the motion until the hearing before me. In my view, that did lead to unnecessary preparation costs. However, it is impossible to know what time was incurred by plaintiffs’ counsel in preparing for the oral hearing. The costs outline consists of a single block of work descriptions for all tasks and lump sum aggregate times spent by each of the two lawyers and student-at-law. I am thereby unable to ascertain the extent to which any conduct by the numbered company defendants may have exacerbated costs. I am also not prepared to pull a number out of thin air. A properly organized costs outline would have permitted me to consider if an order for costs thrown away from unnecessary preparation was appropriate. However, some preparation would always have been required to address validation on the other defendants and substituted service on Sheldon Gross.
[56] The plaintiffs also seek their costs thrown away from the last appearance before McAfee A.J., at which the plaintiffs’ motion was adjourned on consent with a dispute over costs. In my view, none of the parties are entitled to costs of that attendance. Adjournment was necessitated by the collective conduct of counsel. Only the plaintiffs’ motion was properly booked, yet the parties agreed to add Mark Gross’ motion despite not having properly booked it to be heard concurrently. It appears that 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. simply sought to add their motion without having discussed doing so and without booking it. Parties cannot unilaterally decide to add motions to a list.
[57] Overall, the return before McAfee A.J. became wasted because of a collective failure of the parties to follow motion booking, CaseLines invitation, and material uploading requirements, a lack of communication between counsel about how and when the motions should be argued, failing to clearly articulate positions on the motions, and a lack of coordination to ensure that all relevant materials were appropriately organized and uploaded for review by the court.
[58] The plaintiff has been unsuccessful in opposing the set aside motion by 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. Those defendants seek their partial indemnity costs in the amount of $10,000. The plaintiffs argue that I should consider that the same counsel now representing all numbered company defendants was asked who they represented and confirmed that they were only representing one of the defendants. They submit that costs should thereby be no more than $6,500.
[59] In my view, whether the noting in default was justified is separate from whether opposing the motion was warranted. Most of the costs incurred resulted from the plaintiffs’ election to oppose set aside in circumstances where a motion to validate service remained pending and none of 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. were given any notice that the plaintiffs were pursuing default proceedings despite the pending motion. The plaintiffs made a conscious decision to oppose the set aside. I see no reason to insulate them from costs simply because the three corporations ultimately retained the same counsel that had already been retained by 2771837 Ontario Inc.
[60] The costs claimed by the numbered companies are generally reasonable for the materials prepared. The costs outline reflects an appropriate allocation of work between senior and junior lawyers. Two lawyers working and appearing in court together is clearly within the reasonable expectations of the plaintiffs, since that is what their own counsel have done. Nevertheless, considering the total time spent and the materials actually prepared, there appears to be some redundancy of time. There is also time claimed for the plaintiffs’ motion, which are not properly costs of the defendants’ motion. I have also held above that no party is entitled to costs of the appearance before McAfee A.J., which are claimed.
[61] The partial indemnity costs claimed by the numbered company defendants is reduced from the amount set out in the costs outline. That reduction does account for some of my concerns, but not all. I accordingly fix costs of the numbered company defendants’ motion in the amount of $8,500, including HST and disbursements, payable within thirty days.
Disposition
[62] For the above reasons, I order as follows:
(a) Service on 2753703 Ontario Inc., 2771841 Ontario Corp., 2771840 Ontario Ltd., 2771837 Ontario Inc., 2771839 Ontario Limited, and Allen Greenspoon of the statement of claim, motion record of the plaintiffs dated September 7, 2021, factum of the plaintiffs dated September 9, 2021, and the order of Graham A.J. dated September 10, 2021 are hereby validated.
(b) The noting in default of 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. are hereby set aside.
(c) Each of 2753703 Ontario Inc., 2771841 Ontario Corp., 2771840 Ontario Ltd., 2771837 Ontario Inc., 2771839 Ontario Limited, and Allen Greenspoon shall have thirty (30) days from the date of this order to deliver their statements of defence.
(d) Paragraph 1 of the order of Josefo A.J. dated April 25, 2022 is hereby set aside.
(e) The plaintiffs’ motion to extend the time to serve the statement of claim and validate service against Mark Gross is dismissed, without prejudice to seeking that relief by motion to a commercial list judge in the insolvency proceedings, subject to any direction by a judge that the issue may be decided by an associate judge.
(f) The balance of the plaintiffs’ motion is dismissed, without prejudice to moving again on further and better evidence as set out in these reasons.
(g) With respect to costs:
(i) There shall be no costs of the plaintiffs’ motion.
(ii) The plaintiffs shall pay to Mark Gross his costs of his motion fixed in the amount of $15,000, including HST and disbursements, payable within thirty (30) days.
(iii) The plaintiffs shall pay to 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. their costs of their motion fixed in the amount of $8,500, including HST and disbursements, payable within thirty (30) days.
(h) This order is effective without further formality.
[63] A copy of these reasons shall be included in any further motion dealing with the relief dismissed without prejudice.
[64] Draft orders were including in the materials for the motions by the plaintiffs and by 2771839 Ontario Limited, 2771840 Ontario Ltd. and 2771841 Ontario Corp. No draft order was submitted by Mark Gross. I have signed amended versions of the draft orders that were submitted. If Mr. Gross requires a formal order, then he will need to follow the process outlined in rules 59.03 and 59.04 of the Rules for preparing, approving, settling (if necessary), and issuing an order through the registrar.
ASSOCIATE JUSTICE TODD ROBINSON
DATE: December 30, 2022
COURT FILE NO.: CV-21-668061
DATE: 2022 12 30
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
QIU XIE as the trustee of XIE 2018 FAMILY TRUST, YUN ZUO in her personal capacity and as the trustee of THE XUEZHANG FAMILY TRUST, JIAN MING XU and XING WAN, Plaintiffs
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MARK GROSS, SHELDON GROSS, FAUSTO CARNICELLI, DENNIS DIVALENTINO, ALLEN GREENSPOON, GROSS PROPERTIES INC., GROSS CAPITAL INC., 800 PRINCESS STREET HOLDINGS LIMITED, PORTAGE ROAD HOLDINGS LIMITED, MORRISON STREET HOLDINGS LIMITED, 132 SECOND STREET HOLDINGS INC., 132 SECOND STREET PURCHASER LIMITED, 2478658 ONTARIO LTD., 2009 LONG LAKE HOLDINGS INC., GT SUDBURY HOLDING INC., 2771841 ONTARIO CORP., 2771840 ONTARIO LTD., 2771837 ONTARIO INC., 2771839 ONTARIO LIMITED, 65 LARCH HOLDINGS INC., 2753703 ONTARIO INC., 86 ANGELINE STREET HOLDINGS INC., 100 COLBORNE HOLDINGS INC., GT ORILLIA HOLDING INC., 249 ONTARIO STREET HOLDINGS INC., SOUTHMOUNT HEALTHCARE CENTRE INC., 240 OLD PENETANGUISH HOLDINGS INC., GT PORT HOPE HOLDING INC., VICTORIA AVENUE LP and VICTORIA AVENUE NORTH HOLDINGS INC., Defendants
REASONS FOR DECISION
Associate Justice Todd Robinson
Released: December 30, 2022