COURT FILE NO.: CV-22-00000441-0000
DATE: 2023-02-13
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Cashin Mortgages Inc., Operating as Verico Cashin Mortgages, Plaintiff
AND:
2511311 Ontario Ltd., Operating as Mortgages Alliance – Main Street Mortgages, The Mortgage Alliance Company of Canada Inc., Roger Grubb, Orlando Catala, Gerald William (Jerry) Fragomeni, Nikos (Nick) Nicolaou, and Aimee Nanette Novack, Defendants
Krystian Catala and Greenbrix Capital Inc., Respondents
BEFORE: Kurz J.
COUNSEL: Colin Pye, for Mark Cashin, Plaintiff
Jennifer Sullivan, for 2511311 Ontario Ltd., Operating as Mortgages Alliance – Main Street Mortgages and Roger Grubb, Defendants
Scott Pollock, Counsel for The Mortgage Alliance Company of Canada Inc., Defendant
Pierre Lermusieaux and Mohammad Zulifiqar (Articling Student), for Orlando Catala, Gerald William Fragomeni, Nikos Nicolaou, Aimee Nanette Novack Defendants
Pierre Lermusieaux, for Krystian Catala and Greenbrix Capital Inc., Respondents
HEARD: February 7, 2023
ENDORSEMENT
Introduction
[1] The Defendants, Orlando Catala, Gerald (Jerry) William Fragomeni, Nikos (Nick) Nikolaou, Aimee Nanette Novack, and the Defendants by Counterclaim, Krystian Catala (“Krystian”) and Greenbrix Capital Inc. (“GBCI”) move to dismiss, or in the alternative stay this action. Those moving parties (collectively the “Moving Parties”) claim that the Plaintiff, Cashin Mortgages Inc., Operating as Verico Cashin Mortgages (“CMI”), lacks the legal capacity to commence this action. In the alternative, they claim that this action is an abuse of process.
[2] The Moving Parties argue that CMI is without legal capacity to commence this action because the pith and substance of CMI’s claims arise from an alleged breach of an unregistered trademark. Thus, any claims that CMI may make against the defendants must be brought as a passing-off action under the Trademarks Act, RSC 1985, c T-13 (the “TMA”). Yet CMI did not plead or rely on the TMA in its Statement of Claim. The Moving Parties add that the other statutes which CMI relies upon in its Statement of Claim do not grant it the right to bring an action such as this.
[3] The Moving Parties offer two grounds for their abuse of process argument. First, they allege that CMI has harassed them, directly and indirectly, with a campaign of vituperative correspondence. In that correspondence, which was also sent to their professional regulator and others with whom they do business, CMI accused the Moving Parties and their co-Defendants of various legal and professional improprieties.
[4] Second, the Moving Parties assert that there is an impermissible overlap between the parties and subject of this action and those of a Toronto action, file no. CV-20-642947 (the “Toronto action”). That action was commenced by Krystian and GBCI, the third parties in this action. They sued CMI and its principal, Mark David Cashin (“Cashin”) for financial damages and a declaration that they have the exclusive right to the “Greenbrix” name. CMI and Cashin’s counterclaim in the Toronto Action (the “Counterclaim) while ostensibly against the two Plaintiffs in that action, actually sought interlocutory relief against so broad a swath of persons that all of the Defendants in this proceeding were effectively drawn into that litigation. Yet almost a year and a half after CMI and Cashin brought the Counterclaim, they commenced this separate action in a different jurisdiction, Halton. They are suing the same people whom they wished to be subject to the injunctive relief sought in the Counterclaim.
[5] CMI responds that it does not rely on the TMA because it seeks relief on other legal grounds. Its claim is based on breach of contract, the common law tort of passing-off, and unjust enrichment. It argues that it certainly has the legal capacity to make those claims. With regard to abuse of process, CMI asserts that its correspondence is proper, that the only overlap of parties between this action and the Toronto action is CMI itself, and that its claims in this proceeding are different than those in the Counterclaim.
[6] Counsel to the remaining parties to this proceeding appeared at the argument of this motion but chose to make no submissions.
[7] Counsel for both CMI and the Moving Parties agree that the key issue in the dispute between the parties is the use of the trade name, “Greenbrix”. The Moving Parties on the one hand and CMI on the other hand, each claim to have the exclusive right to utilize the Greenbrix name. That same issue is central to the Toronto action. The determination of the rightful owner of the Greenbrix name will likely determine much of the subject matter of both sets of proceedings.
[8] After hearing the argument of the Moving Parties, I canvassed all counsel as to two issues ancillary to the abuse of process issue. First, do they agree that both sets of proceedings should be heard together or one after the other? Second, should this proceeding be transferred to Toronto, where the litigation involving the parties first commenced? After obtaining instructions from their clients, all agreed upon the appropriateness of both a transfer to Toronto and joinder of this and the Toronto Action. However counsel for the Moving Parties stated that he is taking that position only if I do not dismiss this action for want of legal capacity.
[9] For the reasons set out below, I find that CMI has the legal capacity to commence this action. I further find that if this action were to be transferred to Toronto and joined with the Toronto Action, there would be no abuse of process. However, I cannot order that transfer. Rather I can recommend it, subject to the discretion of the Regional Senior Justice in Toronto, who will have the final say. Thus, I adjourn the abuse of process portion of this motion sine die, pending the determination of the transfer and joinder recommendation.
Background
[10] All of the parties in this action are in the mortgage business, whether as mortgage agents, brokers, or brokerages.
[11] The Moving Parties other than CBCI (the “Agents”) are licensed mortgage agents. They claim at all material times to be part of the “Greenbrix Capital Group”, a team of mortgage agents lead by Krystian. He is the sole director of GBCI.
[12] CMI is a mortgage brokerage whose broker of record and directing mind is Cashin.
[13] The Defendant 2551311 Ontario Ltd. o/a Mortgage Alliance – Main Street Mortgages (“MSM”) is the mortgage brokerage which the Agents joined upon their departure from CMI. MSM’s principal broker is the Defendant, Roger Grubb. The Defendant, The Mortgage Alliance Company of Canada, is MSM’s franchisor.
[14] The Agents all worked as mortgage agents under the umbrella of the CMI brokerage. Kristian alleges that he first began using the “Greenbrix” name as a signifier of his mortgage agency business within CMI, with the encouragement of Cashin. He took various steps using that name. They included recruiting his fellow Agents to work together as a unit within CMI, arranging a separate office for the Agents in Aurora (CMI’s office is in Oakville), and the incorporation of GBCI on June 21, 2019.
[15] Krystian claims that at all materials times, he and his fellow Agents worked independently within CMI, under his direction.
[16] On February 21, 2019, four months before Krystian incorporated GBCO, CMI registered “Greenbrix Capital” as a business name in Ontario. He did so under the Business Names Act, R.S.O. 1990, c. B. 17. Krystian denies being aware of this prior registration.
[17] As a term of their agency relationship within CMI, Krystian and his fellow Agents were required to sign a contract, called the Independent Contractor Agreement (“ICA”). The ICA included the following term (the “Trademark Term”):
Independent Contractor’s use of CMI’s name, trademark and/or logo, and any names, trademarks and/or logos licensed by third parties for CMI use, is subject to CMI’s prior written approval and control at all times, and said approval may be terminated at any time without notice. Independent Contractor must return or destroy, as required by CMI, in its sole and unfettered discretion, any promotional material carrying CMI’s name, logo or trademark and any names, trademarks and/or logos licensed by third parties for CMI use, upon request by CMI, or upon termination of this Agreement. Nothing in this Agreement, or in its performance, gives Independent Contractor any ownership interest or right to any goodwill associated with CMI, including the name, logo or trademark.
[18] When CMI raises allegations of breach of contract against the Agents, whether in this or the Toronto action, it is claiming a breach of the Trademark Term.
[19] In 2020, Krystian raised allegations with CMI regarding purported financial irregularities affecting himself and his fellow Agents. CMI disagreed and in April 2020, terminated its ICA with Krystian. Krystian’s fellow Agents resigned shortly thereafter. They then joined The Mortgage Alliance Company of Canada, operating collectively under the Greenbrix name.
[20] The statement of claim in the Toronto action was issued on June 23, 2020. The Counterclaim was issued on November 23, 2020.
Issues
[21] During the course of this motion, counsel for both the Moving Parties and CMI offered an overly broad set of arguments. But as I advised them, the issues here are far more narrow than they sought to make them. The only issues before me are: 1) whether CMI has the legal capacity to commence this action, as defined by Rule 21.01((3)(b) of the Rules of Civil Procedure[^1]; and 2) whether this action is an abuse of process. The first issue is a mainly legal one (albeit arguably mixed fact and law), while the second one deals with the process by which this proceeding was commenced and continues.
Legal Capacity to Commence This Action
Applicable Authorities
[22] The Moving Parties argue that this action must be dismissed “on the basis that the plaintiff is without legal capacity to commence the action”. They rely solely on Rule 21.02(3)(b) to make this argument. Their narrow reference to that one subrule is important. I am only tasked with considering CMI’s legal capacity to commence this proceeding. I am not required to otherwise consider the merits of this proceeding.
[23] Rule 21.01(3)(b) reads as follows:
(3) A defendant may move before a judge to have an action stayed or dismissed on the ground that,
Capacity
(b) the plaintiff is without legal capacity to commence or continue the action or the defendant does not have the legal capacity to be sued;
[24] On its clear face, this subrule speaks only to the status of a plaintiff not the merits of the cause of action, which may be determined by summary judgment or a motion under Rule 21.01(1).
[25] In order to succeed on a motion under Rule 21.01(3)(b), a defendant must satisfy the court that it is “plain and obvious” that the plaintiff lacks legal capacity to proceed with the action. The bar is a high one. In Dolgonos v. Scotia Capital Inc., 2008 CanLII 30311 (S.C.J), Lederer J. offers an excellent capsule summary of the application of Rule 21, writing as follows at para. 38:
Rule 21 deals with when and how the court can deal with a question of law before trial. Like Rule 20, it has a high threshold (Stoneham v. Gladman, supra). Generally, pursuant to Rule 21, the defendant must show that it is plain and obvious and beyond doubt that the plaintiff cannot succeed (Hunt v. Carey Canada Inc., 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959). A motion under this rule is not used to resolve a factual dispute. The facts are to be uncontroversial or easily determined (Stoneham v. Gladman, supra; Goudie v. Ottawa (City), 2003 SCC 14, [2003] 1 S.C.R. 141; Dawson v. Rexcraft Storage & Warehouse Inc. (1988), 1998 CanLII 4831 (ON CA), 164 D.L.R. (4th) 257 (Ont. C.A.). The question is whether the claim can be dismissed on a point of law (Dickinson v. Toronto and Region Conservation Authority, supra).
[26] The generous ambit within which the court must consider issues within the context of Rule 21 and the consequent caution which must be exercised before dismissing a claim under that rule was set out by the Supreme Court of Canada in R. v. Imperial Tobacco Ltd., 2011 SCC 42. There, McLachlin J., writing for the court stated at para. 21:
[21] Valuable as it is, the motion to strike is a tool that must be used with care. The law is not static and unchanging. Actions that yesterday were deemed hopeless may tomorrow succeed... The history of our law reveals that often new developments in the law first surface on motions to strike or similar preliminary motions, like the one at issue in Donoghue v. Stevenson. Therefore, on a motion to strike, it is not determinative that the law has not yet recognized the particular claim. The court must rather ask whether, assuming the facts pleaded are true, there is a reasonable prospect that the claim will succeed. The approach must be generous and err on the side of permitting a novel but arguable claim to proceed to trial.
[27] In Dorey Capital Family Trust (Trustee for) v. Wade, 2022 ONSC 1427 (“Dorey”), Christie J. offers a very clear statement as to the high bar that must be overcome to succeed in a Rule 21.01(3)(b) motion, writing at para. 45:
It is the view of this court that the discretion to strike a claim on a Rule 21.01(3)(b) motion must be reserved for a plain and obvious case where the salient facts are not in dispute or subject to credibility or reliability assessments.
[28] Evidence is admissible in a motion under Rule 21.01(3)(b): Zuppinger v. Toronto Standard Condominium Corp., 2019 ONSC 5117 at para 9, cited in Dorey, at para. 35. Despite the admissibility of evidence, the issue of legal capacity has been described as one of law (see Dolgonos v. Scotia Capital Inc., above), although arguably it is one of mixed fact and law. The point was not argued before me.
[29] The Moving Parties assert that Rule 21.01(3)(b)’s consideration of legal capacity to sue may be predicated on whether legislation or a contract offers a plaintiff the right to bring the action in question. In saying that, they cite Dorey and its reference to Collins Safety Inc. v. ACT Safety Inc., 1998 CanLII 14700 (ON SC), [1998] O.J. No. 5532 (Gen. Div.). But in Collins, the issue was whether the plaintiff still owned the promissory notes on which he sues. Similarly, in Dorey, the issue was whether the Plaintiff was the owner by assignment of a receivable upon which it sues. In both cases, the issue boiled down to the status of the plaintiff not that cause of action.
[30] Dorey offers a very helpful review of a number of other cases decided under Rule 21.01(3)(c). In each of those cases, the issue again is the status of the plaintiff rather than the merits of the claim itself.
Analysis of the Capacity Issue
[31] Here the Moving Parties’ argument is elegantly framed but modestly conceived. They cast CMI’s claims as arising in trademark law because of its references to trademarks in the statement of claim. The Moving Parties contend that CMI’s failure to plead and rely on the TMA in making its claim regarding passing-off and its trademarks is fatal to its legal capacity to sue. They also point to the references in the statement of claim to the Mortgage Brokerages, Lenders and Administrators Act, 2006, SO 2006, c 29 and the Business Names Act. They argue that neither statute gives CMI the legal right to bring this action.
[32] The flaw in this argument, as alluded to in part by CMI, is twofold. First, it ignores the fact that CMI’s claims are grounded in common law causes of action rather than a statute. CMI claims a breach of contract, the common law tort of passing-off and the equitable principle of unjust enrichment. CMI asserts that none of those causes of action need be grounded in a statute. Second, the issue of whether there is a statutory right to bring a certain action is a different one than the legal capacity of CMI. The latter issue relates to the status or standing of CMI itself to bring the action, not the laws upon which it relies to ground its cause of action.
[33] CMI points to the Trademark Term of the ICA that each of the Agents signed before beginning their association. CMI claims that the use of the Greenbrix name is a breach of that Trademark Term. The Agents respond that nothing in the ICA or its Trademark Term even refers to the Greenbrix name. In fact, Kristian and the Agents never started to use the name within their business until after they signed their ICA’s. CMI replies that the issue is at least arguable and should be left for trial.
[34] With regard to passing-off, which is a claim that may be made under the TMA, CMI points to a common law tort of passing-off. The commonality between the statutory claim of passing-off under the TMA and its common law cousin was recognized by the Federal Court of Appeal in Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd., 1987 CanLII 5269 (FCA), [1987] 3 FC 544 (F.C.A.), at p. 549. There, MacGuigan J. wrote for the Court as follows:
Section 7(b) [of the 1970 version of the TMA] is a statutory statement of the common law action of passing-off, which is described in Fleming on Torts, supra, at p. 626 as "another form of misrepresentation concerning the plaintiff's business ... which differs from injurious falsehood in prejudicing the plaintiff's goodwill not by deprecatory remarks but quite to the contrary by taking a free ride on it in pretending that one's own goods or services are the plaintiff's or associated with or sponsored by him". It differs from injurious falsehood in that "it is sufficient that the offensive practice was calculated or likely, rather than intended, to deceive".
[35] In Ciba-Geigy Canada Ltd. v. Apotex Inc., 1992 CanLII 33 (SCC), [1992] 3 S.C.R. 120, the Supreme Court of Canada reviewed the history of the common law tort of passing-off, beginning with the 1842 British case of Perry v. Truefitt (1842), 6 Beav. 66, 49 E.R. 749. There the court seems to have coined the expression, “passing-off”, explaining: "[a] man is not to sell his own goods under the pretence that they are the goods of another man" (p. 752 E.R.). After considering a number of passing-off cases, both British and Canadian, Gonthier J. set out the elements of the tort for the Supreme Court of Canada at para. 33, as follows:
The three necessary components of a passing-off action are thus: the existence of goodwill, deception of the public due to a misrepresentation and actual or potential damage to the plaintiff.
[36] In response, counsel for the Moving Parties referred to the decision of the Supreme Court of Canada in Kirkbi AG v Ritvik Holdings Inc, 2005 SCC 65. There, answering a constitutional question, the Court found that s. 7(b) of the TMA, which creates a civil cause of action which essentially codifies the common law tort of passing-off, is intra vires Parliament. Counsel for Greenbrix argues that this decision shows that the common law tort of passing-off has been extinguished in favour of the statutory one. But the decision does not say that, nor could counsel point the court to a decision that affirms that assertion.
[37] It is not the role of the court in a motion such as this to go so far afield as to investigate the continued existence of a common law tort of passing-off. That is a matter that could be the subject of another motion or trial. I offer a similar answer to the contention that Parliament through the TMA, occupies the statutory field for any claims regarding unregistered trademarks. That may or may not be an issue for another day. But it is not one for a motion dealing with the legal capacity of a plaintiff to commence an action.
[38] Thus, for the reasons set out above, I find that it is not plain and obvious that CMI lacks the legal capacity to bring this action.
Abuse of Process
[39] Under Rule 21.01(3)(d) a defendant may move to have an action stayed or dismissed because it is frivolous, vexatious or otherwise an abuse of the process of the court. A defendant can also seek the same relief under Rule 21.03(3)(c) when “another proceeding is pending in Ontario or another jurisdiction between the same parties in respect of the same subject matter”. The court may also, on its own initiative, stay or dismiss a proceeding if it appears on its face to be frivolous, vexatious or otherwise an abuse of the process of the court: Rule 2.1.01(1).
[40] In Behn v Moulton Contracting Ltd, 2013 SCC 26 at paras. 39-41, LeBel J, writing for the Supreme Court of Canada offered a summary of the doctrine of abuse of process in Canadian law, starting from the inherent jurisdiction of the court to control its process to prevent abuse. He wrote:
39 In Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, Arbour J. wrote for the majority of this Court that the doctrine of abuse of process has its roots in a judge's inherent and residual discretion to prevent abuse of the court's process: para. 35; see also P. M. Perell, "A Survey of Abuse of Process", in T. L. Archibald and R. S. Echlin, eds., Annual Review of Civil Litigation 2007 (2007), 243. Abuse of process was described in R. v. Power, 1994 CanLII 126 (SCC), [1994] 1 S.C.R. 601, at p. 616, as the bringing of proceedings that are "unfair to the point that they are contrary to the interest of justice", and in R. v. Conway, 1989 CanLII 66 (SCC), [1989] 1 S.C.R. 1659, [page245] at p. 1667, as "oppressive treatment". In addition to proceedings that are oppressive or vexatious and that violate the principles of justice, McLachlin J. (as she then was) said in her dissent in R. v. Scott, 1990 CanLII 27 (SCC), [1990] 3 S.C.R. 979, at p. 1007, that the doctrine of abuse of process evokes the "public interest in a fair and just trial process and the proper administration of justice". Arbour J. observed in C.U.P.E. that the doctrine is not limited to criminal law, but applies in a variety of legal contexts: para. 36.
40 The doctrine of abuse of process is characterized by its flexibility. Unlike the concepts of res judicata and issue estoppel, abuse of process is unencumbered by specific requirements. In Canam Enterprises Inc. v. Coles (2000), 2000 CanLII 8514 (ON CA), 51 O.R. (3d) 481 (C.A.), Goudge J.A., who was dissenting, but whose reasons this Court subsequently approved (2002 SCC 63, [2002] 3 S.C.R. 307), stated at paras. 55-56 that the doctrine of abuse of process
engages the inherent power of the court to prevent the misuse of its procedure, in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute. It is a flexible doctrine unencumbered by the specific requirements of concepts such as issue estoppel. See House of Spring Gardens Ltd. v. Waite, [1990] 3 W.L.R. 347 [(C.A.)], at p. 358 ... .
One circumstance in which abuse of process has been applied is where the litigation before the court is found to be in essence an attempt to relitigate a claim which the court has already determined. See Solomon v. Smith, supra. It is on that basis that Nordheimer J. found that this third party claim ought to be terminated as an abuse of process. [Emphasis added.]
41 As can be seen from the case law, the administration of justice and fairness are at the heart of the doctrine of abuse of process. In Canam Enterprises and in C.U.P.E., the doctrine was used [page 246] to preclude relitigation of an issue in circumstances in which the requirements for issue estoppel were not met. … The doctrine of abuse of process is flexible, and it exists to ensure that the administration of justice is not brought into disrepute.
[41] In considering those authorities, I make the following further comments. First, the correspondence issued by CMI may be the subject of a court action (say for defamation, if applicable), but it is not part of the process by which this action is being adjudicated. Thus, I do not consider that correspondence as relevant to the issue of abuse of process.
[42] Second, while the doctrine of abuse of process can address an attempt to relitigate an issue, it can also apply to a multiplicity of actions which raise the risk of inconsistent judicial decisions and/or double recovery (see also: Canadian Standards Assn. v. P.S. Knight Co., 2015 ONSC 7980, at para. 24).
[43] Here, the parties agree that the determination of the single issue of entitlement to use the “Greenbrix” name is the central issue in their dispute. There is a strong risk that the issue could be determined inconsistently in the two proceedings; raising the related issue of double recovery. Further, as a stated above, the scope of persons that CMI wishes to be subject to its injunctive relief in the Toronto Action is so broad that it potentially includes all of the Defendants in this action. That is the case even though they are not named parties in the Counterclaim.
[44] So, even though this case may not be strictly covered by Rule 21.01(3)(c), it comes within its spirit. I note of course that Rule 1.04 calls for the Rules to be “liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits”.
[45] I add that I have been offered no viable explanation for CMI’s decision to commence a separate proceeding in Milton rather than to include the claims in its statement of claim as part of the Counterclaim. It certainly does not appear to meet the goals of Rule 1.04 or to represent proportionate use of scarce judicial resources.
[46] Thus, while it is possible that this proceeding is an abuse of process or may even be caught within a liberal interpretation of Rule 21.01(3)(c), the parties have now agreed that if this action is not dismissed for a want of capacity, it should be transferred to Toronto and joined to the Toronto action.
[47] The parties are at liberty to bring a transfer motion in the Toronto proceedings under Rule 13.01.02. If they do so, they will be required to follow the directions of the Provincial Practice Direction, and in particular para. 47-51 of that Practice Direction.
Conclusion
[48] For the reasons set out above, I dismiss the portion of this motion seeking to have CMI’s action dismissed under Rule 21.01(3).
[49] I defer determination of whether CMI’s action amounts to an abuse of process until the Toronto Region of this Court determines whether it will allow this proceeding to be transferred to that jurisdiction and joined to the Toronto Action. I strongly recommend that this be done.
[50] In that event, I also strongly recommend that a case management judge work with the parties and counsel to determine the manner in which these actions will be joined, the manner of trial, and help them develop a litigation schedule. I am advised that the steps leading to trial in the Toronto action are a fair bit more advanced than they are in this action. Discoveries in the Toronto action are completed while they have not commenced in this action.
[51] If a decision is made not to transfer this action to Toronto, counsel may arrange a conference call with me through my judicial secretary to determine next steps.
Costs
[52] The parties have agreed that the winner of this motion would be entitled to costs of $15,000. However there has not been complete success for one party. CMI has succeeded in the issue that involved the most court time and which occupied the greatest attention in the parties’ materials. Nonetheless, I have made the recommendation set out above regarding transfer to Toronto, which is at least partially in line with the arguments of the Moving Parties. I am not aware of whether that potential step was canvassed before this motion was heard.
[53] In the circumstances, I find that it would be fair, reasonable and proportionate, as well as within the reasonable expectation of the Moving Parties, that they be required to pay costs of $10,000 to CMI within 30 days.
Addendum: Setting Aside the Noting of Default
[54] The Defendants, Orlando Catala, Gerald (Jerry) William Fragomeni, Nikos (Nick) Nikolaou, Aimee Nanette Novack were previously noted in default. The parties agreed that if this action is not dismissed, that the noting of default against those Defendants be set aside without costs. So ordered.
“Marvin Kurz J.”
Electronic signature of Justice Marvin Kurz
Date: February 13, 2023
[^1]: R.R.O. 1990, Reg. 194