COURT FILE NO.: CV-18-00594670-0000

DATE: 2024-06-25

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: VESTACON LIMITED v. HUSZTI INVESTMENTS (CANADA) LTD. o/a EYEWATCH et al

BEFORE: ASSOCIATE JUSTICE D. MICHAEL BROWN

HEARD: June 25, 2024 [by videoconference]

COUNSEL: J. Minster, for the moving plaintiff

No one appearing for the defendants Huszti Investments (Canada) Ltd. o/a Eyewatch et al., Veronica Huszti and Leslie Alexander Huszti

E N D O R S E M E N T

[1] This is a motion by the plaintiff seeking to strike the out the Statement of Defence and dismiss the counterclaim of the remaining defendants in this action: Huszti Investments (Canada) Ltd. o/a Eyewatch, Veronica Huszti and Leslie Alexander Huszti (collectively the “Huszti Defendants”) for their multiple failures to attend scheduled examinations for discovery going back to 2019, and for their failure to comply with various court orders. For the reasons that follow, the motion is granted.

[2] This is the third attendance on this motion, having been adjourned twice at the request of the Huszti Defendants. The motion originally came before me on June 12, 2023. At that time, the Huszti Defendants were in continuing breach of a November 20, 2020 removal of solicitors order requiring them to appoint a new lawyer of record or serve notices of intention to act in person. At the return of the motion on June 12, 2023, the defendant Leslie Huszti appeared his own behalf and purportedly on behalf the other two Huszti Defendants, although he is not a lawyer. Mr. Huszti advised that he had very recently retained a lawyer and requested an adjournment of the motion to allow his lawyer to get up to speed on the file.

[3] I granted the requested adjournment on terms that included a litigation timetable that set deadlines for the Huszti Defendants’s delivery of a notice of appointment of lawyer and sworn affidavits of documents and set a deadline of October 31, 2023 for the conduct of examinations for discovery. My endorsement granting the adjournment provided that the motion could be brought back on by the plaintiff in the event of the defendants’ non-compliance with the litigation timetable.

[4] On June 29, 2023, the Huszti Defendants delivered a notice of appointment of lawyer naming Pallett Valo LLP as their lawyers of record, the third law firm to represent the Huszti Defendants in this action. The Huszti Defendants served their sworn affidavits of documents on July 28, 2023 in accordance with the timetable.

[5] On August 18, 2023, the parties agreed that the examinations for discovery of the Huszti Defendants and the plaintiff would be conducted on October 23 and 24, 2023 and the plaintiff subsequently served a notice of examination on the Huszti Defendants for those dates. On October 19, 2023, Pallett Valo wrote to plaintiff’s counsel advising that they would “have to cancel the examinations next week” and sought to reschedule the discoveries to mid-November, 2023. No reason was provided for the last-minute need to cancel and reschedule the examinations. The plaintiff rejected the cancellation of the examinations and advised that they would be proceeding as scheduled. No one attended the examinations for discovery on October 23, 2024 on behalf of the Huszti Defendants. The plaintiff obtained certificates of non-attendance.

[6] Given the Huszti Defendants non-compliance with the litigation timetable, the plaintiff served an Amended Notice of Motion with a return date of February 28, 2024. The Huszti Defendants did not respond to the motion. On January 5, 2024, Pallett Valo LLP served a motion record seeking to be removed as lawyers of record for the Huszti Defendants. The removal motion was returnable on April 23, 2024 which was the earliest date available from the court.

[7] Pallett Valo attended the motion on February 28, 2024 seeking an adjournment of the plaintiff’s motion until after the motion for removal was heard and determined. Given the asserted breakdown in the relationship with their client, Pallet Vallo was not in a position to respond to the motion on behalf of their clients, nor could the Huszti defendants represent themselves while Pallet Valo remained on the record. I therefore granted a further short adjournment of the plaintiff’s motion to today, peremptory on the Huszti Defendants. To minimize the delay, I seized myself of Pallet Valo’s motion for removal as lawyers of record, and rescheduled it to come before me on March 26, 2024. I also gave the Hustzi Defendants one final chance to attend examinations for discovery. I ordered that by no later than May 10, 2024, the Huszti Defendants would be required to select one of three dates in May and June 2024 offered by the plaintiffs for the Huszti Defendants’ examination for discovery. If the Huszti defendants failed to attend discoveries on the selected date, this motion was to proceed today for a hearing on all issues.

[8] On March 26, 2024 I granted the Pallet Valo’s removal motion and ordered that the Huszti Defendants deliver a notice of appointment of lawyer or a notice of intention to act in person within 30 days. On April 19, 2024, the Huszti Defendants selected June 5, 2024 as the date for their examinations for discovery. The plaintiffs served Notices of Examination for that date. The Huszti Defendants failed to attend the examinations for discovery on June 5, 2024. No explanation for the non-attendance was provided. The Huszti Defendants have not communicated with counsel for the plaintiffs since April 19, 2024 and have not responded to any of the correspondence from plaintiffs’ counsel since that time. The Huszti Defendants have not responded to this motion and do not attend today despite being served with my February 28, 2024 endorsement and order fixing today’s hearing, the plaintiffs’ notice of motion and motion records, the motion confirmation form and the Case Lines link.

[9] This action was commenced on March 26 2018. The plaintiff seeks damages of approximately $450,000 in respect of unpaid invoices for construction work done on the corporate defendants’ commercial property. The claims against the individual defendants are based on the breach of trust provisions under the Construction Lien Act. The Huszti Defendants served their statement of defence and counterclaim on October 10, 2018.

[10] The first attempt at an examination for discovery of the Huszti defendants was on January 31, 2019. The notices of examination were served personally on the Huszti Defendants, as the first lawyers hired by them had been removed from the record in December 2018. On January 29, 2019, the Huszti Defendants unilaterally cancelled the examinations for discovery on the basis that Mister Huszti had to visit a terminally ill family member in hospital.

[11] Since the failed attempt at examination for discovery in January 2019, the Huszti Defendants have unilaterally cancelled or failed to attend scheduled examinations for discovery without explanation on at least five further occasions (in 2020, 2021, 2023 and 2024). All of these examinations had been originally scheduled on dates agreed to by the Huszti Defendants. The dates for three of the examinations had been set by court order. As a result, there have been no examinations for discovery of the Huszti Defendants more than six years into this litigation.

[12] The Huszti Defendants have also failed to comply with various court orders relating to discoveries. They failed to comply with an order of Associate Justice Graham on November 20, 2020 that they attend examinations for discovery within 90 days. They failed to attend a follow-up case conference with Associate Justice Graham to deal with scheduling of discoveries despite agreeing to the case conference date. They further failed to deliver medical evidence in support of their claimed unavailability for examinations for discovery as ordered by Associate Justice Graham.

[13] As noted above, the Huszti Defendants failed to comply with my June 12, 2023 and February 28, 2024 timetabling orders relating to examinations for discovery. They have also not paid the costs ordered on June 12, 2023. The Huszti defendants did not respond to or attend a motion in March 2023 to extend the time for setting this action down for trial, which had been necessitated by their obstruction of the discovery process, and costs were ordered against them as well. The Huszti Defendants have breached three separate orders requiring them to appoint a new lawyer of record or serve a Notice of Intention to Act in Person within 30 days. In respect of the first two orders, the Huszti Defendants did not appoint a new lawyer of record until faced with a motion to strike their defence. The Huszti Defendants remain in breach of my March 26, 2024 order to appoint a new lawyer of record or serve the appropriate notice.

Analysis and disposition

[14] The plaintiff moves to strike the Huszti Defendants’ pleading and dismiss the counterclaim under the following Rules:

Rule 3.04(4)(b) - If a party fails to comply with a timetable, a judge or associate judge may, on any other party’s motion, dismiss the party’s proceeding or strike out the party’s defence.

Rule 34.15(1)(b) - Where a person fails to attend at the time and place fixed for an examination in the notice of examination or summons to witness or at the time and place agreed on by the parties … the court may … where the person is a party or, on an examination for discovery, a person examined on behalf or in place of a party, dismiss the party’s proceeding or strike out the party’s defence.

Rule 57.03(2) - Where a party fails to pay the costs of a motion as required under subrule (1), the court may dismiss or stay the party’s proceeding, strike out the party’s defence or make such other order as is just.

Rule 60.12(b) - Where a party fails to comply with an interlocutory order, the court may, in addition to any other sanction provided by these rules, dismiss the party’s proceeding or strike out the party’s defence.

[15] The conduct of the Huzsti Defendants as described above has engaged all of the above-referenced Rules. In Ponnampalam v. Thiravianathan, 2023 ONSC 1361, Associate Justice Robinson succinctly summarized the considerations for the court on a motion to strike a pleading for non-compliance with court orders and the Rules:

Whether to strike a pleading is a discretionary decision. On motions of this nature, given the severity of the relief, courts are concerned with the balance between having claims defences adjudicated on their merits and ensuring that the administration of justice is not undermined by litigants failing to comply with court orders and their statutory obligations as litigants.

[16] In Advanced Farm Technologies-JA v. Yung Soon Farm Inc., 2021 ONCA 569, the court of appeal listed some common sense factors to be taken into account on a motion to strike pleading for failure to comply with discovery obligations (in that case in relation to documentary discovery):

A court should consider a number of common sense factors including: (i) whether the party’s failure is deliberate or inadvertent; (ii) whether the failure is clear and unequivocal; (iii) whether the defaulting party can provide a reasonable explanation for its default, coupled with a credible commitment to cure the default quickly; (iv) whether the substance of the default is material or minimal; (v) the extent to which the party remains in default at the time of the request to strike out its pleading; and (vi) the impact of the default on the ability of the court to do justice in the particular case …

[17] The Court of Appeal in Advanced Farm Technologies further held that “the remedy is not restricted to “last resort” situations, in the sense that it must be preceded by a party breaching a series of earlier orders that compelled better disclosure or production. However, courts usually want to ensure that a party has a reasonable opportunity to cure its non-compliance before striking out its pleading.” (at para 10) Although the court of appeal was dealing specifically with documentary discovery obligations, in my view the reasoning applies by analogy to a party’s oral discovery obligations which are of similar procedural importance to the fair conduct of civil actions.

[18] Applying the common sense factors to this case, I find that the Huszti Defendants’ breach of their discovery obligations has been knowing and intentional. They have repeatedly failed to attend discoveries despite their prior agreement to the dates, even in the face of a court order to attend. They have provided no explanation for most of these non-attendances and there is no evidence that any non-attendance was the result of inadvertence. Their failures to attend and their breaches of the court orders have been clear and unequivocal.

[19] The substance of the Huszti Defendant’s default is material to the litigation. As a result of the defaults the plaintiff has been unable to conduct any examinations for discovery of these defendants. Finally, the Huszti Defendants have been given multiple opportunities to cure their defaults. The Huszti Defendants have been given at least six opportunities to attend at examinations for discovery over the past 5 years. This motion has been adjourned twice to provide the Huszti Defendants an opportunity to comply with their discovery obligations, yet they have failed to do so. On the record before me, there is no reason to believe that the Huszti defendants will ever comply with their discovery obligations.

[20] The conduct of the Huszti Defendants as evidenced by their continuing breaches of their discovery obligations and orders of this court demonstrates a flagrant disregard for the Rules of Civil Procedure and this court’s process. I find that by their conduct the Huszti Defendants have shown that they have no bona fide intention of defending this action through to trial or of pursuing their counterclaim against the plaintiff. In my view, allowing the Huszti Defendants to continue with their defence and counterclaim in the face of such conduct would undermine the administration of justice. The plaintiff’s motion is granted. The Statement of Defence of the Huszti Defendants is hereby struck, with prejudice, and the Huszti Defendants are herby noted in default. The counterclaim of the Huszti Defendants is dismissed.

[21] The plaintiff in its notice of motion further seeks an order for default judgment against the Huszti Defendants under Rule 19.05. However, as counsel for the plaintiff acknowledged in oral submissions, motions under Rule 19.05 must be brought before a judge. The motion for default judgment is therefor adjourned to be brought back on before a judge.

Costs

[22] The plaintiff seeks costs of this motion on a partial indemnity scale in the amount of $4,942.62 based on a Costs Outline, filed. This motion involved three attendances and required the preparation of three different motion records as well as a factum (which I found to be helpful). In light of the work involved and the significance of the relief sought, I find that the amount requested is within the parties’ reasonable expectations. The plaintiff shall have costs of the motion fixed at $4,942.62.

[23] ORDER TO GO AS FOLLOWS:

1. The Statement of Defence of the defendants, Huszti Investments (Canada) Ltd. o/a Eyewatch, Veronica Huszti and Leslie Alexander Huszti is hereby struck, with prejudice.

2. The defendants, Huszti Investments (Canada) Ltd. o/a Eyewatch, Veronica Huszti and Leslie Alexander Huszti are hereby noted in default.

3. The Counterclaim of the defendants, Huszti Investments (Canada) Ltd. o/a Eyewatch, Veronica Huszti and Leslie Alexander Huszti is hereby dismissed.

4. The defendants, Huszti Investments (Canada) Ltd. o/a Eyewatch, Veronica Huszti and Leslie Alexander Huszti shall pay to the plaintiff its costs of the motion fixed at $4,942.62, inclusive of HST, payable within 30 days.

5. The plaintiff’s motion for default judgment under rule 19.05 is adjourned to be brought back on before a judge.

6. This order is effective immediately, without further formality.

D. Michael Brown, Associate Judge

DATE: June 25, 2024