Court File and Parties

COURT FILE NO.: CV-24-00722469-00CL DATE: 20241212 ONTARIO - SUPERIOR COURT OF JUSTICE – COMMERCIAL LIST

RE: NATHAN SCHMERLER and SHEPPARD-MORNINGSIDE HOLDINGS LIMITED, Plaintiffs AND: ZEV SCHMERLER, a.k.a. Zeew Schmerler, RAMY SCHMERLER, VALLEY MILL INVESTMENTS LIMITED and 574780 ONTARIO LIMITED, Defendants

BEFORE: Peter J. Osborne J.

COUNSEL: Philip Underwood and Tyler Morriso, for the Plaintiffs Gregory Sidlofsky, for the Defendants

HEARD: December 12, 2024

Endorsement

[1] The Plaintiffs move for an order transferring the pending Application bearing Ct. File No. CV-20-00001509-0000 commenced in Waterloo Region, to the Commercial List in Toronto pursuant to Rule 13.1.02 of the Rules of Civil Procedure, and consolidating it with this Action.

[2] The Plaintiff, Nathan Schmerler, resides in Toronto. The Defendants, Zev and Ramy Schmerler are his father and brother, respectively. They also reside in Toronto. The Defendant Valley Mill Investments Limited (VMI) is the family’s holding company.

[3] Defined terms in this Endorsement have the meaning given to them in the motion materials unless otherwise stated. I refer where appropriate to the parties by their first names given the commonality of surname.

[4] For the reasons that follow, the motion is granted.

[5] This Court has jurisdiction to order transferring consolidation pursuant to Rule 6 of the Rules of Civil Procedure and section 107 of the Courts of Justice Act.

[6] Section 107 of the Courts of Justice Act provides:

Consolidation of proceedings in different courts

107 (1) Where two or more proceedings are pending in two or more different courts, and the proceedings,

(a) have a question of law or fact in common;

(b) claim relief arising out of the same transaction or occurrence or series of transactions or occurrences; or

(c) for any other reason ought to be the subject of an order under this section,

an order may, on motion, be made,

(d) transferring any of the proceedings to another court and requiring the proceedings to be consolidated, or to be heard at the same time, or one immediately after the other; or

(e) requiring any of the proceedings to be,

(i) stayed until after the determination of any other of them, or

(ii) asserted by way of counterclaim in any other of them.

[7] Rule 6 of the Rules of Civil Procedure provides:

Where Order May Be Made

6.01 (1) Where two or more proceedings are pending in the court and it appears to the court that,

(a) they have a question of law or fact in common;

(b) the relief claimed in them arises out of the same transaction or occurrence or series of transactions or occurrences; or

(c) for any other reason an order ought to be made under this rule,

the court may order that,

(d) the proceedings be consolidated, or heard at the same time or one immediately after the other; or

(e) any of the proceedings be,

(i) stayed until after the determination of any other of them, or

(ii) asserted by way of counterclaim in any other of them.

(2) In the order, the court may give such directions as are just to avoid unnecessary costs or delay and, for that purpose, the court may dispense with service of a notice of listing for trial and abridge the time for placing an action on the trial list.

[8] Section 138 of the Courts of Justice Act has mandatory language. It provides that as far as possible, multiplicity of legal proceeding shall be avoided.

[9] Both parties rely on the decision of the Divisional Court in Hanif v. College of Pharmacists, 2014 ONSC 2598 at para. 23, which states that the purpose of section 107 is to:

a. avoid a multiplicity of proceedings;

b. prevent inconsistent judicial decisions;

c. preserve scarce judicial resources; and

d. save costs for the parties.

[10] The Plaintiffs submit the non-exhaustive list of factors that this Court identified in 1014864 Ontario Ltd. v. 1721789 Ontario Inc., 2010 ONSC 3306 at para. 18 as being relevant to a consideration of whether consolidation or order of a trial of issues together is appropriate [1]:

[18] A non-exhaustive list of some of the considerations on ordering trial together may, depending on the circumstances, include:

(a) the extent to which the issues in each action are interwoven;

(b) whether the same damages are sought in both actions, in whole or in part;

(c) whether damages overlap and whether a global assessment of damages is required;

(d) whether there is expected to be a significant overlap of evidence or of witnesses among the various actions;

(e) whether the parties the same;

(f) whether the lawyers are the same;

(g) whether there is a risk of inconsistent findings or judgment if the actions are not joined;

(h) whether the issues in one action are relatively straight forward compared to the complexity of the other actions;

(i) whether a decision in one action, if kept separate and tried first would likely put an end to the other actions or significantly narrow the issues for the other actions or significantly increase the likelihood of settlement;

(j) the litigation status of each action;

(k) whether there is a jury notice in one or more but not all of the actions;

(l) whether, if the actions are combined, certain interlocutory steps not yet taken in some of the actions, such as examinations for discovery, may be avoided by relying on transcripts from the more advanced action;

(m) the timing of the motion and the possibility of delay;

(n) whether any of the parties will save costs or alternatively have their costs increased if the actions are tried together;

(o) any advantage or prejudice the parties are likely to experience if the actions are kept separate or if they are to be tried together;

(p) whether trial together of all of the actions would result in undue procedural complexities that cannot easily be dealt with by the trial judge;

(q) whether the motion is brought on consent or over the objection of one or more parties.

[11] Ramy is an officer of VMI and the owner of 50% of the non-voting common shares of VMI. Zev owns all of the voting shares and is the sole director of VMI.

[12] The sole business of VMI is its ownership interest (50%) in a shopping plaza located in Pickering known as Brockington Plaza. VMI formerly owned an interest (50%) in another shopping plaza in Toronto, known as Westmore Plaza.

[13] The Defendant 574780 Ontario Limited (“574”) is also a family holding company. It owns a commercial building on Sheppard Ave. East in Toronto. Zev owns the voting shares of 574. Each of Nathan and Ramy own the common shares of 574 - Ramy directly and Nathan through a corporation he controls called Sheppard-Morning Holdings Limited. This property is leased to a tenant who operates a Tim Hortons and a Wendy’s Hamburger franchise there.

[14] Nathan’s position is that since around 2018, Zev and Ramy have refused to share with him information about the finances of VMI. Nathan alleges mismanagement of VMI and related companies by Zev and Ramy, to his prejudice.

[15] When Zev and Ramy refused to provide audited financial statements for VMI from 2017 onwards, Nathan commenced the Application on November 23, 2020. He was at that time, represented by previous counsel. The requested relief was originally limited to an order requiring VMI to appoint an auditor and provide audited financial statements, as well as declaratory relief and damages arising from the alleged failure by Zev and Ramy to provide an accounting in respect of various transactions and for the company generally.

[16] The Notice of Application was amended, however, on December 15, 2021 and the Amended Notice of Application now includes additional allegations and heads of relief sought. Nathan alleges that Zev and Ramy mismanaged an arbitration proceeding regarding the ownership of VMI in the Westmore and Brockington plazas and he seeks damages arising from that misconduct, and seeks an order removing Zev and Ramy as officers and directors of VMI.

[17] That arbitration, commenced in 2015, related to an entity called Art Tile Limited which was the co-owner of two retail plazas with VMI, and further included allegations of mismanagement of the plazas.

[18] Nathan’s position is that in January, 2023, he learned that VMI was working to settle the litigation with Art Tile on the basis that the companies would divide their interests by each acquiring the 50% stake of the other in one of the plazas, such that the parties would divorce and VMI would exclusively own one of the plazas and Art Tile would exclusively on the other.

[19] Nathan alleges that Ramy had directed the proceeds of the Art Tile settlement (the 50% stake in one of the plazas), to a new corporation that he (Ramy) owned: 1000456494 Ontario Ltd. (“494”). 494 had purchased Art Tile’s 50% interest in Brockington Plaza. When counsel for Nathan sought to explore these transfers and related issues on cross-examination in the Application, they were refused by counsel to Ramy and Zev on the basis that they were not relevant to the Application.

[20] Nathan then engaged his current counsel. Given the breadth of his allegations of alleged misconduct by Zev and Ramy, and their continued refusal to provide information regarding the Art Tile settlement and resulting transactions, Nathan commenced this action on June 20, 2024.

[21] In the action, Nathan alleges, among other things, that Ramy and Zev directed funds or assets from the Art Tile settlement to themselves in a manner that was oppressive and prejudicial to Nathan. The claim also includes other allegations relating to 574 and related companies, none of which were advanced in the Application (as originally brought, or in the Amended Notice of Application).

[22] The Plaintiffs proposed to the Defendants that the parties agree to consolidate the action and the Application and address all outstanding issues in this Action (certain allegations originally advanced in the Application now having been rendered moot, such as with respect to the management of the Art Tile litigation, given that the arbitration proceeding has been settled).

[23] The Defendants refused. Zev and Ramy submit that the Application has proceeded in “fits and starts” with periods of intense activity, followed by periods of inaction, all of which can be attributed to Nathan. They further allege that they expressly invited Nathan to participate in the transaction for the purchase of the Art Tile interest, and that Nathan refused. They adamantly deny the allegations of oppression and assert that on the contrary, Nathan has attempted to cause harm to each of them and their corporate interests. I make no determination on the merits of any of the allegations. What is clear for present purposes, however, is that all of the allegations are in my view, inextricably linked, and should be determined together.

[24] The fact that all parties acknowledge the poor relationship between Nathan on the one hand and Zev and Ramy on the other hand, and the fact that even Zev and Ramy acknowledge that they (and at their direction, VMI) have limited the disclosure that VMI provides of its books and records to only what Nathan is entitled to receive under the Business Corporations Act, in my view further militate in favour of having all issues resolved in one proceeding.

[25] I am satisfied that the circumstances of these particular proceedings (this Action and the Application) justify consolidation. The test in section 107 of the Courts of Justice Act and in Rule 6 of the Rules of Civil Procedure is satisfied here.

[26] It is clear to me that both proceedings involve an overlapping factual matrix. The relief sought in each proceeding arises out of a continuing, and common, series of transactions and occurrences. Whatever the merits of the allegations (and to be clear, those are for another day), both proceedings revolve centrally around the alleged exclusion of Nathan by Zev and Ramy from VMI, the key transactions at issue, and the related entities.

[27] It is inescapable that factual findings made in either proceeding will be applicable to both. Witnesses and the evidence they give will have significant overlap and duplication.

[28] If determined separately, there is a considerable risk of inconsistent or contradictory factual findings.

[29] There is considerable overlap in the relief sought in both proceedings. I accept that the scope of relief is broader in the Action, but it is artificial to state that the only relief sought in the Application is the production of audited financial statements. The Amended pleading in the Application is clear that additional relief is sought. Findings of oppression are sought in both proceedings.

[30] In the circumstances, in my view, the nature of the oppression alleged, based on the reasonable expectations of the parties, is best evaluated in a comprehensive manner on the basis of a complete record, in one proceeding, rather than on a piecemeal basis in separate but concurrent proceedings.

[31] In short, I cannot conclude other than that both this Court and the parties will save considerable time and resources if these matters are consolidated and determined together.

[32] Both proceedings involve the same parties and principals (and the same counsel). I acknowledge, as submitted by Zev and Ramy, that as is obvious from the title of proceeding in each matter, there are additional corporate entities in the Action that are not parties to the Application. But the principal parties and directing minds are all the same. There are no outsiders or strangers to one proceeding who are parties to the other: the parties are, in both matters, Nathan, Zev and Ramy and/or entities that one or more of them own, direct and control. Moreover, those entities are essentially holding companies that hold the respective equity positions of the principals in the corporate entities that are common to both proceedings.

[33] On the other hand, in my view, no party, and in particular Zev and Ramy, will face any prejudice if consolidation is ordered. Again, and as stated above, in my view all parties will enjoy increased efficiency. I pause to observe that all of the principals are located in Toronto, and none resides in Waterloo Region where the Application was originally commenced (as that is where former counsel for Nathan resided).

[34] Further in my view, there ought not to be costs, or at least any material costs, thrown away. There is no reason why the evidence tendered to date in the Application cannot be used in the Action, as has already been proposed by Nathan. That is routinely done in this Court, and I encourage the parties to agree on a protocol to do just that, failing which the Court may impose one. Documents produced can be agreed to have been produced in the consolidated action. Many steps can be agreed to maximize efficiency and minimize or eliminate prejudice.

[35] To the extent that there is duplication, or costs thrown away, those issues are best determined, and appropriate relief awarded, by the trial judge presiding over a determination of all issues in one consolidated proceeding.

[36] I cannot accept that the Application is ready to be determined on its merits, while many steps need to be completed in the Action before it is ready to be tried. Given the expanded relief sought in the Amended Notice of Application, various steps will need to be completed before a merits hearing in the Application as well as in the Action. Whether or not that is the case, efficiency and the other factors clearly favour a determination of all of these issues between and among the parties in one consolidated proceeding.

[37] For all of these reasons, the motion is granted. The Application is transferred to the Commercial List at Toronto and shall be consolidated with the Action.

[38] At the conclusion of argument, the parties made submissions with respect to costs.

[39] The Costs Outline of the Plaintiffs reflects partial indemnity costs of $18,231.42 and substantial indemnity costs of $27,177.63. Both amounts are inclusive of fees and disbursements but exclusive of HST.

[40] The Costs Outline of the Defendants reflects partial indemnity costs of $11,088.43, inclusive of fees, disbursements and HST.

[41] The Plaintiffs have been successful on the motion. They are presumptively entitled to their costs.

[42] Pursuant to s. 131 of the Courts of Justice Act, costs are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.

[43] Rule 57.01 of the Rules of Civil Procedure provides that in exercising its discretion under s. 131, the court may consider, in addition to the result in the proceeding (and any offer to settle or contribute), the factors set out in that Rule.

[44] The overarching objective is to fix an amount that is fair, reasonable, proportionate and within the reasonable expectations of the parties in the circumstances: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at paras. 24-26.

[45] A costs award should “reflect what is reasonably predictable and warranted for the type of activity undertaken in the circumstances of the case, rather than the amount of time that a party’s lawyer is willing or permitted to expend”: Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587, at para. 65.

[46] Rule 57.03 of the Rules of Civil Procedure provides that, on the hearing of a contested motion, unless the court is satisfied that a different order would be more just, the court shall fix the costs of the motion and order them to be paid within 30 days.

[47] In my view, there is no reason to depart from an award of partial indemnity costs on this motion. The parties agreed on the applicable legal test and factors. Further in my view, and having considered the factors in Rule 57 as against the circumstances of this matter as described above, a just and equitable award of costs is $15,000, inclusive of fees, disbursements and HST. That amount is payable by the Defendants to the Plaintiffs within 30 days.

[48] Order to go to give effect to these Reasons.

Osborne J.

Footnotes

[1] Zev and Ramy also rely on Klassen v. Klassen, 2020 ONSC 4835 at para. 40, where the Court set out the factors to be considered. While they are expressed slightly differently, the factors are consistent.