2013 ONSC 7063, 2013 ONSC 7063

CITATION : Bearsfield Developments Inc. v. McNabb , 2013 ONSC 7063 COURT FILE NO.: 13-56562 DATE: 2013-11-14 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: ) ) Bearsfield Developments Inc. and Mod-Aire Homes Limited ) ) ) David Debenham, McMillan LLP, for the Plaintiffs ) Plaintiffs (Responding Parties) ) ) - and - ) ) ) Debra Ann McNabb, Kevin Donald McNabb, Miranda McNabb and Karissa McNabb ) ) ) Benoit M. Duchesne , Heenan Blaikie for the Defendants ) Defendants (Moving Parties) ) ) ) )) HEARD: October 16, 2013, at Ottawa, Ontario Madam Justice B. R. Warkentin Reasons On Motion [1] This was a motion by the Defendants under rules 3.02 and 21.01(

c) of the Rules of Civil Procedure and under sections 106 and 138 of the Courts of Justice Act for an Order staying this proceeding until further Order of this Court or in the alternative, an Order granting the Defendants an extension of time to deliver their Statement of Defence within 20 days from the date of the Order dismissing this motion. [2] The Plaintiff claims that the Defendant, Debra Ann McNabb (“Debra”) embezzled approximately $700,000.00 from

the Plaintiffs (her former employers) and that she used the funds to improve her property in Ontario. They allege she then sold that property and indirectly used the sale funds, and thus indirectly the monies embezzled, to purchase property in New Brunswick. [3] The Plaintiffs commenced this action in Ontario on January 18, 2013, as amended on January 22, 2013, by way of a Statement of Claim. They then attempted to register a Certificate of Pending Litigation (the “Certificate”) on Debra’s New Brunswick property in order to preserve their claim to the money they claim Debra embezzled from them.

The New Brunswick Court would not register the Certificate unless an action had been commenced in New Brunswick. [4] The Plaintiffs then commenced the identical action in the Court of Queen’s Bench of New Brunswick on January 24, 2013 in which they obtained and registered a Certificate against Debra’s New Brunswick property on January 28, 2013. [5] The Plaintiffs assert that the New Brunswick action was commenced for the sole purpose of obtaining and registering the Certificate in order to preserve the asset in which they claim the embezzled funds can be traced.

Counsel for the Plaintiffs then advised the lawyer for the Defendants after both actions were served on the Defendants, that the Plaintiffs were located in Ontario and that it was their intention that only the Ontario action would proceed. They specifically instructed the lawyers for the Defendants not to defend or take any steps with respect to the New Brunswick action. [6] The Defendants disregarded the instruction not to respond to the New Brunswick action and pleaded in the New Brunswick action and then brought a motion seeking to vacate the Certificate.

They then brought this motion for a temporary stay of the Ontario action.

[7] Counsel for the Plaintiffs advised the Defendants’ counsel that if the Defendants insisted on proceeding with the New Brunswick action, the Plaintiffs would bring a motion for

Summary Judgment in Ontario, which they did. The motion for

Summary Judgment was originally returnable at the same time as this motion for a temporary stay of the Ontario action, but was adjourned at the request of the Defendants and is now scheduled to proceed in January 2014. [8] The Defendants seek to have this Ontario proceeding temporarily stayed on terms to be fixed by this Court pending the final outcome of the New Brunswick action.

It is their position that the Plaintiffs should not be permitted to knowingly commence a multiplicity of proceedings and obtain some relief in New Brunswick while proceeding with the identical action in Ontario. [9] It was also the position of the Defendants that the New Brunswick action is the proceeding that should be continued because it is more advanced and is wider in scope than this Ontario proceeding because Debra has made a counter-claim in the New Brunswick action against Michael Orsi, a principal of the Plaintiff corporations. [10] The Plaintiffs oppose the Defendants’ motion and claim that they are entitled to choose the jurisdiction in which they wish to try their case and that Ontario is the more convenient forum in which to do so because the Plaintiffs, their witnesses and experts live in Ontario and the events in question occurred in Ontario.

In addition, the Plaintiffs claim that the Defendants have deliberately enhanced the New Brunswick action by pleading in New Brunswick and refusing to plead in Ontario, over the objections of the Plaintiffs. [11] The Plaintiffs also claim that they are entitled to the judicial advantage of the Rule 20,

summary judgment process in Ontario as well as admissions that were made by the Defendants

in the Ontario action in a Request to Admit that have not been made in the New Brunswick action (and in fact were denied in the New Brunswick action) regarding certain substantive facts and the authenticity of documents. Defendants’ Position, Staying of Ontario Action [12] The Defendants argued that this action should be temporarily stayed pending the outcome of the New Brunswick proceedings.

The test for a temporary stay of a proceeding in Ontario on the basis of another proceeding between the parties in another jurisdiction has a component derived from the Rules of Civil Procedure and a component derived from jurisprudence. [13] In support of their position, counsel for the Defendants made the following arguments:

a) A Defendant may move before a judge to have an action stayed or dismissed on the ground that another proceeding is pending in another jurisdiction between the same parties in respect of the same subject matter and the judge may make an order or grant judgment accordingly. [1]

b) A court, on its own initiative or on a motion by a person, whether or not a party, may stay any proceeding in the court on such terms as are considered just. [2]

c) As far as possible, multiplicity of legal proceedings shall be avoided. [3]

d) Pursuant to rule 21.01(3)(c), there must be an identity of parties and the subject matter in both jurisdictions for the Rule to apply. In this case, there is no dispute that the parties are the same in both jurisdictions with respect to main action and that the subject matter of the litigation as framed by the pleadings reflects not only identity, but almost verbatim duplication between the New Brunswick and the Ontario proceedings.

e) The issues that courts have considered in deciding to exercise their discretion in issuing a temporary stay of a proceeding in circumstances where there are two proceedings between the same parties based on the same subject-matter in two jurisdictions are (hereafter referred to as the “Hollinger Test”):

i) whether there is substantial overlap of issues in the two proceedings; ii) whether the two cases share the same factual background; iii) whether issuing a temporary stay will prevent unnecessary and costly duplication of judicial and legal resources;

iv) whether the temporary stay will result in an injustice to the party resisting the stay. [4] In this case there is no dispute that the first two parts of the Hollinger Test have been satisfied; leaving only the issues of duplication and potential injustice.

f) Temporary stays pending resolution of a foreign proceeding are typically granted when the foreign proceeding would “substantially reduce the issues to be determined” or if success in the foreign proceeding could render the local proceeding “substantially moot’ or otherwise have a “material” impact on the outstanding issues in the case. [5]

g) A motion for a temporary stay pursuant to rule 21.01(

c) and sections 106 and 138 of the Courts of Justice Act do not attract the application of the forum non conveniens test because there is no attempt to oust a court’s jurisdiction. Rather, the purpose of such a motion is to avoid a multiplicity of proceedings, the costs and inconvenience of multiple proceedings in two jurisdictions with the same witnesses and to forestall the possibility of inconsistent findings of fact and liability on the issues between the parties. [6]

h) Any injunctive (and by extrapolation any stay) relief is discretionary and should be governed by the equities of the situation. Contrary to the test applicable for injunctive relief, a temporary stay is not governed by the test applicable to injunctive relief: the threshold is lower than that applicable to injunctive relief. [7]

i) The assumption of and the discretion not to exercise jurisdiction must ultimately be guided by the requirements of order and fairness, not a mechanical counting of contacts or connections. [8] Plaintiffs’ Position [14] The Plaintiffs disagree with the Defendants’ characterization of the issues. The Plaintiffs argued that should a stay on the Ontario action be granted pending resolution of the New Brunswick action, the result would be a permanent stay of the Ontario proceeding because it is identical to the New Brunswick one.

It was the Plaintiffs’ position that the Rules and jurisprudence relied upon by the Defendants is limited to those circumstances where a true temporary stay is granted, not where a permanent stay is the result. [15] The Plaintiffs’ position was that it is their right as plaintiffs to choose the forum in which they wish to proceed and that they should not be deprived of any jurisdictional

advantage. They argued that in addition to the fact that Ontario is the most convenient forum, that if this action proceeds in New Brunswick they would lose the jurisdictional advantage of the

summary judgment rule in Ontario when they have already commenced a motion for

summary judgment to be heard in January 2014. [16] The Plaintiffs claimed that the Defendants have attempted to usurp their right to choose the forum by creating a “flurry of litigation in their new home” (New Brunswick) and in doing so have artificially created a situation where they are in a position to apply for a temporary stay of the Ontario action. Counsel for the Plaintiffs stressed that the principal of forum conveniens is the proper principal to apply rather than the Defendants’ relief in seeking a temporary stay. The relevant factors in assessing the proper forum include:

a) Any juridical advantage to the plaintiff or defendant,

b) The location of witnesses,

c) Where the contract in dispute was signed,

d) The residence of the parties,

e) The location of evidence,

f) The jurisdiction where the factual matters arose, and

g) Any applicable limitation periods. Discussion [17] The general rule as set out in the Courts of Justice Act, the Rules of Civil Procedure and the jurisprudence is that the law favours the litigation of issues only once and in the most appropriate forum. In applying this rule it may be appropriate to stay or set aside concurrent actions in another jurisdiction. [18] The Defendants readily admit that on balance, Ontario is the more convenient forum for the Plaintiffs and that the Court in Ontario has jurisdiction over the subject matter of

the litigation between the parties. However, the Defendants have argued that the forum conveniens test is not applicable in this motion because by seeking only a temporary stay under rule 21.01(3)(

c) they are not attempting to oust the jurisdiction of the Ontario court. They claim their sole purpose is to avoid a multiplicity of proceedings, the costs and inconvenience of multiple proceedings in two jurisdictions with the same witnesses and to forestall the possibility of inconsistent findings of fact and liability on the issues between the parties.

The Defendants also noted that many of the Plaintiffs’ witnesses live in Brantford which is some distance from Ottawa where the Ontario proceeding was commenced and would have to travel regardless. [19] The Plaintiffs have taken the position from the outset that it was never their intention to seek adjudication in New Brunswick beyond preserving their claim for a Certificate, pending the outcome of the proceeding in Ontario. They argue that but for the actions of the Defendants in New Brunswick, there was no risk of conflicting adjudication in two different forums or duplication of expense.

It was the Defendants who insisted that the Plaintiffs respond to their counter claim in New Brunswick or risk having pleadings closed and the Plaintiffs noted in default. [20] The Plaintiffs claim that the test in rule 21.01(3)(

c) and the associated jurisprudence, in particular the Hollinger Test, does not change the requirements for granting a stay of proceedings namely that there is a heavy onus on the party seeking the stay to establish that the stay is justified and that the Court should only use its discretion to issue a stay sparingly and only in the clearest of cases. [21] In considering the positions of the parties, I do not find that I am unable to consider the forum conveniens argument put forward by the Plaintiffs when applying the

Hollinger Test. As discussed above, only the last two parts of the Hollinger Test need be addressed because the first two parts have been satisfied. The last two parts are:

a) whether issuing a temporary stay will prevent unnecessary and costly duplication of judicial and legal resources; and

b) whether the temporary stay will result in an injustice to the party resisting the stay. [22] I am not convinced by the Defendants’ argument as set out in their factum to this motion that their sole purpose in bringing this motion is to avoid a multiplicity of proceedings and the associated costs. More importantly, I am not satisfied that there in fact would be unnecessary and costly duplication of judicial and legal resources in refusing the stay of the Ontario action when the Plaintiffs have clearly indicated that they do not intend to proceed with the New Brunswick action.

The only reason the action in New Brunswick is more advanced is because the Defendants have sought to move that action forward. [23] I accept the Plaintiffs’ contention that the Defendants should not be rewarded by having the matter proceed in New Brunswick, which is clearly more convenient for the Defendants, by virtue of having defended the action only in New Brunswick and not in Ontario and having brought a counter claim in that action. [24] Nor do I accept that the Defendants’ argument that the New Brunswick action is far more advanced than the Ontario action.

Neither action has proceeded in any significant way. There have been no examinations for discovery in either action and it is reasonable to assume that the defence to the Ontario action would be essentially the same as the defence filed in New Brunswick given the fact that the Statements of Claim in both jurisdictions are identical on all substantive points. It would not result in a significant duplication of expense for the

Defendants to defend the Ontario action, whereas it would cost the Plaintiffs substantially more to prosecute their claim in New Brunswick than in Ontario. Additionally, because the Certificate was only obtained in the New Brunswick action, it would not be a duplication of proceedings for the Defendants to move to set the Certificate aside in New Brunswick. [25] With respect to the last issue of whether or not a temporary stay would result in an injustice to the party resisting the stay, I find that issuing a temporary stay would result in an injustice to the Plaintiffs.

A temporary stay would render the Ontario action moot and would therefore result in a permanent stay. The Plaintiffs would then be deprived of their right to choose the forum in which to proceed, particularly when all parties acknowledge that Ontario is the forum conveniens . [26] It would be an injustice on the facts of this case to prevent the Plaintiffs from having the opportunity to choose the jurisdiction in which to try this case, particularly when there is no credible dispute that Ontario is the forum conveniens.

In making this finding, I accept the Defendants’ argument that the Court should look at order and fairness rather than purely forum conveniens on this type of motion. However, there was nothing before me to suggest that this matter would proceed more expeditiously in New Brunswick. In fact as previously noted, there is a motion for

summary judgment scheduled in Ontario in January 2014. Furthermore, I accept that the cost to the Plaintiffs would be significantly greater to try the action in New Brunswick rather than in Ontario and this would be unfair to the Plaintiffs. [27] I therefore dismiss the Defendants motion for a temporary stay of the Ontario action. It is open to the Defendants to seek a stay of the New Brunswick action in the Court of Queen’s Bench of New Brunswick should they choose

to do so. [28] I will grant the Defendants 20 days from the date of this decision to serve and file their Statement of Defence and any counter-claims should they choose to make any. [29] The parties agreed that the sum of $7,000.00 in costs was appropriate for the party succeeding in this motion. I therefore order costs payable by the Defendants to the Plaintiffs in the amount of $7,000.00. ___________________________ Madam Justice B. R. Warkentin Released: November 14, 2013 CITATION : Bearsfield Developments Inc. v. McNabb , 2013 ONSC 7063 COURT FILE NO.: 13-56562 DATE: 2013-11-14

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: Bearsfield Developments Inc. and Mod-Aire Homes Limited Plaintiffs (Responding Parties) - and – Debra Ann McNabb, Kevin Donald McNabb, Miranda McNabb and Karissa McNabb Defendants (Moving Parties) REASONS ON MOTION Warkentin J. Released: November 14, 2013