Ontario Court Of Appeal Upholds Setting Aside Of A Notice Of Discontinuance

• Published date: 03 November 2021
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Real Estate
• Law Firm: Gardiner Roberts LLP
• Author: Mr Stephen Thiele, Anna Husa and Gavin Tighe

On August 3, 2020, lawyers at Gardiner Roberts LLP were successful in getting a notice of discontinuance set aside for their real estate brokerage client. In that judgment, Justice Koehnen set aside the notice of discontinuance on the grounds that pleadings against the brokerage were closed and, in the alternative, that the notice of discontinuance was an abuse of process. When pleadings are closed, a plaintiff cannot deliver a notice of discontinuance without obtaining leave of the court. The plaintiffs had not obtained leave of the court in the circumstances.

In Kawaguchi v. Kawa Investments Inc., 2021 ONCA 770, the plaintiffs appealed this judgment.

The factual background

The plaintiffs' case involved a corporate dispute between family members. The defendant, LK, essentially wanted to liquidate her shareholdings in a company that owned a commercial property. As President of that company, she engaged the brokerage to sell the Property. Another family-run business operated out of the Property owned by this company.

Under a signed Listing Agreement, the brokerage marketed the Property for sale and eventually a buyer made an offer. The offer to purchase, however, did not close because the plaintiffs commenced an action challenging the validity of LK to have entered into the Listing Agreement.

The brokerage and its agent were named as two of many defendants in this action. While they filed a statement of defence to the action, other defendants did not. The plaintiffs did not take any steps to note any of the defendants who did not file a statement of defence in default. In general, a defendant is required under r. 18.01 of the Rules of Civil Procedure (the "Rules") to deliver a statement of defence within 20 days after being served with a statement of claim.

Where a defendant does not serve and file a statement of defence within the prescribed time period, the defendant can be noted in default under r. 19.01(1) of the Rules. The plaintiffs took no steps to note in default those defendants who had not delivered a statement of defence, and therefore pleadings against them were not closed.

At the outset of the litigaiton, the plaintiffs sought an injunction against the defendants, including the brokerage and its [agent?], to prevent the listing and sale of the Property. The injunction motion was dismissed against the brokerage and its agent.

Following this dismissal, lawyers for the brokerage and its agent wrote to the lawyers for the plaintiffs to advise that...