COURT FILE NO.: 748/01

DATE: 20030115

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N:

KAYBAR FLUID POWER LTD.

Plaintiff

• and -

DANFOSS A/S, DANFOSS INC., DANFOSS FLUID POWER, a Division of Danfoss Inc., ROBERT STUART, MICHAEL WAYNE MacKAY and MODULAR FLUID POWER INC.

Defendants

Ronald B. Moldaver, Q.C., for the Plaintiff

Frank J. McLaughlin, for the Defendants

HEARD: January 15, 2003

LANE J.: (Orally)

1In this motion the plaintiff seeks leave to appeal to the Divisional Court from the Order of Justice Jarvis made at Toronto on the 13^th of July, 1999, after seven days of trial in which a part of the plaintiff's case was heard. At that point the learned Judge declared a mistrial for reasons to be discussed in a moment and ordered the plaintiff to pay costs thrown away on a solicitor and client basis.

2Subsequently those costs were established at $122,000, a sum which the applicant has stated will prevent the plaintiff for economic reasons from taking advantage of any opportunity for a further trial.

3The action was for damages for breach by the defendant of a certain contract and conspiracy among the defendants to injure the plaintiff. The evidence, so far as proceeded with, had disclosed a further allegation of the plaintiff that the acts of the defendants had put it out of business.

4During the course of the trial it came to light that there were documents that had not been produced by the plaintiff. The trial was halted for a brief period to allow the examination of these documents which consisted of a large number of boxes in custody of the accountant for the plaintiff.

5On the 13^th of July, on the resumption of the trial, the defendants contended that that failure of the plaintiff to produce these documents was grounds for dismissal of the action. Jarvis J. declined to dismiss the action but declared a mistrial. His reasons for declaring a mistrial included the difficulty of resuming after a long break to enable discovery and the like to take place on the new documents. As well he felt that, having been exposed to what he regarded as the false evidence of the principal of the plaintiff on the documents issue, he would not be able to conduct a fair trial if it were to resume.

6As noted, he made an order for solicitor and client costs which, it is submitted by Mr. Moldaver, amount to a de facto order staying the action.

7The initial question is whether the order is interlocutory and thus the proper subject of a motion of this sort, or whether it is a final order and therefore an appeal lies not here, but directly to the Court of Appeal. The test for an interlocutory order, as opposed to a final one, is that the interlocutory order does not resolves the very issue between the parties but resolves some other collateral issues.

8An order declaring that a trial is to stop and a new trial be begun is an order that does not decide the issue before the Judge. It is an order that such an issue cannot be decided for various reasons by that Judge and must instead be decided elsewhere on another occasion. Such an order, in my view is interlocutory. Accordingly, the motion is properly brought for leave.

9The second issue is whether the application for leave has been brought in a timely way. The dates are as follows: the mistrial was declared on July 13^th, 1999. On July 20^th, the first notice of motion for leave to appeal was served upon the defendants by the plaintiff, but it was not filed. Instead, the plaintiff moved before Justice Jarvis in effect for a re-consideration of the order of July 13^th. That motion was dismissed on October 28^th, 1999. After that the notice of motion that had been served on July 20^th was still not proceeded with. There were motions regarding sealing the reasons of Justice Jarvis and as to costs. On August 4^th, 2000, a second motion for leave to appeal was served but, like the first, it was never filed. On November 14, 2001, the notice of motion which is now before me was filed and served and has been proceeded with since that time.

10It is clear therefore that the rule as to timeliness had not been complied with and I must therefore consider whether I should extend the time. The test for extending the time consists, first, of proof of a settled intention of the would-be appellant to appeal; and secondly, reasonable explanation for the delay. As to the first, I must say that while the preparation of a motion for leave to appeal within a week of the original order certainly reveals an intention at that time to appeal, there is really little else about this case and how it was handled to give any evidence of such a settled intention throughout the intervening years.

11As to an explanation for the delay, there really is none offered. Certainly the motion to re-consider could be regarded as a reason for not filing the notice of motion for leave, but that was dismissed in October, 1999 and nothing was done to activate the then-existing motion.

12There is, as far as I can see in the material, no acceptable explanation for all this delay. There is an effort to blame the trial judge for not being available to hear certain motions. I should say that this point was not put forward by Mr. Moldaver but rather by his client in the affidavit. That is really not an explanation because those motions were collateral to the order of July 13^th, which is the real order for which leave to appeal is sought.

13On this basis, the grounds do not exist for an order being made to extend the time. I could stop, there but in deference to the argument presented by Mr. Moldaver, and so that the plaintiff will understand the reason why the Court is not intervening to extricate it from its position, I will go on to review the other point.

14As the order is interlocutory, the provisions of Rule 62 must be complied with. It was submitted that there was a conflicting decision and therefore leave should be given to clear the matter up. The alleged conflicting decision is the case in the United Kingdom of Landauer Ltd. v. Comins and Co. heard by the Court of Appeal, Civil Division, on the 14^th of May, 1991. The trial judge had dismissed the action when it was discovered that there had been destruction of documents such that a fair trial could no longer be held. In my view, those facts are sufficiently dissimilar to the case at bar that it cannot stand as a precedent for how such a matter should be addressed. In the present case the documents were in fact available. They simply had been produced far too late. The situation was quite different. So, even if the Landauer case is regarded as establishing some sort of principle upon which discretion should be exercised, it is not a principle that can apply in the very different circumstances of this case. Accordingly, I do not think that there are conflicting decisions that require some resolution by an Appellate Court to clarify the law.

15As to the other branch of Rule 62, it is said that there is good reason to doubt the correctness of the order of Justice Jarvis because the learned trial judge knew from the evidence that he had heard that the plaintiff was impecunious and would be unable to pay the costs. Because of that inability, it is said that the learned trial Judge erred in making what he himself on another occasion described as a punitive order for costs.

16Before dealing with that, I wish to mention briefly the use of the term "punitive". I do not understand the trial judge as having, in effect, awarded punitive damages in the guise of costs. There is no sense in which the order he made gives the defendant a windfall of any sort. The order was that the costs thrown away should be paid by the plaintiff on a solicitor and client basis. Such an order is not unusual in circumstances where a party has by some form of disobedience to the rules, whether deliberate or accidental, caused a proceeding to have been in vain.

17I do not think the order of Justice Jarvis offends the principle that costs are not a punishment but a compensation.

18Now I return to the question of whether it is a proper exercise of discretion to require costs to be paid by a party who is impecunious and may not therefore be able to pay them, with the result that that party may not be able to continue with its action.

19Counsel did not point to any decided case to support the existence of a principle that a discretion as to costs may not be exercised by a judge where a particular exercise of it will lead to the involuntary termination of the action, by virtue of financial inability on the part of the party ordered to pay the costs.

20In the absence of a precedent establishing such a principle, I do not see that it can be established that the judge in making that order erred in principle. It is not enough that I or any other judge might well have decided to make a different order in the exercise of discretion. It is trite law that cases where a discretion has been exercised differently on different facts do not establish principle but really are examples of a principle being carried into effect.

21The costs order of Justice Jarvis was discretionary and in the absence of an error in principle there is no good reason to doubt its correctness and the second branch of Rule 62 is not met. Finally, I observe that, although the result here is very important to the parties, there is no overriding public interest that transcends the interest of the parties that would require an Appellate Court to review this matter in order to establish some kind of principle that is of importance to the public.

22For all of these reasons, I declined to extend the time and if I had extended the time I would have refused leave to appeal.

23I should in fairness make it clear that Mr. Moldaver, who said everything that could reasonably be said for his client, was not counsel at any relevant time during the events which are the subject of these reasons.

24Accordingly the motion is dismissed. There is no reason why costs should not follow the event on a partial indemnity basis and it is so ordered. Having discussed the quantum with counsel, I fix those costs at $5,000, inclusive of disbursements and taxes.

LANE J.

Date of Reasons for Judgment: January 15, 2003

Date of Release: January 23, 2003

COURT FILE NO.: 748/01

DATE: 20030115

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N: