CITATION: 3Genius Corporation v. Locationary Inc., 2015 ONSC 4558

DIVISIONAL COURT FILE NO.: 216-15

COURT FILE NO.: CV-14-497239

DATE: 2015-07-15

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 3Genius Corporation, Plaintiff (Respondent)

AND: Grant Ritchie, Locationary Inc. and Sergejs Marin, Defendants (Moving Parties)

AND: Arlen Ritchie and 1780626 Ontario Ltd., (Third Parties)

BEFORE: H. Sachs J.

COUNSEL: Peter R. Greene and David N. Vaillancourt, for the Plaintiff (Respondent)

Bruce W. Stratton, Sangeetha Punniyamoorthy and Nikolas S. Purcell, for the Defendants (Moving Parties)

HEARD: In Writing

ENDORSEMENT

Introduction

[1] This is a motion for leave to appeal the order of Dow J., dated April 24, 2015, in which he dismissed the Defendants’ motion for summary judgment and ordered the Defendants to pay the Plaintiff its costs fixed in the amount of $81,955.05. The Defendants seek leave to appeal both aspects of the motion judge’s order.

[2] The claims of the Plaintiff arise from what it argues is an infringement of its copyright in certain software developed and ultimately sold to Apple for what is allegedly a considerable sum of money. On the summary judgment motion, the Defendants relied on a Quitclaim that they submit the Plaintiff executed in relation to the software at issue. According to the Defendants, this Quitclaim provides a complete defence to the Plaintiff’s claims. In its Statement of Claim, the Plaintiff seeks a declaration that this Quitclaim is “void ab initio and is of no force and effect” (Statement of Claim, para. 1(a)).

[3] The Defendants also submitted before the motion judge that the Plaintiff’s action was statute-barred.

[4] The motion judge dismissed the Defendants’ motion on the basis that both the Quitclaim issue and the limitations period issue required determinations of credibility and fact-finding that could not be made fairly without a trial.

[5] On the motion, the Defendants provided a costs outline in which it claimed costs in the amount of almost $175,000.00. In its costs outline, the Plaintiff claimed costs in the amount of $81,955.05 at the substantial indemnity level. The motion judge noted the disparity in the parties’ claims for costs and inferred from that “that the appropriate work involved in bringing and defending this motion would have been more equal than the respective cost outlines suggest” (Motion Judge’s Reasons, para. 24). Therefore, he exercised his discretion to fix the Plaintiff’s costs at the amount it claimed on a substantial indemnity basis.

The Test for Granting Leave to Appeal

[6] The test for granting leave to appeal under Rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test, and in each case, both aspects of the two-part test must be met before leave may be granted.

[7] Under Rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is, in the opinion of the judge hearing the motion, “desirable that leave to appeal be granted.” A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd.(1992), 1992 7405 (ON SC), 7 O.R.(3d) 542 (Div. Ct.).

[8] Under Rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong: that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate”: Nazari v. OTIP/RAEO Insurance Co., 2003 40868 (ON SC), [2003] O.J. No. 3442 (S.C.J., per Then J.); Ash v. Lloyd’s Corp. (1992), 1992 7652 (ON SC), 8 O.R. (3d) 282 (Gen. Div., per Farley J.). In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice: Rankin v. McLeod Young Weir Ltd. (1986), 1986 2749 (ON SC), 57 O.R. (2d) 569 (H.C.J., per Catzman J.); Greslik v. Ontario Legal Aid Plan (1988), 1988 4842 (ON SCDC), 65 O.R. (2d) 110 (Div. Ct.).

[9] Leave to appeal a costs award is granted only “in obvious cases where the party seeking leave convinces the court that there are “strong grounds upon which the appellate court could find that the judge erred in exercising his discretion’”. Further, “[l]eave to appeal a costs order, standing alone, is granted only sparingly.” (McNaughton Automotive Ltd. v. Co-Operators General Insurance Co., 2008 ONCA 597, [2008] O.J. No. 5040 (C.A.), at paras. 24-25.

Analysis

[10] According to the Defendants, the motion judge erred in his analysis on the limitations period issue in two ways. First, he erred by failing to apply the statutory presumption in s.5(2) of the Limitations Act, 2002, S.O. 2002, c-24 that a claim is discoverable on the day the act or omission took place unless that contrary is proven. Second, he erred by restricting the principle of discoverability to the subjective knowledge of the Plaintiff, rather than also considering when a reasonable person in the position of the Plaintiff could have discovered the cause of action.

[11] On the facts, according to the Defendants, the Plaintiff, if it had been acting reasonably, should have known of the existence of the Quitclaim by, at the latest, May of 2011 when the Quitclaim was forwarded to one of the third parties, Arlen Ritchie, by way of giving him access to a “dropbox” that contained a number of documents. The Plaintiff did not commence its action seeking to set aside the Quitclaim until January of 2014, more than two years later.

[12] In its factum, the Defendants assert that the motion judge “held that the limitations period had not expired so as to render the action statute-barred”. (para. 3). This statement fundamentally mischaracterizes the motion judge’s decision on the limitations period issue and the associated issues of discoverability.

[13] The motion judge did not resolve the limitations period issue on any basis. Rather, he determined that that issue could not be determined on the record before him, even with his enhanced fact-finding powers. This is a discretionary decision to which considerable deference is owed on appeal (Hryniak v. Mauldin, 2014 SCC 7, at paras. 68, 81-83; Henry v. Harvey, [2015] O.J. No. 1670 (Div. Ct.), at paras. 3, 5).

[14] The motion judge’s decision to be cautious in the face of a summary judgment motion record that raised real credibility concerns is consistent with the Court of Appeal’s decision in Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, [2014] O.J. No. 2745, where, at para. 44, the Court states:

What happened here illustrates one of the problems that can arise with a staged summary judgment process in an action where credibility is important. Evidence by affidavit, prepared by one party’s legal counsel, which may include voluminous exhibits, can obscure the affiant’s authentic voice. This makes the motion judge’s task of assessing credibility and reliability especially difficult in a summary judgment and mini-trial context. Great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the judge sees and hears it all.

[15] In this case, it cannot be said that the motion judge erred in principle when he found that he could not decide the question of whether the Plaintiff should have known of the existence of the Quitclaim in May of 2011 when Arlen Ritchie was provided access to a drop box containing a number of documents. It does not constitute an error in principle to conclude that the context surrounding the providing of the dropbox and the evidence of what was going on between the parties before and after May of 2011, on which there was considerable divergence, would reasonably have to be assessed and considered before a determination on the limitations period issue could be made in a fair and just manner.

[16] While the Defendants are correct that there are cases where courts have reached conclusions respecting limitations period issues when discoverability is a concern on summary judgment motions, this does not mean that the motion judge’s decision is in conflict with those decisions. The motion judge made his decision based on the record before him, a record that was different than the record in the other decisions the Defendants put forward. In other words, to the extent that the motion judge’s decision “conflicts” with other decisions, it is not a conflict on an issue of principle; it is a conflict arising from the application of the same set of legal principles to a different factual record.

[17] There is also no reason to doubt the correctness of the motion judge’s decision that the limitations period issue could not be determined without a trial, nor does leaving the issue to be determined at a trial raise a concern that goes beyond the interests of the parties and involves a question of general or public importance.

[18] A fair reading of the motion judge’s decision as to costs makes it clear that he felt that the disparity in the claims for costs (the Defendants’ claim being double that of the Plaintiff’s) made it appropriate to award the Plaintiff an amount for costs equivalent to the amount they were claiming on a substantial indemnity basis. In his view, the disparity in the amounts claimed for costs made it likely that the amount actually incurred for costs by the Plaintiff was higher than their costs outline suggested. This inference was an inference that the motion judge was entitled to draw from the costs outlines before him. In short, this is not one of those obvious cases where leave to appeal should be granted on the question of costs alone.

Conclusion

[19] For these reasons, the motion for leave to appeal is dismissed. Contrary to the direction of the Toronto Divisional Court, the Defendants have failed to provide their submissions as to costs prior to the hearing date for the leave motion. The Plaintiff has requested its costs fixed in the amount of $10,831.80, all inclusive. The Defendants shall provide their response to this request within 10 days after the release of this endorsement.

H. SACHS J.

Date: 2015-07-15