Platinum Stairs Ltd. v. Laranjeira, 2017 ONSC 6107
DIVISIONAL COURT FILE NO.: 357/15
SMALL CLAIMS COURT FILE NO.: SC-13-32060
SUPERIOR COURT OF JUSTICE – ONTARIO
DIVISIONAL COURT
RE: PLATINUM STAIRS LTD., Appellant
AND:
MANNY LARANJEIRA also known as SUPERIOR DISPOSAL, ALEXANDRE LARANJEIRA and 1269016 ONTARIO LIMITED operating as SUPERIOR DISPOSAL, Respondents
BEFORE: SPIES J.
COUNSEL: William Ribeiro, for the Appellant/Plaintiff
John Gray, for the Respondents/Defendants
HEARD at Toronto: October 11, 2017
ENDORSEMENT
Overview of the Appeal
1The appellant appeals to this Court from two endorsements of Deputy Judge Hunt of the Toronto Small Claims Court, both dated June 16, 2015. In his first endorsement, Deputy Judge Hunt dismissed the appellant’s action and struck the appellant’s defence to the respondents’ claim (First Endorsement). In the second endorsement, after hearing the evidence on an uncontested trial in the absence of the plaintiff/appellant, Deputy Judge Hunt granted default judgment to the defendant/respondent Superior Disposal in the amount of $5,788.99 plus $2,000 for costs. He also awarded costs of the respondents’ motion in the amount of $1,000 (Second Endorsement).
2The appellant argues that the Deputy Judge erred in law in three respects:
in his First Endorsement by ordering that the appellant’s claim and its defence to the respondents’ claim be dismissed and failing to hear the trial on its merits on the basis that the costs ordered by Deputy Judge Ferreira resulting from a previous adjournment of the trial had not been paid when in fact a cheque and/or cash was presented in court to comply with that order.
in his Second Endorsement by awarding default judgment to Superior Disposal on its claim as he based his judgment on his erroneous First Endorsement.
in his Second Endorsement by ordering costs of the motion brought by the respondents to dismiss the appellant’s claim and defence to the respondents’ claim without giving the appellant the opportunity to make submissions on costs.
Facts
3The plaintiff sued the defendants in the Small Claims Court in November 2013 for a little over $10,000 for alleged unpaid accounts for the construction of three staircases. The defendants defended the claim and asserted a $25,000 claim against the plaintiff relating to alleged deficiencies and delays in the work completed by the plaintiff.
4On February 26, 2015, Deputy Judge Ferreira of the Toronto Small Claims Court granted an adjournment of the trial at the request of the plaintiff and ordered that the plaintiff pay the defendants’ costs in the amount of $600 (Costs Order). He noted in his endorsement that the previous trial date had been adjourned on consent but at the request of the plaintiff. The Costs Order did not specify when costs would be payable.
5On March 4, 2015 a Notice of Trial was sent to the parties with a new trial date of June 16, 2015. The plaintiff’s licenced paralegal, Mr. Capicotto, did not respond to two emails from the defendants’ solicitor that followed the Notice of Trial requesting payment of the Costs Order.
6On May 19, 2015 counsel for the defendants sent an email to Mr. Capicotto advising that as the costs had still not been paid, a motion would be brought to strike out the plaintiff’s pleadings. Mr. Capicotto did respond to this email on the same date pointing out that the Costs Order did not indicate anywhere that the funds must be provided by a certain date failing which the pleadings would be struck. As the plaintiff had still not paid the Costs Order, Mr. Gray, new counsel for the defendants, served a motion to strike returnable at the opening of trial. Mr. Capicotto did not serve any responding material and the plaintiff did not pay the Costs Order in advance of the trial.
7At the opening of the trial on June 16, 2015, before Deputy Judge Hunt, Mr. Gray advised the Deputy Judge that the Costs Order had still not been paid and that he was proceeding with his motion to strike. Mr. Capicotto advised the Deputy Judge that no deadline date was specified in the Costs Order nor did it state that if costs were not paid within a prescribed time that the defence [sic] would be struck. Mr. Capicotto suggested that the costs could await the outcome of the trial, at which point the costs would either be added or deducted from the result. Significantly, Mr. Capicotto also advised the Deputy Judge that his client had a cheque for payment of the Costs Order.
8Mr. Gray referred the Deputy Judge to the affidavit filed in support of the motion to strike and to Susin v. Chapman, 2002 3799; a decision of Bain J. of the Superior Court of Justice, which was upheld on appeal at 2004 3175 (Ont. C.A.). Mr. Gray referred in particular to para. 7 of the trial decision where Justice Bain dismissed the plaintiff’s claim under Rules 57.03(2) and 60.12 of the Rules of Civil Procedure as a result of the non-payment of costs. The Deputy Judge then made his decision, without calling on Mr. Capicotto for submissions, and stated that he was bound by the Susin decision and concurred in the reasoning of Justice Bain in para. 7 of that decision. He dismissed the plaintiff’s claim and the plaintiff’s defence to the defendants’ claim, with costs, although he did not proceed to fix those costs at that time. Instead he stated “We will proceed with the defendants’ claim”.
9Mr. Capicotto then asked the Deputy Judge whether or not this was the case even though he had the costs cheque with him. The Deputy Judge said it was. Mr. Capicotto then attempted to distinguish the Susin decision. After a brief exchange, Mr. Capicotto reiterated that he was in possession of a cheque and would simply pass it over and as such would comply with the Costs Order. He said that it was unfair to his client to not have the ability to pursue its claim. At that point the Deputy Judge asked Mr. Gray for his position. After a brief indulgence so Mr. Gray could consider the matter, Mr. Gray essentially took the position that the Deputy Judge had made his order with due consideration of the circumstances and that it should stand. He submitted that where a timeline is not specified, costs must be paid forthwith. Mr. Gray also suggested that if the Deputy Judge was inclined to allow the trial to proceed then there would be cost consequences of his having to bring the motion in order to enforce the payment of the Costs Order. This time, Mr. Capicotto was permitted to respond to these submissions. He advised that he could also pay the defendants cash if they proceeded with the trial that day. To this, Deputy Judge Hunt stated as follows:
The costs order of Deputy Judge Ferreira is not de minimis, nor is the integrity of the decisions made in this Court to be taken lightly or in a cavalier fashion. The Plaintiff, Platinum Stairs called on this Court to assist it in pursuing its claim. And then proceeded to ignore an Order of this Court. My Order stands and the claim is dismissed as well as the defence to the Defendants’ claim. And you, your client and your witnesses Mr. Capicotto are free to leave.
10Deputy Judge Hunt then stood the matter down and proceeded shortly thereafter with an undefended trial of the defendants’ claim. After hearing evidence from one witness, the Deputy Judge found that, in addition to the dismissal of the plaintiff’s claim, the defendants were entitled to $5,788.99 from the plaintiff plus pre and post-judgment interest.
11With respect to costs, the costs of the defendants’ motion to strike were argued in the absence of the plaintiff and Mr. Capicotto. Mr. Gray asked for $500 inclusive for the costs of the motion. As for the trial, he asked for the full 15% of the amount claimed by the plaintiff of $25,000; namely $3,750 pursuant to s. 29 of the Courts of Justice Act (CJA). Deputy Judge Hunt fixed the costs of the motion at $1,000, all inclusive (double what the defendants requested) and costs of the trial at $2,000 plus disbursements pursuant to Rule 19.01(1) of the Rules of the Small Claims Court.
Standard of Review
12An appeal lies to the Divisional Court from the final order of the Small Claims Court in an action for the payment of money in excess of the “prescribed amount”, excluding costs, which at this time is $2,500. I therefore have jurisdiction to hear this appeal.
13I raised a question with Mr. Ribeiro, counsel for the appellant, as to whether or not leave was required with respect to the costs orders made by the Deputy Judge pursuant to s. 133(b) of the CJA. Pursuant to Rule 61.3(7) of the Rules of Civil Procedure, if costs are appealed as part of the appeal of a final order, the request for leave to appeal shall be included in the Notice of Appeal or in a Supplementary Notice of Appeal as part of the relief sought. Mr. Ribeiro’s position was that since he was primarily appealing the final order of the Deputy Judge dismissing the appellant’s claim and defence to the defendants’ claim, the costs order would necessarily fall too if he is successful. I agree with that observation provided that the appeal, if successful, is not on the grounds of the costs orders alone.
14As for the standard of review, the Supreme Court of Canada has set out the standard of review applicable in appeals from judges’ orders in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. On questions of law, the standard is correctness (at para. 8), on questions of fact, the standard is palpable and overriding error (at para. 10) and on questions of mixed fact and law there is a spectrum.
15Where a party raises an issue of procedural fairness, it is not necessary to engage in a standard of review analysis. Rather it is for the court to determine whether the requisite level of procedural fairness has been accorded, taking into account the factors in Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817.
16The general rule is that costs are in the discretion of the court and the exercise of that discretion should only be interfered with on appeal in limited circumstances. Specifically, the discretion to award costs should only be interfered with if the judge considered irrelevant factors, failed to consider relevant factors, or reached an unreasonable conclusion; see Canadian Pacific Limited Ltd. v. Matsqui Indian Band, 1995 145 (SCC), [1995] 1 S.C.R. 3 at p. 32.
Analysis – Grounds of Appeal
Did the Deputy Judge err in law in dismissing the appellant’s claim and defence to the respondents’ claim and proceeding to hear the respondents’ claim on an uncontested basis and granting default judgment to the respondents?
17I will deal with the first two grounds of appeal together as the second ground follows from my conclusion on the first. However, before dealing with this issue, I note that there is an issue of procedural fairness that was not raised by the appellant in his Notice of Appeal. I am concerned that the Deputy Judge made his original decision to dismiss the plaintiff’s claim and defence to the defendants’ claim without even calling from Mr. Capicotto. He only heard from Mr. Capicotto after he persisted, resulting in him effectively reopening, to some extent, the issue. By then, in my view, the Deputy Judge had clearly made up his mind and as urged by Mr. Gray, decided that his decision would stand. As a matter of procedural fairness, Mr. Capicotto should have been permitted to respond to Mr. Gray’s submissions on the motion before the Deputy Judge made his decision.
18Setting aside this issue, in my view the Deputy Judge erred in law when he considered himself bound to the Susin decision which applied Rule 57.03(2) and Rule 60.12. I come to this conclusion for a number of reasons.
19First of all, the rules of the Small Claims Court do not have an equivalent rule to Rule 57.03(2). Furthermore, I understand from counsel that there are no decisions of the Small Claims Court that provide any guidance as to when costs in these circumstances would be payable.
20In Sears v. Sears, 2005 5863, the Divisional Court was dealing with when costs fixed by the Court of Appeal on an appeal from a trial decision, namely a final order, were payable. The motions judge who heard the motion to enforce the order relied on Winer v. Fisher (1998), 1998 5213 (ON CA), 42 O.R. (3d) 153, where the Court had held “[a]bsent a statement that the costs are payable forthwith or within a certain time such as 30 days … the costs are payable at the conclusion of the litigation.” The Divisional Court held that the motions judge had erred in applying Winer, as it was in the context of an interlocutory motion not a final disposition of the appeal. The Court found that the costs ordered by the Court of Appeal were payable forthwith as the Court of Appeal order was a final disposition of the appeal.
21In coming to that conclusion, albeit in obiter, the Divisional Court noted that the Winer decision may now be superseded by Rule 57.03(1) which is mandatory. The Court held at para. 18 that given the wording of the new Rule it was no longer necessary that costs not be recoverable until the end of the litigation and that the norm is that all costs be payable within 30 days. The Court concluded:
… it seems to us that in the light of this mandatory language, if the judge fails to say anything about when costs are payable, the presumption will be that they are payable in 30 days since the judge is required to make that order absent reasons for doing otherwise. [Emphasis added]
22Mr. Gray argued that, in fact as a matter of law, in the absence of Deputy Judge Ferreira stating when the costs were payable, they were payable “forthwith”. As I have said, the Sears case makes it clear that that is only for final orders. The Costs Order was clearly an interlocutory order.
23All of the cases that Mr. Gray relies upon in his book of authorities either dealt with other issues or applied Rule 57.03(1)(a). The only exception was a short endorsement by C. Campbell J. in Sansone v. D’Addario, (2007) 54281 (Ont. S.C.J.), where he held that “absent specific direction to the contrary, or extenuating circumstances, the meaning to be accorded Rule 57.03(1)(a) is that costs should be payable forthwith (see Sears v. Sears at paras. 17 and 18). This decision appears to have related to an interlocutory order although the order disposed of a specific issue so that is not clear. In any event, I have already referred to paras. 17 and 18 of the Sears decision and with respect, if the costs order in issue is an interlocutory order it seems to me that Campbell J. incorrectly interpreted the Sansone decision.
24As Mr. Ribeiro submitted, the Small Claims Court Rules do not have an equivalent to Rule 57.03 and so he argued that the Winer decision should apply in these circumstances. However, Rule 1.03(1)/(2) of the Small Claims Court Rules provides that “if these rules do not cover a matter adequately, the court may give directions and make any order that is just, and the practice shall be decided by analogy to these rules, by reference to the CJA and the Act governing the action and, if the court considers it appropriate, by reference to the Rules of Civil Procedure.” Also of some relevance is Rule 2.01 of the Small Claims Court Rules which provides that a failure to comply with the Rules is an irregularity not a nullity and the court may grant all necessary amendments or other relief on such terms as are just “to secure the just determination of the real matters in dispute.”
25Given the absence of cases in the Small Claims Court on point, I would not say that the position taken by Mr. Capicotto was unreasonable. Certainly before Rule 57.03 was put in place, pursuant to the Winer decision, it was generally the case that unless an order stated costs were payable forthwith or within a certain timeframe, that costs were payable at the conclusion of the litigation. Furthermore, there do not appear to be any cases from the Small Claims Court that have adopted the jurisprudence in the Superior Court of Justice with respect to Rule 57.03.
26That said, given Rule 1.03(1)/(2) of the Small Claims Court Rules, had the Deputy Judge not considered himself bound by the Susin case, in my view he could have crafted reasons deciding that, by analogy, the principles in Rule 57.03(1)(a) apply and that the most reasonable interpretation of the Costs Order, since it is an interlocutory order, would be that costs were payable within 30 days.
27However, this is not how the Deputy Judge decided the matter. He considered himself bound by the Susin decision which was clearly distinguishable from the case at bar. In my view this constituted an error in law. Even accepting that Rule 57.03 of the Rules of Civil Procedure applies in Small Claims Court matters, in Susin, the evidence before Bain J. was that there was a history of two other actions involving the same parties and that in the three actions the plaintiff had failed to pay, in total, 12 orders for costs totaling $38,000. It was in that context that Bain J. found that the plaintiff had elected not to pay the ongoing costs of the litigation and that the court could not allow the litigation to continue “in the face of the clear non-payment of outstanding costs without any justification” (at para. 7). On appeal the Court held that it was satisfied that Bain J. was entitled to make the order she did “given the lengthy history of these proceedings and the material that was before her.” The facts of that case are a far cry from the facts in the case at bar.
28The other error of law made by the Deputy Judge was that he struck the appellant’s claim and defence to the respondents’ claim as a remedy of first resort without accepting the appellant’s offer to cure the default by payment of the costs. As stated by Epstein J.A. for the Court of Appeal for Ontario in Kooagstani v. Mahmood, 2015 ONCA 56:
54Notwithstanding the legitimate concerns raised before Spence J., my difficulty with his decision to strike the appellants’ defence is that he failed to apply the principles relevant to such a request, particularly those set out by this Court in Bell ExpressVu Limited Partnership v. Torroni (2009), 2009 ONCA 85, 94 O.R. (3d) 614 … [where] at para. 35, the majority identified striking out a defence as a severe remedy and made it clear that it should generally not be imposed as a remedy of first resort. The defaulting party should, at least, be provided with an opportunity to cure the default. [Emphasis added]
55Such was not done in this case.
29I agree with Mr. Gray that for orders of the court to have any meaning they must be enforced. The law, however, is clear that a decision to strike a claim or a defence to a claim is a severe remedy only available for repeated breaches and not to be imposed as a remedy of first resort and not without providing an opportunity to the defaulting party to cure.
30In all of the cases relied upon by the parties, this principle was applied and no claims were struck absent repeated breaches where the breach had not been cured. That is not this case. There was a legitimate issue to be determined as to when the costs were payable given that it appears this issue has not been considered in the Small Claims Court. Secondly, Mr. Capicotto came to court prepared to pay the costs if so ordered and his position did not find merit with the trial judge. Mr. Capicotto’s offer of the payment of the Costs Order by cheque or cash ought to have been accepted and the Deputy Judge’s failure to do so prevented the appellant from curing the default and was a further error in law. For these reasons the Deputy Judge’s First Endorsement and his decision to dismiss the appellant’s claim and defence to the respondents’ claim and proceed by way of an uncontested trial cannot stand. As a result, that decision including the judgment and order for costs that followed, are all set aside.
Did the Deputy Judge err in law in his Second Endorsement by ordering costs of the motion brought by the respondents to dismiss the appellant’s claim and defence to the respondents’ claim without giving the appellant the opportunity to make submissions on costs?
31I reject Mr. Gray’s submission that having granted the respondents’ motion that the appellant was not entitled to be present for the argument as to the quantum of costs on that motion. In any event I have set that decision aside and so the costs decision is necessarily set aside as well. Even if that decision were sound, Mr. Capicotto clearly should have been able to make submissions as to costs before the Deputy Judge asked him and the appellant to leave the courtroom. To make matters worse, his order for costs doubled the amount claimed by the respondents. As this Court said in Melloul-Blamey Construction Ltd. v. Schleiss Development Co., 2003 CarswellOnt 4413, at para. 12, the failure to invite submissions raises a concern of procedural fairness and indicates an improper exercise of discretion requiring appellate intervention.
32Furthermore, if leave is required to appeal the decision of Deputy Judge with respect to costs of the motion, it is granted. The Deputy Judge’s decision on costs was in breach of Rule 15.07 of the Small Claims Court Rules which provides that costs of a motion exclusive of disbursements shall not exceed $100 unless the court orders otherwise “because there are special circumstances”. The Deputy Judge did not invoke this section as I understand his decision.
Disposition
33For these reasons the First and Second Endorsements of the Deputy Judge dated June 16, 2015 are set aside, including all costs orders, and this matter is remitted back to the Small Claims Court so that the appellant’s claim and the respondents’ claim can be heard on the merits by a different Deputy Judge.
34In a letter dated December 15, 2015, Mr. Ribeiro sent a firm trust cheque to Mr. Gray made payable to the respondents, in the amount of $600, representing the amount of the Costs Order. That cheque was returned to Mr. Ribeiro a couple of months later and so the costs have not yet been paid. Accordingly, as a condition of this order, the appellant shall pay the Costs Order in the amount of $600.
35However, in my view the appellant is entitled to its costs of this appeal as the successful party. I do not accept Mr. Gray’s position that even if successful, the appellant should pay the respondents’ costs or bear its own costs. The respondents defended the appeal resulting in the attendance before me. Both counsel submitted Cost Outlines in the range of $5,000-$6,000 on a partial indemnity basis. In my view considering all of the circumstances, including the amount in issue and the reasonable expectations of the parties as evidenced by their respective Cost Outlines, an award of costs for this appeal in the amount of $3,500 is appropriate. From that amount the costs ordered to be paid by the appellant of $600 will be deducted leaving a net amount of $2,900 in costs to be paid by the respondents to the appellant within 30 days of the release of this decision.
SPIES J.
Date: October 18, 2017