COURT OF APPEAL FOR ONTARIO
CITATION: Advanced Farm Technologies-JA v. Yung Soon Farm Inc., 2021 ONCA 569
DATE: 20210817
DOCKET: C68506
Feldman, Paciocco and Coroza JJ.A.
BETWEEN
Advanced Farm Technologies-JA, Limited, carrying on business as Advanced Farm Technologies, JA. Ltd., and Advanced Farm Technologies, Jamaica Ltd.
Plaintiff
(Respondent)
and
Yung Soon Farm Inc., Michael Chung, Walter Chung, and Stephen Chung
Defendants
(Appellant)
James Chow, for the appellant
Mahdi M. Hussein, for the respondent
Heard: March 9, 2021 by videoconference
On appeal from the order of Justice Janet Leiper of the Superior Court of Justice, dated June 19, 2020, with reasons at 2020 ONSC 3831.
Feldman J.A.:
[1] The appellant was sued under the simplified procedure for failing to pay the agreed price of US$48,238.49 for papayas ordered and delivered. After having default judgment set aside, the appellant defended the action and instituted a counterclaim for $5,000,000 in damages for breach of contract and $1,000,000 in punitive damages, taking the action out of the simplified procedure. After that, the appellant effectively absented itself from the litigation, with the result that its defence and counterclaim were eventually struck out by the motion judge without leave to amend. The appellant appeals that decision.
[2] The motion judge’s decision is well-supported by the record and the law. I would dismiss the appeal.
A. History of the Action
[3] The statement of claim was served on all parties in December 2017, no statement of defence was filed, and default judgment was obtained in January 2018. In August 2018, the defendants had the default judgment set aside on the condition that they pay costs and deliver a defence within 30 days. After the plaintiff discontinued its action against the individual directors, the appellant delivered its statement of defence along with a counterclaim for $5 million for breach of contract and $1 million punitive damages, which had the effect of converting the action from the simplified procedure to the ordinary stream. After the plaintiff moved to strike portions of the appellant’s pleading, the appellant delivered an amended statement of defence and counterclaim in January 2019.
[4] The plaintiff delivered its affidavit of documents on June 7, 2019, then made numerous attempts thereafter to move the litigation forward, with no response from appellant’s counsel except to cancel the scheduled examinations for discovery and to consent to the timetable imposed by Master Short. I am setting out the details, as did the motion judge, because understanding the full extent of the appellant’s conduct of the litigation is necessary to understand and review the decision of the motion judge to strike the defence and counterclaim. The following are the details:
a. July 11, 2019: Plaintiff’s counsel's office wrote to appellant’s counsel in an attempt to schedule examinations for discovery. Counsel to the plaintiff advised appellant's counsel that, "We have tried contacting your office numerous times, and only reach your voicemail. You have not returned any of our recent voicemails."
b. July 24, 2019: Plaintiff’s counsel’s office set dates for examination for discovery, as he had not heard from appellant's counsel nor had he received the appellant’s affidavit of documents.
c. August 12, 2019: Four days before the scheduled examinations for discovery, appellant's counsel advised that his client was unable to attend and asked the plaintiff to provide further dates. Appellant’s counsel did not advise when his client would provide its affidavit of documents.
d. August 27, 2019: Plaintiff's counsel made a further request for the appellant's affidavit of documents and provided available dates for examinations between September and October 2019. Plaintiff's counsel advised that if appellant's counsel did not respond, he would schedule a motion to compel the appellant's affidavit of documents and would issue a further notice of examination. Appellant's counsel did not respond to this correspondence.
e. September 13, 2019: Plaintiff's counsel unilaterally set an examination for discovery of the appellant for October 17, 2019 and sent correspondence to the appellant's counsel advising of this date. Appellant's counsel did not respond to this correspondence.
f. September 23, 2019: Plaintiff's counsel served a motion record on the appellant's counsel with a return date of October 2, 2019, seeking the appellant's affidavit of documents and an order for the appellant to attend the scheduled examination for discovery. The appellant filed no responding materials for this motion. Appellant's counsel did not respond to this correspondence.
g. October 2, 2019: The court imposed a timetable on consent, and ordered costs of $1,500 payable to the plaintiff in 60 days. The order required the appellant to deliver its unsworn affidavit of documents by November 1, 2019. The appellant did not comply with the timetable. The appellant did not pay the costs ordered within 60 days.
h. November 4, 2019: Plaintiff's counsel sought to formalize the October 2, 2019 endorsement. In that letter, plaintiff’s counsel sought the status of the appellant's affidavit of documents. Plaintiff's counsel also put appellant’s counsel on notice that he would move to strike the defence. Appellant's counsel did not respond to this correspondence.
i. March 6, 2020: Plaintiff's counsel enclosed a notice of examination in aid of execution seeking payment for the outstanding costs award from the October 2, 2019 motion. Plaintiff's counsel also sought dates for a motion to strike the appellant's defence for failing to abide by the terms of the October 2, 2019 endorsement. This letter asserted that, "It is clear that your client has no interest in litigating the action." Appellant's counsel did not respond to this correspondence.
j. March 16, 2020: Plaintiff's counsel wrote to inform appellant's counsel that due to the COVID-19 pandemic the court would not schedule its motion. Plaintiff's counsel sought a virtual mediation in accordance with Rule 24 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Appellant's counsel did not respond to this correspondence.
k. May 12, 2020: Plaintiff’s counsel informed appellant's counsel via email of the chambers appointment returnable on May 15, 2020. Appellant's counsel did not respond to this correspondence.
l. May 13, 2020: Plaintiffs counsel provided appellant's counsel with a proposed schedule for the litigation ahead of the chambers appointment. Appellant's counsel did not respond to this correspondence.
m. May 15, 2020: Myers J. convened a chambers appointment. Appellant's counsel did not attend. The motion to strike the defence was scheduled on that date and timelines were set for delivery of motion materials.
[5] The order under appeal was made on a motion in writing dated June 15-19, 2020, which was scheduled by Myers J. at the May 15, 2020 chambers appointment that appellant’s counsel did not attend. After the plaintiff had served its motion record and factum, on June 11, 2020, the appellant sent a cheque for the outstanding costs due to the plaintiff with a letter apologizing for the delay. Finally, on June 12, 2020, the appellant delivered its affidavit of documents with a letter that apologized for the delay, proposed mediation, and asked for the plaintiff’s position on posting security for costs. An affidavit of an officer of the appellant stated that he believed the appellant had a strong case, and that the appellant intended to proceed expeditiously and would participate in mediation, but provided no explanation for any of the delays or for its failure to abide by the order of Master Short.
B. The Motion Judge’s Analysis
[6] The motion judge referred to Rule 60.12 of the Rules of Civil Procedure, which allows the court to sanction a party for failure to comply with an interlocutory court order, including by staying the proceeding, dismissing the proceeding, striking out a defence, or making such other order as is just.
[7] The motion judge referred to the 2009 decision in Dew Point Insulation Systems Incorporated v. JV Mechanical Limited, 2009 CanLII 71721 (ON SCDC), 259 O.A.C. 179, where Bellamy J. summarized the purpose and approach to Rule 60.12 motions: to sanction repeated procedural breaches while bearing in mind that striking the defence is a last resort remedy to be used when there has been utter disregard for court orders or where there is prejudice to the other party. Applying those principles, the motion judge concluded that the appropriate remedy was to strike the defence and counterclaim, based on five aspects of the record:
The appellant took no step to move the litigation forward without a court order.
The appellant breached the consent order of Master Short by failing to deliver the affidavit of documents or the costs on time.
The appellant did not remedy the breaches until after the plaintiff had scheduled a compliance motion, and delivered a motion record and factum.
The appellant displayed a months-long pattern of failing to respond to correspondence.
The appellant asserted that the action was vexatious, yet it took no steps to deal with the action as such, and instead responded with a $6 million counterclaim that belied the suggestion that the claim was vexatious.
[8] The motion judge acknowledged that the plaintiff was seeking an extreme remedy but concluded that it was warranted in all the circumstances. By ignoring Master Short’s order, the appellant showed an utter disregard for court orders “in the overall context of this litigation”, as outlined above.
C. Issues
[9] The appellant’s position on appeal is that the motion judge erred by: 1) failing to give the appellant a last chance to comply with court orders; 2) failing to acknowledge that by the return of the motion the appellant was no longer in breach of Master Short’s order; 3) failing to consider the merits of its defence; 4) failing to consider that the action was at the early stages and should have been decided on its merits; and 5) failing to consider that there was no evidence of prejudice to the plaintiff.
D. Analysis
[10] This court has recently had the opportunity to address the issue of when it is appropriate to strike a pleading under Rule 30.08(2) of the Rules of Civil Procedure for non-compliance with document disclosure obligations in Falcon Lumber Limited v. 2480375 Ontario Inc. (GN Mouldings and Doors), 2020 ONCA 310. In that case, the court summarized the applicable principles, at para. 57, as follows:
To summarize, several principles guide the exercise of a court’s discretion to strike out a party’s claim or defence under r. 30.08(2) for non-compliance with documentary disclosure and production obligations:
• The remedy is not restricted to “last resort” situations, in the sense that it must be preceded by a party breaching a series of earlier orders that compelled better disclosure or production. However, courts usually want to ensure that a party has a reasonable opportunity to cure its non-compliance before striking out its pleading;
• A court should consider a number of common sense factors including: (i) whether the party’s failure is deliberate or inadvertent; (ii) whether the failure is clear and unequivocal; (iii) whether the defaulting party can provide a reasonable explanation for its default, coupled with a credible commitment to cure the default quickly; (iv) whether the substance of the default is material or minimal; (v) the extent to which the party remains in default at the time of the request to strike out its pleading; and (vi) the impact of the default on the ability of the court to do justice in the particular case;
• The merits of a party’s claim or defence may play only a limited role where breaches of disclosure and production obligations are alleged as one would reasonably expect a party with a strong claim or defence to comply promptly with its disclosure and production obligations;
• In considering whether an order to strike out a pleading would constitute a proportional remedy in the circumstances, a court should consider:
o the extent to which the defaulting party’s conduct has increased the non-defaulting party’s costs of litigating the action, including the proportionality of those increased costs to the amount actually in dispute in the proceeding; and
o to what extent the defaulting party’s failure to comply with its obligation to make automatic disclosure and production of documents has delayed the final adjudication of the case on its merits, taking into account the simplicity (or complexity) of the claim and the amount of money in dispute.
[11] Because the default in this case involved the appellant’s failure to produce an affidavit of documents, the principles articulated by the court in Falcon are clearly relevant and should apply accordingly. In this case, the appellant also breached a court order, which adds significantly to the impugned conduct. In addition, counsel, on behalf of the appellant, failed to respond to normal communications from opposing counsel with no explanation.
[12] With respect to the “last resort” issue raised by the appellant, there are a number of responses. First, as Brown J.A. explains in Falcon, a court may strike out a pleading if that is the remedy warranted by all the circumstances, as long as the party has had a reasonable opportunity to cure any non-compliance. Second, as the plaintiff points out, had the appellant attended the chambers appointment with Myers J., it would have had its last chance to comply with Master Short’s order before going to the motion where the pleading was struck. Third, in this case, the appellant shunned the many overtures made by plaintiff’s counsel to comply and move forward with the litigation. Instead, the appellant ignored every overture after the consent order of Master Short.
[13] With respect to taking into account the potential merit of the appellant’s defence, Brown J.A. points out that it plays only a limited role in the court’s analysis because if a party has a strong position on the merits, one would expect them to produce their documents to demonstrate that strength.
[14] In applying the common sense factors set out by Brown J.A.,
• the appellant’s failure to comply with Master Short’s court order appears to have been deliberate as so many chances were given to comply and there has been no explanation for its inaction;
• the appellant’s failure to comply is clear;
• although there has now been very late compliance with Master Short’s order and a statement in its officer’s affidavit that the appellant intends to proceed expeditiously with the litigation, without an explanation for its prior inaction, there is no basis on which to accept its assurance;
• the substance of the default was significant;
• the appellant complied with Master Short’s order mere days before the motion to strike, meaning that the appellant was in default when the motion was commenced and even after the chambers appointment before Myers J.; and
• the impact of the default was that the litigation could not proceed.
[15] Further, there was clearly prejudice to the plaintiff, through the ongoing cost of chasing the appellant to fulfill its procedural obligations and to participate in the litigation, as required by the Rules of Civil Procedure.
[16] Ultimately the motion judge concluded that the extreme remedy of striking the appellant’s pleadings was warranted, noting that she did not grant it lightly. She considered the appellant’s compliance with the order of Master Short, but noted that it was done “on the last possible day”. She also considered the steps taken by the plaintiff and the responses of the appellant “in the overall context” and concluded that the remedy requested by the plaintiff was the appropriate one.
[17] The motion judge was entitled to conclude that notwithstanding the appellant’s eventual, months-late delivery of the costs and affidavit of documents ordered by Master Short, its history of an overall failure to participate in the litigation process in accordance with the Rules called for the extreme remedy of striking the appellant’s statement of defence and counterclaim. I see no error in the motion judge’s approach. I would not interfere with her decision.
E. Conclusion
[18] I would therefore dismiss the appeal with costs, fixed in the agreed amount of $10,000 inclusive of disbursements and HST.
Released: August 17, 2021 “K.F.”
“K. Feldman J.A.”
“I agree. David M. Paciocco J.A.”
“I agree. S. Coroza J.A.”```