Court of Appeal for Ontario

Date: 20230411 Docket: M54026 (COA-22-CV-0391)

Before: Lauwers, Paciocco and Thorburn JJ.A.

Parties

BETWEEN

NDrive, Navigation Systems S.A. Plaintiff (Respondent/Moving Party)

and

Si Zhou (aka Si (Silas) Zhou aka Silas Zhou), Aguazion, Inc. , Hakemi & Ridgedale LLP and Tom A. Hakemi Defendants (Appellants / Responding Parties)

AND BETWEEN

Si Zhou (aka Si (Silas) Zhou, aka Silas Zhou), Aguazion Inc. and Aqua Latitude International Limited Plaintiffs by Counterclaim (Appellants/Responding Parties)

and

NDrive, Navigation Systems S.A., Joao Filipe Dos Santos Teixera Neto, Andreia Susana Dias and Eduardo Augusto De Sousa Carqueja Defendants by Counterclaim (Respondents/Moving Parties)

Counsel

Corey Groper, for the moving parties Si Zhou, acting in person

Heard: March 31, 2023

Endorsement

[1] In 2013, NDrive discovered that LG Electronics Inc. had underreported the number of mobile phones on which it had installed the NDrive software. NDrive started an arbitration in December 2015 against LG to recover the shortfall. Mr. Zhou was given day-to-day supervision over the arbitration on NDrive’s behalf. As a result of the arbitration, NDrive received an arbitral award of $1,068,085.43 USD. After disbursing about $200,000 to others, Mr. Zhou collected the balance of the award and paid it into an account held in the name of his company, Aguazion Inc. NDrive demanded payment of the funds and later moved for a Mareva injunction in May 2020 when payment was not forthcoming. In his endorsement granting the world-wide Mareva injunction against the Zhou parties, McCarthy J. stated that “the materials disclose a strong prima facie case of civil fraud.”

[2] Eventually pleadings were exchanged and NDrive brought a partial summary judgment motion against the Zhou parties. The motion judge granted partial summary judgment and dismissed the counterclaim: NDrive, Navigation Systems v. Zhou et al., 2021 ONSC 7366. She awarded $881,170.84 USD in Canadian dollars, together with pre- and post-judgment interest, as well as punitive damages in the amount of $200,000. In her costs endorsement, she awarded full indemnity costs in the amount of $230,000: NDrive, Navigation Systems v. Zhou, 2021 ONSC 7772.

[3] This court dismissed Mr. Zhou’s appeal, finding that the appellant “failed to establish a palpable or overriding error with the motion judge's granting of judgment in favour of the respondents and dismissal of the counterclaim”: NDrive, Navigation Systems S.A. v. Zhou, 2022 ONCA 602, at para. 44. The court noted: “[t]he motion judge relied on the extensive record and made findings open to her in support of these conclusion”: NDrive (2022), at para. 44. This court also upheld the motion judge’s award of punitive damages and full indemnity costs.

[4] When Mr. Zhou refused to consent to the payment out of funds standing to the credit of the action, NDrive brought a motion to McCarthy J. as case manager, who ordered payment out. His order provided:

1. THIS COURT ORDERS that all funds paid into court to the credit of this action up to the amount of CAD $1,782,446.45 be paid out of court to DMG Advocates LLP in Trust.
2. THIS COURT ORDERS that costs of the motion in the amount of $5,000 inclusive of disbursements and HST are payable to Plaintiff within 30 days of the date of this Order.

[5] McCarthy J.’s endorsement stated, “[t]he Plaintiffs are entitled to payment out of court up to the amount of that total amount of $1,782,446.45. The motion should not have been opposed; the failure of the Defendant to consent to the relief sought unnecessarily complicated and prolonged the matter.”

[6] Mr. Zhou’s appeal to this court of the order of McCarthy J. underpins this motion. NDrive moves to quash Mr. Zhou’s appeal on the basis that McCarthy J.’s order for payment out of the funds paid into court was interlocutory.

[7] An appeal from an interlocutory order lies only to the Divisional Court under s. 19 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[8] NDrive argues that:

The Order under appeal is undeniably interlocutory in nature (and not final). It merely provides for the payment of monies out of court in accordance with and further to Justice Healey’s decision on the summary judgment motion. It does not determine the very subject matter of the litigation or any substantive right.

[9] NDrive further submits that:

It is difficult to understand how Justice McCarthy’s Order could be seen as anything other than “collateral”, as that term was used in Hendrickson v. Kallio, [1932] O.R. 675 (C.A.), at p. 678. No aspect of the Order affects any of the Zhou Defendants’ defences (which have already been rejected - in their entirety) or NDrive’s claims (all of which have been granted). No substantive rights are affected by the Order. This court therefore lacks jurisdiction over this appeal.

[10] We agree.

[11] In Hendrickson, Middleton J.A. gave the classic explanation of the distinction between final and interlocutory orders at p. 678:

The interlocutory order from which there is no appeal is an order which does not determine the real matter in dispute between the parties -- the very subject matter of the litigation, but only some matter collateral. It may be final in the sense that it determines the very question raised by the applications, but it is interlocutory if the merits of the case remain to be determined.

[12] To this we would add: “It may be final in the sense that it determines the very question raised by the applications, but it is interlocutory if the merits of the case remain to be [or have already been] determined.”

[13] The cases since Hendrickson have also adapted the distinction between substantive merits and procedural rights in determining whether an order is final or interlocutory. In Drywall Accoustic v. SNC Lavalin, 2020 ONCA 375, Zarnett J.A. noted, at paras. 16 and 17:

An interlocutory order is one which does not determine the real matter in dispute between the parties—the very subject matter of the litigation—or any substantive right to relief of a plaintiff or substantive right of a defendant. Even though the order determines the question raised by the motion, it is interlocutory if these substantive matters remain undecided: Hendrickson v. Kallio, [1932] O.R. 675 (C.A.), at p. 678; Ball v. Donais (1993), 13 O.R. (3d) 322 (C.A.).

In Sun Life Assurance Co. of Canada v. York Ridge Developments Ltd., 1998 CarswellOnt 4534 (C.A.), Weiler J.A. distinguished substantive matters, which are the subject of final orders, from procedural rights, which are not. She stated, at para. 13:

As stated in Holmsted and Watson on Ontario Civil Procedure at 62-24: “ … to be final an order must deal with the substantive merits as opposed to mere procedural rights, no matter how important the procedural rights may be. The test focuses on whether the order under appeal finally disposes of the rights of the parties, in the sense of substantive rights to relief (in the case of a plaintiff) or a substantive defence (in the case of a defendant).”

[14] The merits of the action have been finally decided and all appeal avenues regarding the merits are now closed. It is too late for Mr. Zhou to challenge the corporate status or bona fides of NDrive. An order for payment out of the funds standing to the credit of the action is a procedural, not substantive, order and it is therefore interlocutory. Accordingly, this court has no jurisdiction.

[15] The motion is allowed, and the appeal is quashed, with costs to the moving parties fixed at $11,000, on the substantial indemnity scale, because the appeal of an order requiring payment out of funds standing to the credit of this action after the merits have been finally determined is abusive.

“P. Lauwers J.A.”

“David M. Paciocco J.A.”

“J.A. Thorburn J.A.”