CITATION: VLMTeck Inc. v. Dhillon, 2019 ONSC 986 DIVISIONAL COURT FILE NO.: DC-18-00961 DATE: 20190208
ONTARIO
SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
KITELEY, WILTON-SIEGEL, and MYERS JJ.
BETWEEN:
VLMTECK INC.
Respondent
– and –
DR. TEJINDER DHILLON and DR. T.J. DHILLON DENTISTRY PROFESIONAL CORPORATION
Appellants
Branko J. Kurpis, lawyer for the respondent
Barry Weintraub, lawyer for the appellants
HEARD at Hamilton: February 4, 2019
Myers J.:
REASONS FOR JUDGMENT
THE APPEAL
[1] The appellants appeal the order of Parayeski J. dated June 26, 2018 striking out their statement of defence and counterclaim. For the reasons that follow, the appeal is dismissed on the terms set out at the end of these reasons.
BACKGROUND
[2] In September, 2014, the respondent sued the appellants for $53,082.82 for the price of dental equipment sold and delivered earlier that year. The appellants defended the claim on the basis that the supposedly new equipment was actually used, incorrectly installed, and defective. They counterclaimed for the return of a $5,000 deposit that they paid to the respondent.
[3] The parties settled in August, 2017. The settlement did not close and the litigation continued.
[4] The parties settled again during a pre-trial conference before Master McGraw in November, 2017. According to the terms of settlement, the respondent agreed to remove a specified list of equipment from the appellants’ dental office within 45 days. The appellants, for their part, agreed to pay $37,000 to the respondent. The appellants required that the settlement funds be paid into escrow until the respondent attended at their office and removed the specified equipment as agreed. The settlement provided that once the respondent removed the equipment and the appellants’ payment was then released to the respondent from escrow, the respondent would execute and deliver a release and file a notice of discontinuance to end the litigation.
[5] Attempts to carry out the terms of the settlement failed. As a result, the respondent brought a motion to enforce the terms of settlement under Rule 49.09. The motion was scheduled for February 27, 2018. Both sides filed evidence for the motion. The motion was adjourned at the request of the appellants. The adjournment was granted on terms that the parties schedule the removal of the equipment and that the adjournment was peremptory to the appellants. The parties scheduled the removal of equipment for March 24, 2018 with both counsel to be present.
[6] All evidence that follows was adduced after March 24, 2018 by the respondent alone. Apart from the initial affidavit in February, the appellants have not filed any evidence or conducted cross-examinations on the evidence delivered by the respondent. The respondent’s evidence about the events after the February adjournment is uncontradicted.
[7] On March 24, 2018, representatives of the respondent and counsel attended at the appellants’ site as agreed. However, the appellants did not give the respondent all the equipment that they had agreed to provide. In addition, the appellants did not pay the $37,000 into escrow or to the respondent as required by the terms of settlement. The appellants have never said why some of the equipment was not there or, if it was there, why they did not give it to the respondent. The respondent claims that the value of the equipment that the appellants failed to return to it as required by the settlement agreement is $10,655.90.
[8] As a result of the appellants’ failure to pay and to provide all the agreed equipment, the respondent re-scheduled its motion to enforce the settlement. However, it amended its notice of motion so that, in addition to enforcing the settlement by seeking payment of the $37,000 and delivery of the agreed-upon equipment, it asked, in the alternative, for payment of a further $10,655.90 as damages in lieu of delivery of the remaining equipment, and for an order striking the appellants’ defence.
[9] On May 15, 2018, Donohue J. heard the motion. The appellant Dr. Dhillon appeared at the motion hearing in person having dismissed his counsel. Donohue J. enforced the settlement as sought by the respondent. She ordered the appellants to be available between May 28 and June 1, 2018 during business hours to surrender the remaining equipment to the respondent. She ordered the appellants to pay the $37,000 settlement amount to the respondent’s counsel in trust by May 22, 2018. Donohue J. made an explicit finding that it was the actions of the appellants that delayed and complicated the completion of the settlement. As a result, she assessed costs of $11,000 against the appellants payable within seven days (i.e. also by May 22, 2018). Donohue J. also required that once all terms of the settlement were fulfilled, the respondent must provide a notice of discontinuance within five days.
[10] Donohue J. recognized that there was a continuing implementation issue as to whether the remaining equipment would be delivered and, if not, whether the respondent ought to be entitled to compensation. She therefore adjourned to June 12, 2018, to supervise the implementation of the settlement as ordered.
[11] Instead of paying the settlement funds of $37,000 and the costs of $11,000, a total of $48,000, on May 22, 2018 as ordered, the appellant Dr. Dhillon wrote an email to the respondent’s counsel that day. Dr. Dhillon told Mr. Kurpis that he intended to retain counsel to appeal the order made by Donohue J. He requested that the respondent take no action to enforce the settlement in the interim.
[12] Mr. Kurpis responded by email dated May 25, 2018. He expressly declined to agree to refrain from taking enforcement steps. Mr. Kurpis also wrote that, considering Dr. Dhillon’s failure to pay the aggregate sum due of $48,000 by May 22, 2018 as ordered, he assumed that the appellants would also not deliver the remaining equipment. As a result, he cancelled a May 30th appointment that the parties had set for the respondent to pick-up the outstanding goods.
[13] The respondent then scheduled the return of the motion that had been adjourned by Donohue J. to continue enforcement efforts. Despite Dr. Dhillon’s indication, the appellants did not appeal the order made by Donohue J. Accordingly, the findings made by Donohue J. are not open for review at this time.
[14] The parties appeared before the motions judge on June 26, 2018. Dr. Dhillon appeared without counsel. After reading the endorsement of Donohue J. and a further affidavit that had been delivered by the respondent regarding the events since the appearance before Donohue J., the motions judge revised and signed a draft order that had been submitted by the respondent’s counsel. He confirmed the enforcement of the settlement. He ordered the appellants to pay forthwith the $48,000 that Donohue J. had ordered paid by May 22, 2018. The motions judge refused to grant, and struck out of the draft order, a provision under which the appellants would have been required to pay $10,655.90 for breach of the settlement and a provision dismissing the action. In leaving the action alive however, the motions judge also struck out the statement of defence and counterclaim. Finally, he ordered the appellants to pay costs of $1,000 to the respondent “for breaching the Endorsement of the Honourable Madam Justice Donohue.”
[15] The motions judge provided no written reasons for making the order that he signed.
JURISDICTION
[16] An appeal lies to this court from the final order of the motions judge striking out the appellants’ statement of defence and counterclaim under s. 19(1)(a) of the Courts of Justice Act, RSO 1990, c C.43.
STANDARD OF REVIEW
[17] This court will review the decision of a judge on a correctness standard for errors of law. The court applies a palpable and overriding error standard to assess appeals of questions of fact and mixed fact and law. The decision to strike out the applicants’ statement of defence and counterclaim was an exercise of judicial discretion. To challenge a discretionary decision of a judge, the appellants bear the burden of establishing that the judge made an error in the legal principles applied or that he or she exercised the discretion in a manner that was plainly wrong. Housen v Nikolaisen, 2002 SCC 33 at para. 10; Penner v Niagara (Regional Police Services Board), 2013 SCC 19 at para. 27. Whether I would have exercised the discretion to strike out the statement of defence and counterclaim in this case is not the issue. On an appeal, a motion judge’s exercise of discretion is subject to substantial deference.
ANALYSIS
[18] When the matter returned before the motions judge, he was faced with a motion to enforce the order of Donohue J. rather than a motion to enforce the settlement under Rule 49.09. Donohue J. had already enforced the settlement and returned the matter to herself or another judge to oversee the implementation process which she had commenced. There was no need for the motions judge therefore to order the enforcement of the settlement again. The issues before the motions judge involved supervising and enforcing the implementation process regarding the delivery of the remaining equipment, the alternative claim for compensation in lieu of delivery of the remaining equipment, and the request to strike the appellants’ statement of defence and counterclaim in conjunction with the assessment of any applicable compensation.
[19] The respondent relied on Rule 60.12 in its notice of motion to clothe the motions judge with jurisdiction to enforce the implementation process ordered by Donohue J. That rule entitles the court to enforce interlocutory orders by “making such order as is just.” Rule 60.12(b) expressly provides the option of striking a party’s defence. As Donohue J. adjourned the implementation process to wait and see whether the remaining equipment would be delivered or whether other enforcement and compensation might be required, those portions of her order were interlocutory and were properly considered by the motions judge under Rule 60.12.
[20] There was ample evidence to support the motion judge’s decision. All the evidence points to non-compliance by the appellants with both the settlement and the order made by Donohue J. They provided no reason for failing to deliver all the equipment in March and for not paying the settlement funds when due and when ordered. The finding made by Donohue J. that the appellants were at fault for not complying with the settlement is not open to question. When ordered to comply with the settlement within strict time frames by Donohue J., the appellants again failed to do so. The May 22, 2018 email from Dr. Dhillon confirmed that he would not be paying the funds that day as promised and ordered. When the respondent reasonably declined to incur costs to arrange for a pick-up of equipment in light of the appellants’ ongoing refusal to comply with the settlement agreement and the order made by Donohue J., the appellants’ response was silence. They did not protest that they wished to proceed to deliver the equipment and to pay the funds due. The appellants have never paid the settlement funds as agreed and ordered. There was therefore a sufficient evidentiary basis for the motions judge to conclude that the appellants were in breach of the order made by Donohue J. and to infer, as the respondent did, that the appellants would not have delivered the equipment as ordered.
[21] The appellants argue that the motions judge should not have exercised the discretion to strike out their pleadings without providing them an opportunity to cure their default. Bell ExpressVu Limited Partnership v Corkery, 2009 ONCA 85 at paras. 34 and 35. In my view, that case does not assist the appellants. In Bell ExpressVu there was contested evidence concerning performance and an issue arose as to the burden of proof on a motion to enforce a settlement. Here, there was no evidence by the appellants seeking to explain or justify their misconduct. The respondent readily met the burden upon it. Moreover, the appellants had many chances to comply – first with the settlement – and then with the order of Donohue J. After receiving Mr. Kurpis’s email of May 25, 2018, the appellants knew that the motion to enforce the order of Donohue J. was being brought back on. They had three weeks in which to perform. Moreover, it is now some seven months later and the appellants did not seek to introduce evidence on this appeal to show that they have complied with the terms ordered by Donohue J. even as yet.
[22] The appellants argue that the motions judge erred by failing to give reasons for his order. The lack of reasons is unfortunate. The Supreme Court of Canada has written that “[t]he delivery of reasoned decisions is inherent in the judge’s role. It is part of his or her accountability for the discharge of the responsibilities of the office.” R. v Sheppard, 2002
SCC 26, at para. 55(1). In that regard, the lack of reasons also made appellate review more challenging. Even a brief handwritten endorsement would have helped explain to the parties why the court decided as it did. And it would have shown the judge’s essential reasoning instead of leaving it to this court to discern.
[23] Having said that, not every failure to provide reasons amounts to a ground of appeal: Sheppard at para. 55(4). If the basis for the decision is reasonably intelligible to the parties and the appeal court based on the particular circumstances of the case, the reasons of the appellate court can make up for the lower court judge’s failure to provide reasons. In such circumstances, a new hearing is not required: see s. 134(6) of the Court of Justice Act which is the civil law analogue of the section of the Criminal Code referred to by the Supreme Court of Canada in Sheppard at para. 55(10).
[24] In this case, the motion judge’s reasoning is apparent from the order that he amended and signed. He repeated the order of Donohue J. enforcing the settlement. He reiterated that the overdue payments remained due forthwith. His costs order recites his determination that the appellants were in breach of the order of Donohue J. He declined however to decide the question of whether the appellants ought to be held liable for the damages of $10,655.90 sought by the respondent in respect of the equipment that the appellants had failed to deliver up. The motions judge could have scheduled a hearing on the issue within the implementation process commenced by Donohue J. Instead, he left that issue for resolution in the action and he struck out the appellants’ statement of defence and counterclaim. I see no error of law in this decision. There was nothing else left to determine concerning the settlement. His decision to refuse to dismiss the action and to strike the appellants’ defence served the important purposes of requiring a hearing for the respondent to prove the damages claimed for breach of the settlement, and of preventing the appellant from delaying or obfuscating the proceeding further, respectively. It is evident that the motions judge clearly understood the task in which he was engaged.
[25] The appellants argue that the motions judge erred by creating a process to determine the damages for breach of the settlement in this action. They argue that the respondent should have been left to commence a new action in Small Claims Court to claim damages for breach of the settlement. Alternatively, they argue that the judge should have directed a reference for the determination of the damages rather than dealing with it under the main claim and then striking the statement of defence and counterclaim. They fear that the respondent might seek default judgment in the full amount claimed in the action without accounting for the fact that the settlement has been enforced and the only issue outstanding is the compensable value of the portion of the equipment that the appellants have failed to deliver.
[26] I disagree. Donohue J. had the prescience to require a judge to oversee the implementation of the settlement. That decision is not reviewable now. The issue is the process for that oversight. I agree with Mr. Weintraub that in accordance with the principal goals of the civil justice system, any dispute resolution process must provide for a fair and just determination of the issues in dispute. Hryniak v Mauldin, 2014 SCC 7, at para. 23. But the process must also be efficient, affordable, and proportionate to be accessible and just: Hryniak at para. 28. The notion of starting a fresh claim or a reference process for a $10,500 matter that has arisen within an existing action is not efficient, affordable, or proportionate. Neither is it either fair or just to subject the respondent to a further round of dealing with the appellants who have evinced a clear intention to avoid complying with both their agreements and the court’s order. The motions judge held that a judge should determine the quantum of damages to which the respondent is entitled on motion for default judgment. Mr. Kurpis concedes that all that remains for determination is the quantum of damages for breach of the settlement agreement in the maximum amount of $10,655.90. He also agrees that to obtain default judgment under Rule 19.05, the respondent is required to bring a motion before a judge, on evidence that takes full account of the settlement. In my view, the process adopted by the motions judge is fair, proportionate, and well within his discretion.
[27] While the decision to exclude the appellants from the process for determining the final outstanding amounts may seem harsh, the record supports concluding this vestigial piece of the overall settlement quickly and without adversity, cost, or further delay. It remains open to the judge who hears the motion for judgment to determine whether the evidence of value for the missing equipment supports the respondent’s claim. Whether the matter might have been resolved differently is not the issue for this court. Rather, the question is whether the motions judge erred in principle or was clearly wrong in making the order striking the statement of defence and counterclaim. In my view, he made no error in principle and he was not clearly wrong in the exercise of his discretion to strike.
COSTS
[28] The parties agreed that costs fixed at $4,646.06 all-inclusive would be awarded to the successful party.
ORDER
[29] This court orders that:
a. the appeal is dismissed;
b. the appellants are jointly and severally liable to pay costs of the appeal in the amount of $4,646.06 to the respondent forthwith; and
c. the sole issue remaining for determination in this action is the quantum of damages payable by the appellants to the respondent for breach of the settlement agreement in respect of the equipment that the appellants failed to deliver to the respondent on March 24, 2018 in the maximum amount of $10,655.90. On consent of the
respondent, it will not seek to have the registrar sign judgment but may move for default judgment under Rule 19.05 by motion before a judge, on evidence that includes the amount required to be paid by the appellants pursuant to the order of Donohue J.
___________________________ Myers J.
I agree
Kiteley J.
I agree
Wilton-Siegel J.
Date of Reasons for Judgment: February 8, 2019
CITATION: VLMTeck Inc. v. Dhillon, 2019 ONSC 986 DIVISIONAL COURT FILE NO.: DC-18-00961 DATE: 20190208
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
KITELEY, WILTON-SIEGEL, and MYERS JJ.
BETWEEN:
VLMTECK INC.
Respondent
– and –
DR. TEJINDER DHILLON and DR. T.J. DHILLON DENTISTRY PROFESIONAL CORPORATION
Appellants
REASONS FOR JUDGMENT
MYERS J.
Date of Reasons for Judgment: February 8, 2019