ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 00-CL-3627
DATE: 20120524
BETWEEN:
CANADIAN TIRE CORPORATION, LIMITED Plaintiff – and – ROBERT ERIC OFFENBACHER a.k.a BOB YOUNG, IMAGECOM SIGN PRODUCTS INC., AND MAIWARNAISHWARIE SUKHDEO a.k.a. ESHWARI OFFENBACHER Defendants AND BETWEEN: IMAGECOM SIGN PRODUCTS INC. Plaintiff by Counterclaim - and – CANADIAN TIRE CORPORATION, LIMITED Defendant by Counterclaim
A. Hamilton, for the Plaintiff
Frances M. Wood, for the Defendant
HEARD: May 16, 2012
CUMMING J.
The Motions
[ 1 ] The moving party defendants bring a motion seeking various relief. A main ground underlying their position is that by Rule 48.15 (6) the plaintiff’s action is deemed to have been dismissed as abandoned on January 1, 2012.
[ 2 ] The plaintiff brings a cross-motion which, inter alia , seeks an order declaring that the main action is not deemed to be dismissed as abandoned pursuant to Rule 48.15 (6) or alternatively, setting aside the dismissal of the main action as abandoned. They also seek, in the alternative, an order dismissing the counterclaim as abandoned.
The Evidence
[ 3 ] The plaintiff, Canadian Tire Corporation, Limited (“Canadian Tire”) commenced this proceeding by way of a Notice of Action on January 24, 2000 against the defendants, Robert Eric Offenbacher a.k.a. Bob Young (“Offenbacher”), Imagecom Sign Products Inc. (“Imagecom”) and Malwarnaishwarie Sukhdeo a.k.a. Eshwari Offenbacher (“Sukhdeo”).
[ 4 ] Canadian Tire alleged, inter alia , that Mr. Offenbacher, an employee of Canadian Tire, manipulated Canadian Tire’s procurement process in order to award signage contracts to Imagecom, a company that he and his spouse, Ms. Sukhdeo, controlled.
[ 5 ] Canadian Tire moved immediately for an interlocutory Mareva injunction, ex parte , which was granted by Lane J., which effectively prevented the defendants from using their assets, except to pay normal personal expenses. Following service of the injunction order, the defendants Ms. Sukhdeo and Imagecom appeared before Farley J. on January 31, 2000, who continued the injunction by order of that date until further order of the court.
[ 6 ] Canadian Tire’s statement of claim was filed March 23, 2000 with Mr. Offenbacher filing a statement of defence on May 8, 2000 and Imagecom and Ms. Sukhdeo filing the same day a defence and counterclaim for $1,250,000 for alleged breach of contract and $10 million in alleged damages for harm caused to Imagecom for the alleged wrongful grant of injunctive relief. On May 29, 2000, Canadian Tire filed a reply and defence to the counterclaim.
[ 7 ] On July 27, 2000, Canadian Tire moved to continue the injunction until trial. The motion was granted by Farley J., whose endorsement set forth in detail his reasons for finding the test was met for the continuance of the injunction until trial. Costs of $25,000 were awarded against the defendants. Farley J.’s order of July 27, 2000 was not appealed.
[ 8 ] On June 18, 2003, Pitt J. heard a motion by the defendants seeking to fund legal expenses associated with both the preliminary inquiry arising in respect of criminal charges and also in respect of the civil proceedings by way of a mortgage on the individual defendants’ residence which was subject to the continuing injunction.
[ 9 ] Pitt J.’s Order entered on July 8, 2003 permitted a refinancing mortgage which would ultimately make available to the defendants some $41,000. By paragraph 3 of the Order, up to $12,000 could be used in meeting the expense of the defendants’ counsel in conducting the preliminary inquiry related to the criminal charges. Paragraph 4 of the Order is clear as to how the remainder of the funds were to be used:
This court orders that the entire remainder of the funds described in paragraph 1 shall be held in trust for the defence of the case at bar only. No funds shall be withdrawn from the trust account of the defendants’ counsel until proper accounts are submitted to the defendants and to the plaintiff’s solicitors after the legal services have been performed and, if the plaintiff and defendants are unable to agree on such accounts, the accounts shall be reviewed and approved by the Master on a motion brought on notice to the other party.
[ 10 ] The defendants were awarded costs of the motion in the amount of $4,535.12.
[ 11 ] The defendants then took the position that the July 2000 costs award by Farley J. was not immediately payable. The parties attended before Farley J. and, on December 13, 2003, he endorsed the record to the effect that such costs were payable forthwith. The defendants sought to appeal this ruling and, on March 18, 2004, Mr. Justice McCombs dismissed the defendants’ motion for leave to appeal to the Divisional Court, ordering the defendants to pay $2,000 in costs.
[ 12 ] The defendants on March 23, 2004 asserted that the Farley J. costs award of July 2000 did not bear any post-judgment interest. On March 25, 2004, Mr. J. Sebastian Winny, counsel for the defendants, wrote to counsel for Canadian Tire with a cheque for $22,464.88 “representing payment of the costs award....” .
[ 13 ] Mr. John Birch, counsel for Canadian Tire, responded by letter the same day advising that Canadian Tire would not accept payment of the tendered amount as payment in full of the outstanding costs awards because post-judgment interest was not included.
[ 14 ] Counsel for Canadian Tire also asked Mr. Winny to:
...please confirm that the funds that you have provided to me... are not funds stemming from Justice Pitt’s June 19, 2003 order. This is because Justice Pitt specifically directed that the funds received from the mortgage on your client’s house could only be used for payment of defence legal costs. Neither I nor Canadian Tire would in any way want to breach or undermine that order.
[ 15 ] Canadian Tire arranged an appointment before Farley J. on April 14, 2004 who directed, pursuant to s. 129 (1) of the Courts of Justice Act that pre-judgment interest ran from the date of the July 2000 costs award.
[ 16 ] Counsel for the defendants argues that Canadian Tire could have consented to a variation of the Pitt J. Order or to a variation of the Farley J. Order which on its terms allowed for changes on consent.
[ 17 ] Mr. Winny admitted in a further reply letter dated March 25, 2004 that the $22,464.88 tendered emanated from the refinancing funds freed up by Pitt J.’s Order. Counsel for Canadian Tire advised Mr. Winny by letter dated April 8, 2004 that Canadian Tire “does not wish to participate in any breach of Justice Pitt’s order by your clients....”. The trust cheque for $22,464.88 sent by Mr. Winny was returned by Canadian Tire’s counsel on April 13, 2004.
[ 18 ] Indeed, counsel for Canadian Tire in his letter of April 8, 2004, stated:
Since my client does not wish to participate in any breach of Justice Pitt’s Order by your clients, an order of the court will be required to permit any of the funds held by your firm in trust to be used for payment of a costs award. I am prepared to recommend to my client that the previous orders of the court (including Justice Pitt’s Order) be varied to permit use of those funds to pay costs. Presuming that this is acceptable to you, would you please prepare a Notice of Motion, Consent, and draft Order so that your client can obtain the court’s permission to pay the costs out of the mortgage funds.
[ 19 ] In a letter from counsel for Canadian Tire to Mr. Winny dated April 14, 2004, Mr. Birch commented, inter alia, that Mr. Winny advised Justice Farley at the April 14 appearance that he would be preparing a consent order permitting the costs award to be paid out of the pool of funds covered by Justice Pitt’s June 19, 2003 Order and that Mr. Birch looked forward to receiving a copy of this order, in draft, for his comments and approval.
[ 20 ] Mr. Winny denied in a reply letter of April 22, 2003 that he gave any undertaking to bring a motion for the requisite consent order and stated that “such motion should be brought and paid for by your client”.
[ 21 ] Either counsel for the defendants or counsel for the plaintiff could have simply and easily obtained the requisite order allowing the payout of the $22,464.88 towards the plaintiff’s costs awards, on consent of the other party. Both parties have undoubtedly expended considerably more in continuing the war on this point over the ensuing years than would have been the cost expended in obtaining the amending order on consent.
[ 22 ] A great deal of the defendants’ submissions before me went to the further issue as to whether Mr. Winny’s tender of $22,464.88 on March 25, 2004 effectively precluded the accruing of any further interest upon the outstanding costs award.
[ 23 ] On May 19, 2004, Mr. Birch, in response to Mr. Winny’s reiteration of his position on costs in a letter of May 19, 2004, again stated that the defendants could obtain an amendment to Justice Pitt’s Order permitting the pool of funds to be used for the purposes of paying costs to Canadian Tire who would consent to such amendment.
[ 24 ] The plaintiff did not receive virtually any communication from counsel for the defendants from June 1, 2004 to January 4, 2012 except for the following.
[ 25 ] On May 5, 2005, Mr. Winny served a Notice of Change of Solicitors as he had joined a new firm and requested a consenting by Canadian Tire to the transfer of the refinancing funds to the new firm pursuant to the Order of Justice Pitt. Mr. Birch by letter dated May 10, 2005 consented to the request and again demanded payment of the outstanding costs awards.
[ 26 ] Mr. Winny on May 23, 2006 requested consent to withdrawing funds in the amount of $9,046.61 from his trust account as stipulated by the Order of Pitt J. on account of his services to the defendants to May 23, 2006. It is unclear from the submitted account as to whether Mr. Winny performed any services in connection with the action at hand after April 14, 2004. (Accounts of $8,448.07 had been approved previously, presumably in connection with the preliminary inquiry.)
[ 27 ] Mr. Birch raised some concerns about the account but gave his approval on May 24, 2006. At the same time, he again demanded payment of the outstanding costs awards and warned that Canadian Tire might move to strike the counterclaim because costs had not been paid.
[ 28 ] On June 12, 2009, Mr. Winny again wrote with yet a further Notice of Change of Lawyer. Mr. Birch replied on June 16, 2009 again demanding payment of outstanding costs awards and again saying that failure to pay costs had been holding up the action since 2004 and that Canadian Tire might move to strike the defence and counterclaim.
[ 29 ] Mr. Winny responded to Mr. Birch on October 19, 2009, again saying that the defendants’ position is that they had made the costs payment on March 23, 2004 by delivery of the trust cheque for $22,464.88. Mr. Birch replied on October 20, 2009, yet again reiterating the history in respect of the costs dispute and his suggestions several times before as to amending Justice Pitt’s Order.
[ 30 ] It is noted that as of March 23, 2004, there was in fact $28,691.41 owing by the defendants to the plaintiff for outstanding costs, inclusive of interest, after setting-off the costs award in favour of the defendants by the Order of Pitt J.
[ 31 ] Mr. Birch did not hear from Mr. Winny for a further 17 months. On April 1, 2010, Mr. Winny sent a third Notice of Change of Lawyer.
[ 32 ] Mr. Birch did not hear further from Mr. Winny until receiving Mr. Winny’s letter dated January 4, 2012. In that letter, Mr. Winny asserts yet again that the defendants had effectively tendered payment of the outstanding costs awards.
[ 33 ] It may be that both counsel were unreasonably obstinate in their positions as to who should take the initiative in obtaining the necessary variation of Mr Justice Pitt’s Oder dated June 18, 2003, on the consent of the other party.
[ 34 ] However, the simple fact, in my view, is that Canadian Tire did not consent to a de facto variation of the Oder of Pitt J. and was not obliged to do so. If the defendants sought a variation, it was up to them to go to court with a requested variation. They did not do so and have not done so in the nine years since Mr. Justice Pitt’s Order of June 18, 2003.
Disposition
[ 35 ] I find for the plaintiff, Canadian Tire, in respect of the issue of interest accruing to date on the outstanding costs award. I make this finding for two reasons. First, as Farley J. held, post-judgment interest accrues on a costs award, and the tender of $22,464.88 did not include any interest accrued to that date which amounted to some $6,226.53 as of March 23, 2004.
[ 36 ] Second, and more significantly, the Order of Pitt J. implicitly excluded any use of the monies released from the Mareva injunction being utilized to satisfy the outstanding costs awards. I do not accept defendants’ counsel’s submissions to the contrary. The language of Pitt J.’s Order is clear on its face.
[ 37 ] Accordingly, in my view, and I so find, there is owing to Canadian Tire the accrued interest on the outstanding costs award to date. There is common ground that the principal together with accrued interest to the date of the hearing, May 16, 2012, is $42,406.00. Judgment will be given in favour of Canadian Tire for this amount. Post–judgment interest will accrue on the judgment given.
[ 38 ] I turn now to the motion of the defendants that there is a deemed dismissal of the plaintiff’s action by virtue of Rule 48.15 (6).
[ 39 ] The only reported decision to date interpreting Rule 48.15 (6) is that of M. Justice Ricchetti in Pinevalley Trim & Doors Ltd. v. Tibolo & Associates Professional Corp. , 2012 ONSC 1002 , [2012] O.J. No. 585 (S.C.J.). He held, authoritatively reviewing the history in the development of the Rule, that Rule 48.15 (6) does not apply to defended actions. I adopt the reasoning and finding of Ricchetti J. on this point. Accordingly, the plaintiff’s action is not deemed to be dismissed under Rule 48.15.
[ 40 ] The defendants alternatively submit that Rule 48.14, the so-called “status hearing rule”, applies. It is triggered if a civil action in which a defence has been filed has not been placed on the trial list or terminated by any means within two years after the first defence has been filed. In the case at hand, no status notice was ever served by the Registrar but this fact is consistent with the Practice Direction for Commercial List matters.
[ 41 ] The defendants submit that if Rule 48.15 (6) does not apply, then the Court should treat the return of the motions at hand substantively as a status hearing and either grant relief under Rule 48.14(3) or dismiss the action for delay under Rule 48.14 (13)(b).
[ 42 ] The well-established practice on the Commercial List, as set forth in its Practice Direction, is to come before a judge of the Commercial Court via a 9:30 a.m. request form for scheduling when the intended matter involves a trial or the trial of an issue. The 9:30 Chambers appointments serve a function in part like that seen with the function of a status hearing under Rule 48.14 but the Commercial List 9:30 am Chambers appointment is not operating under Rule 48.14 as a “status hearing”.
[ 43 ] In essence, the defendants submit the plaintiff’s action should be dismissed for delay, but submit the counterclaim should not be dismissed for delay and defendants should be able to elect to proceed with their counterclaim pursuant to Rule 24.04. In the circumstances of the record before me, I do not agree with this submission.
[ 44 ] On the record, it is evident that neither the plaintiff nor the defendants have taken any steps to advance this proceeding in any meaningful way since its inception in 2000 other than the defendants seeking a variation of the injunction by Pitt J. in 2003 to fund defence costs.
[ 45 ] The plaintiff says it was insisting upon payment of the outstanding costs award before proceeding. However, there was nothing to prevent the plaintiff from advancing its action expeditiously.
[ 46 ] I infer that the plaintiff did not take active steps to advance its claim because it perceived that the costs of proceeding were not worth the risk of not being able to collect upon any judgment obtained.
[ 47 ] The defendants have delayed in advancing their counterclaim for some 12 years. A counterclaim is, of course, an “action” within the meaning of the Rules: Rule 1.03 (1) (c).
[ 48 ] Hence, had I granted the defendants’ motion to dismiss the plaintiff’s claim, I would have likewise granted the plaintiff’s motion to dismiss the defendants’ counterclaim, for the same reasons
[ 49 ] Defendants’ counsel in argument says that the defendants could not take active steps to advance their counterclaim since 2003 because they did not have the money to fund the litigation. Indeed, the defendants’ factum asserts at paragraph 32 that “the defendants could not afford to bring” a motion to amend the Pitt J. Order, “on consent or otherwise”.
[ 50 ] There is no affidavit evidence on the motions before me from any of the defendants as to their current financial state or in respect of anything whatsoever. Mr. Winny is the only affiant for the defendants.
[ 51 ] This statement ignores that Mr. Justice Pitt freed up funds of $41,297.33 by his Order in 2003. Although $12,000 was committed to funding the preliminary hearing faced by the defendants, $29,297.33 remained to defend the action and advance the counterclaim. When the plaintiff’s counsel returned the trust cheque in the amount of $22,464.88 tendered to the plaintiff in payment of its outstanding costs award, the cheque was cancelled. The record suggests sufficient funds remained in Mr. Winny’s trust account until 2012 to pay for a simple motion to vary Justice Pitt’s Order on consent.
[ 52 ] The defendants have not made any motion to the Court since 2003 to lift the Mareva injunction for further monies to finance their civil litigation costs.
[ 53 ] Moreover, Mr. Justice Pitt allowed refinancing up to only 75% of the defendants’ property value. A fair inference is that the property has appreciated in value since 2003 and that mortgage payments to date have reduced the mortgage given in the refinancing.
[ 54 ] The cross-motion further requests that the terms of the June 18, 2003 Order of Mr. Justice Pitt be varied to permit payment by the defendants to the plaintiff of the outstanding costs awards (and any other costs awards to be made against the defendants) in these proceedings out of the assets and monies which are subject to the injunction. This is a reasonable request given the history relating to non-payment of the outstanding costs awards to date and the cross-motion is granted to this extent in respect of this component.
[ 55 ] The cross-motion also seeks an order striking the defence and counterclaim because of the defendants’ failure to pay the outstanding costs orders of Mr. Justice Farley dated July 27, 200 and of Justice McCombs dated March 18, 2004 together with post-judgment interest to date. Rule 57.03 (2) provides for such a motion.
[ 56 ] In virtually every exchange of correspondence or emails between counsel over the years, counsel for Canadian Tire has demanded payment of the outstanding costs awards and threatened a motion to strike for failure to pay.
[ 57 ] In my view, the defendants should properly have paid the current outstanding costs awards many years ago by obtaining the necessary variation to the Order of Mr. Justice Pitt.
[ 58 ] Accordingly, I order the defendants to pay to the plaintiff in satisfaction of the current outstanding costs awards, within 30 days, the amount of $ 42,406 plus post-judgment interest from May 16, 2012 to the date of payment, failing which the defence and counterclaim shall be struck and the counterclaim dismissed.
[ 59 ] In my view, the Mareva injunction is properly to be vacated in all events given the significant time lapse since its inception without the plaintiff advancing its claim. It is ordered that the Mareva injunction is vacated within five days following upon the payment of the current outstanding costs awards or within five days following upon the defence and counterclaim having been struck and the counterclaim dismissed pursuant to this order because of the non-payment of the outstanding costs awards, whichever date is earlier.
[ 60 ] Provided the defence and counterclaim are not struck because of the non-payment of the costs awards, it is ordered that the parties appear at a 9:30 am chambers appointment within 45 days before any judge of this Commercial Court office for the purpose of an order implementing a case timetable and scheduling in respect of both the main action and counterclaim.
[ 61 ] If they so wish, the parties may make submissions as to costs in respect of the motion/ cross-motion at hand. In such event, each party may make a written submission within 10 days, and each party has 10 days to make a responding written submission thereafter in respect of the other party’s submission.
CUMMING J.
Released: May 24, 2012
COURT FILE NO.: 00-CL-3627
DATE: 20120524
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
CANADIAN TIRE CORPORATION, LIMITED Plaintiff – and – ROBERT ERIC OFFENBACHER a.k.a BOB YOUNG, IMAGECOM SIGN PRODUCTS INC., AND MAIWARNAISHWARIE SUKHDEO a.k.a. ESHWARI OFFENBACHER Defendants AND BETWEEN: IMAGECOM SIGN PRODUCTS INC. Plaintiff by Counterclaim - and – CANADIAN TIRE CORPORATION, LIMITED Defendant by Counterclaim
REASONS FOR DECISION
CUMMING J.
Released: May 24, 2012