SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

C-2325-12 (Sudbury)

RE: Carriere Industrial Supply Limited, Plaintiff

AND:

2026227 Ontario Inc., James Garland, John Davis, 2140074 Ontario Inc. and The Toronto-Dominion Bank, Defendants

CV-12-9839-00CL (Toronto)

RE: Carriere Industrial Supply Limited and Dibrina Sure Benefits Consulting Inc., Applicants

AND:

The Toronto-Dominion Bank, 2026227 Ontario Inc., 2140074 Ontario Inc., James Garland and John Davis, Respondents

BEFORE: D. M. Brown J.

COUNSEL: G. Bowden, for the Toronto-Dominion Bank

M. Huneault, for Carriere Industrial Supply Limited in the Sudbury Action

HEARD: Written cost submissions dated January 29 and February 4, 2013.

REASONS FOR DECISION

I. Costs of a discontinued action

[1] Carriere Industrial Supply Limited commenced Action C-2325-12 in Sudbury on December 20, 2012. Carriere discontinued that action four weeks later by Notice of Discontinuance dated January 16, 2013. One defendant, The Toronto-Dominion Bank, seeks its costs of the Sudbury Action, fixed at $2,866.81 on a substantial indemnity basis, even though it was not formally served with the statement of claim.

[2] Why bother writing a set of Reasons over a $2,866.81 cost claim? A rather important point of litigation practice is at issue. Simply put: litigants who seek relief before the Superior Court of Justice must pick the county in which they wish to assert their claims and stick with their choice; they cannot hedge their bets by starting a duplicative second action in another county. To do so constitutes a misuse of the resources of this court, and such conduct should be discouraged by the court through an award of substantial indemnity costs.

II. Basic facts

[3] 2026227 Ontario Inc., which carried on business as Time + Plus Canada, provided payroll processing services to its clients, which included Carriere. Last year I released reasons dealing with the methodology by which to distribute to client-claimants funds paid into court following the demise of 2026227.[^1] Carriere, a Sudbury-based company, participated in those proceedings and was represented by Sudbury counsel.

[4] That distribution order did not end the litigation concerning Time + Plus. On September 10, 2012, Carriere and another former Time + Plus client, Dibrina Sure Benefits Consulting Inc., obtained an order from a judge of the Toronto Region Commercial List to commence an application (CV-12-9838-00CL) as representatives of a class of 416 former Time + Plus clients against the Bank and others. That application was commenced on September 13, 2012. By order dated October 12, 2012, I directed that the application proceed by way of the trial of issues, approved a timetable, and set a trial date of May 6, 2013. Carriere was represented by Toronto counsel at that hearing.

[5] On December 20, 2012, Carriere commenced the Sudbury Action against the same defendants named in the Toronto Representative Proceeding seeking essentially the same relief based on the same facts. Counsel representing Carriere in the Toronto proceeding was not the same as that representing it in the Sudbury Action.

[6] Early last month Carriere’s Sudbury counsel contacted the Bank’s counsel to ask whether he would accept service of the Statement of Claim in the Sudbury Action. He emailed a copy of the Claim to the Bank’s counsel on January 8, 2013.

[7] The Bank’s counsel then arranged a 9:30 appointment before me for January 15, 2013 to deal with the issue of the new Sudbury Action. Carriere did not provide its Sudbury counsel with instructions to discontinue the Sudbury Action prior to that appointment. On January 15, I ordered Carriere to provide me with a written explanation by January 18 as to why it had commenced the duplicative Sudbury Action. By letter of January 16, 2013, Carriere’s Sudbury counsel did not provide an explanation, but did send me his client’s January 16, 2013 Notice of Discontinuance of the Sudbury Action. In subsequent written cost submissions Carriere provided the following explanation for its conduct:

The Sudbury action was issued to preserve a limitation period on behalf of Carriere. Our client was concerned that the claim for relief, that was personal to Carriere, was not covered in the representation order. Our client is now satisfied that this claim is subsumed in the Toronto action and on this basis the Sudbury action was discontinued.

III. Analysis

[8] As a result of changes to Rule 25 which came into effect in 2010, the entitlement of a defendant to costs for a discontinued action requires the bringing of a motion. Rule 23.05(1) of the Rules of Civil Procedure provides:

23.05(1) If all or part of an action is discontinued, any party to the action may, within thirty days after the action is discontinued, make a motion respecting the costs of the action.

[9] As Master McLeod observed in N12 Consulting Corp. v. Hulford, 2012 ONSC 7306, “whether the action is treated as dismissed for delay or discontinued, the court has complete discretion to fashion a costs award that is in the interests of justice”.[^2] The authors of Archibald, Killeen and Morton, 2013 Ontario Superior Court Practice, regard the cost consequences of Rule 23.05(1) as “presumptive” and consider that “the appropriate test to be applied by the court in the exercise of its discretion under r. 23.05 may be called the ‘justified action test’”:

P must satisfy the court on a balance of probabilities that it had a bona fide cause of action, that it was not frivolous or vexatious and that there was some justification for commencement of the claim. Although r. 23.05 establishes a prima facie right to costs in favour of the defendant, it does not restrict the broad discretion of the court to determine costs on a case-by-case basis.[^3]

The authors of Morden & Perell, The Law of Civil Procedure in Ontario, First Edition, take a similar view:

In our opinion, the former case law remains relevant. Under the case law on the former rule, to be relieved of costs, the plaintiff must satisfy the court that the material filed discloses a bona fide cause of action that is not frivolous or vexatious and that he or she was justified in commencing a lawsuit.[^4]

Obviously, whether or not a defendant should be awarded costs on the discontinuance of an action will require a very fact-specific analysis of the circumstances giving rise to the initiation of the action and its discontinuance.

[10] In the present circumstances, Carriere’s Sudbury Action did not disclose a cause of action distinctive from that it was asserting in the Toronto Representative Action. Its commencement of the Sudbury Action constituted the commission of one of the seven deadly litigation sins – it violated the rule against the multiplicity of legal proceedings.[^5] Carriere’s proffered explanation that it commenced that Sudbury Action because it was concerned its personal claim was not covered in the representation order holds no water since it took Carriere a mere week and a bit to reach that conclusion after the Bank had objected to the Sudbury Action, and a mere 24 hours after I had required an explanation from Carriere. Hardly a knotty problem. On the facts of this case, there was no justification for Carriere commencing the Sudbury Action.

[11] Nevertheless, Carriere advanced several reasons why the Bank was not entitled to any costs in the circumstances. First, Carriere submitted that since it had not formally served the Bank with its Sudbury Statement of Claim, the Bank could not recover any legal costs. I view that argument as the mere splitting of hairs. Carriere had a long involvement in the Time + Plus matter and it commenced the Toronto Representative Proceeding. Carriere could not reasonably have expected that once it had emailed the Statement of Claim to the Bank’s counsel, the Bank would not take immediate steps to deal with the new action given the pending trial date in the Toronto proceeding. And those steps would require the Bank to incur legal costs. Even though Carriere may not have served the Bank formally with originating process, given the timetable in the Toronto Representative Proceeding it should have been reasonably foreseeable to Carriere that by starting and informing the Bank of the Sudbury Action, the Bank would incur legal costs by having to deal with the duplicative proceeding, even in the absence of formal service.

[12] Second, Sudbury counsel contended that he was not aware of the timetabling order in the Toronto Representative Proceeding. I have no reason to doubt that representation. However, his client, Carriere, certainly knew of that order since it was plaintiff in the Toronto Representative Proceeding. It became apparent that Carriere’s Toronto counsel was not aware of the existence of the Sudbury Action until the Bank learned of it. Carriere apparently kept its respective counsel in the dark to some extent – not conduct which elicits sympathy from a court.

[13] Third, Carriere contended that an award of costs against it would discourage parties from attempting to resolve disputes after process had issued, but before they had wandered too far down the litigation track. That might be a legitimate argument in some cases, but not in this one. Given its role in the Toronto Representative Proceeding, Carriere should never have commenced the Sudbury Action. End of story.

[14] Fourth, Carriere contended that the Bank could not seek its costs through the Toronto Representative Proceeding, but would have to high-tail it up to Sudbury to bring a motion in the Sudbury Action to recover its costs. That does not strike me as a sensible proposition - spend a day travelling to and from Sudbury to argue a motion over less than $3,000 in costs? Not what one would call an argument consistent with spirit of the general principle of securing “the just, most expeditious and least expensive determination of every civil proceeding on its merits”.

[15] Put more technically, Rule 37.03(1) allows a court to order that a motion be heard in a county other than that in which the proceeding was commenced. That is precisely what my endorsement of January 22, 2013 did:

(1) C-2325-12: (a) if TD seeks costs, to file written cost submissions by Jan. 29; (b) Carriere to file responding submissions by Feb 5/13; I will deal with the matter based on written submissions.

As the case management judge in the Time + Plus proceedings, I possessed the jurisdiction to direct motions be made in writing.[^6] The result of that direction was that no party had to incur travelling expenses to deal with the motion – amazing how the Rules are capable of working pragmatic results! As to whether the case management judge in the Toronto Representative Proceeding could direct that the costs of the discontinued Sudbury Action be dealt with through the case management process for the Toronto Representative Proceeding, context is everything. The disputes concerning Time + Plus were and remain Toronto-based disputes, and Carriere itself initiated the representative proceeding in Toronto. So, it does not lie in Carriere’s mouth to protest that steps should be taken in Sudbury, not Toronto, to deal with the costs of an action that it should never have started. The Rules of Civil Procedure must be applied to secure the least expensive determination of civil disputes; they cannot be used by parties to crank up the costs by relying on technical arguments worthy of the Bleak House era.

[16] In sum, suffice it to say I do not accept Carriere’s submissions as to why it should not pay the Bank some costs.

[17] As to the quantum, substantial indemnity costs may only be awarded where litigation conduct merits sanction. More specifically, as the Court of Appeal stated in Davies v. Clarington (Municipality), 2009 ONCA 722, “elevated costs should only be awarded on a clear finding of reprehensible conduct on the part of the party against which the cost award is being made”.[^7] In my view, Carriere’s litigation conduct fell into that category. I repeat myself: having commenced the Toronto Representative Proceeding, Carriere should never have started the duplicative Sudbury Action. It put the Bank to totally unnecessary costs. Such litigation behavior merits sanction by an award of substantial indemnity costs.

[18] Carriere took no issue with the entries on the Bank’s Bill of Costs. I have reviewed the Bill of Costs and consider reasonable both the time spent and the rate charged. Accordingly, I conclude that an award of costs in the amount of $2,866.81 would be a reasonable one in the circumstances, and I order Carriere to pay the Bank that amount within 30 days.

D. M. Brown J.

Date: February 14, 2013

[^1]: 2012 ONSC 2992.

[^2]: 2012 ONSC 7306, para. 15.

[^3]: Ontario Superior Court Practice, 2013 (Toronto: LexisNexis, 2012), p. 936.

[^4]: (Toronto: LexisNexis, 2010), p. 401.

[^5]: Courts of Justice Act, s. 138.

[^6]: Abrams v. Abrams, 2010 ONSC 2703, leave to appeal refused 2010 ONSC 4714 (Div. Ct.).

[^7]: (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.), para. 40.