SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 09-45875
DATE: 20130227

RE: Veritaaq Technology House Inc., Plaintiff (Respondent)

- and –

ADGA Group Consultants Ltd. and Brian Deeks, Defendant (Moving Party)

BEFORE: Hackland R.S.J.

COUNSEL:
Porter Heffernan and R. Paul Marshall, for the Plaintiff (Respondent)

K. Scott McLean and Christopher R.N. McLeod, for the Defendant ADGA Group Consultants Ltd. (Moving Party)

costs ENDORSEMENT

[1] The defendant moving party ADGA Group Consultants Ltd. (the defendant) brought this motion for summary judgment under Rule 20.01, seeking to dismiss the action of the plaintiff Veritaaq Technology House Inc. (the plaintiff) and also seeking an order, in the alternative, striking the statement of claim under Rule 21.01(3)(d). The defendant’s motion seeking this relief was served at the close of pleadings.

[2] When the motion came on before me, defendant’s counsel first argued his client’s position that the statement of claim disclosed no cause of action. I then asked plaintiff’s counsel to respond to that argument. The motion for summary judgment was never fully argued. Having heard the submissions on the sufficiency of the statement of claim, I expressed the opinion to counsel that in my view the statement of claim did not disclose a viable cause of action on its face and that it would be struck, but inevitably with leave to amend. I suggested to counsel that I make an order to that effect and that the defendant, as moving party, would be entitled to its costs thrown away. The plaintiff was permitted to file a fresh amended statement of claim to which the defendant filed an amended statement of defence. Counsel agreed to this approach and considerable court time was saved. The contentious issue which subsequently arose, and on which counsel have been unable to agree, is what disposition of costs, if any, should be made concerning the motion for summary judgment.

[3] The defendant claims its costs for both the motion to strike the statement of claim as well as for its motion for summary judgment. The costs claimed are in the sum of $115,301.81. The defendant argues that the fresh amended statement of claim filed by the plaintiff pleads an entirely new cause of action, with the result that the motion for summary judgment will not now be pursued and the extensive time invested in preparing that motion, including affidavits and cross-examinations, constitutes costs thrown away as a result of the plaintiff radically altering its pleadings.

[4] The position of the plaintiff is that its amended statement of claim supplements and clarifies its prior pleading and rejects the argument that it is pleading an entirely new action. The plaintiff further submits that while the defendant is entitled to reasonable costs for its motion to strike the statement of claim on which it was successful, the defendant is not entitled to its costs of the summary judgment motion because it should not have been brought in the first place in view of the principle of proportionality and the governing principles established in the decision of the Ontario Court of Appeal in Combined Air Mechanical Services v. Flesch, (2011) 2011 ONCA 764, 108 O.R. (3d) 1.

[5] The defendant does not take a position as to what proportion of its claim for costs relate to the motion to strike as opposed to the motion for summary judgment. The defendant’s argument is that both motions were brought together and then segregated in argument only because the court wished to hear the pleadings motion first. It is said that if a statement of claim was indeed fundamentally defective as the court found, the summary judgment motion would inevitably have succeeded.

Analysis

[6] I agree that the plaintiff’s original statement of claim was clearly unsupportable, as pleaded. It was based strictly on an alleged breach of a trade or custom. In defending the plaintiff’s pleading, its counsel argued that the original claim was rooted in the intentional tort of inducing breach of contract with the alleged inducement relating to contracts between the plaintiff and individuals set out in schedule A to the original statement of claim. Counsel also argued that the claim as pleaded also was adequate to put forward restitutionary claims based on waiver of tort or unjust enrichment. In my view, while the original statement of claim may have hinted at the tort of inducing breach of contract and the facts pleaded might have formed the basis for a restitionary claim, as submitted by the plaintiff, no such causes of action were actually pleaded.

[7] The plaintiff’s fresh amended statement of claim clearly pleads the intentional tort of inducing breach of contract and clearly specifies the parties to such contracts and adds a series of restitutionary claims. The new claim seeks disgorgement of profits rather than damages as sought in the original pleading.

[8] I permitted the plaintiff to amend its statement of claim under Rule 26.01, which states:

On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[9] I recognize that the fresh amended statement of claim filed by the plaintiff does plead new causes of action and does so properly. The original pleading, the product of work of the plaintiff’s former counsel, may have adverted to or reflected tortious and restitutionary claims, as plaintiff’s counsel argued on the motion, but the pleading was simply one based on implied contract and was insufficient to support any other causes of action. Leave to amend with costs thrown away is the normal disposition at the pleadings stage of an action, as contemplated by Rule 26.01.

[10] In my opinion, the defendant’s entitlement to costs thrown away referable to its motion for summary judgment depends not on whether such costs can properly be regarded as thrown away as a result of the significantly different causes of action now properly pleaded, but rather on whether the motion for summary judgment would have been the subject of a costs award, had it been argued.

[11] I recognize that if the statement of claim was struck due to fundamental defects, the summary judgment motion might well have been granted. On the other hand, it would have been open to the court to allow an amendment to the statement of claim and the court could have accepted the position currently being put forward by the plaintiff that the motion for summary judgment was premature and unnecessary and reflected a “failure to adopt an appropriate litigation strategy.”

[12] The plaintiff relies on the following passage from Combined Air Mechanical Services:

[57] However, we add an important caveat to the “best foot forward” principle in cases where a Motion for Summary Judgment is brought early in the litigation process. It will not be in the interest of justice to exercise rule 20.04(2.1) powers in cases where the nature and complexity of the issues demand that the normal process of production of documents and oral discovery be completed before a party is required to respond to a summary judgment motion. In such a case, forcing a responding party to build a record through affidavits and cross-examinations will only anticipate and replicate what should happen in a more orderly and efficient way through the usual discovery process.

[58] Moreover, the record build through affidavits and cross-examinations at an early stage may offer a less complete picture of the case than the responding party could present at trial. As we point out below, at para. 68, counsel have an obligation to ensure that they are adopting an appropriate litigation strategy. A party faced with a premature or inappropriate summary judgment motion should have the option of moving to stay or dismiss the motion where the most efficient means of developing a record capable of satisfying the full appreciation test is to proceed through the normal route of discovery. This option is available by way of a motion for directions pursuant to rules 1.04(1), (2) and 1.05.

[13] The court is not in a position to assess whether the motion for summary judgment would ultimately have succeeded had it been argued or whether the court would have accepted the plaintiff’s agreement that the core issue was a defective pleading of otherwise viable causes of action that would have permitted an amendment to the statement of claim, without the necessity of the extensive factual record arising from the affidavits, cross-examinations thereon and answers to undertakings. In other words, I cannot be sure whether the full appreciation test discussed in Combined Air Mechanical Services would have been met in the face of the plaintiff’s argument that they were in substance putting forward a tortious claim, (i.e. inducing breach of contract) together with restitutionary claims.

[14] In the circumstances, I am of the opinion that the disposition of the costs referable to the motion for summary judgment should be dealt with as an award of costs to the defendant in the cause. As this motion was never argued and as the facts and events canvassed in the affidavits and cross-examinations bear on the events that will be heard at trial (even though the legal issues will differ to an extent), these costs should be paid to the defendant if it is ultimately successful on the merits of the action. I am of the opinion that the court has jurisdiction to make this order under the broad discretion concerning costs conferred by section 131 of the Courts of Justice Act.

[15] Having reviewed the parties submissions and bills of costs, I am of the opinion that the costs of the combined motions should be fixed in the sum of $100,000.00, on a partial indemnity scale, and I consider that out of that amount, the sum of $25,000.00 is attributable to the motion to strike, on which the defendant was clearly successful and entitled to its costs.

[16] In the result, the defendant is awarded its costs of the motion to strike fixed in the sum of $25,000.00 and disbursements in the sum of $2,000, payable by the plaintiff to the defendant moving party within 30 days of the release of this endorsement. The balance of the costs being $75,000.00 which I fix in respect of the motion for summary judgment, are payable by the plaintiff to the defendant, in the cause.

Mr. Justice Charles T. Hackland

Released: February 27, 2013

COURT FILE NO.: 09-45875
DATE: 20130227

SUPERIOR COURT OF JUSTICE - ONTARIO

Veritaaq Technology House Inc.

- and –

ADGA Group Consultants Ltd. and Brian Deeks

COSTS ENDORSEMENT

HACKLAND R.S.J.

Released: February 27, 2013