SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-417969
DATE HEARD: January 24, 2013
ENDORSEMENT RELEASED: February 20, 2013

RE: DILSHOD MARUPOV et al v. METRON CONSTRUCTION INC. et al

BEFORE: Master R. Dash

COUNSEL:
Patrick Bakos, for the plaintiffs

Eric Appotive, for the defendant Winsafe Corp.

REASONS FOR DECISION

[1] This is a motion under rule 23.05 by the defendant Winsafe Corp., against whom the action has been discontinued, for costs of the action and to compel delivery of a release. The issues are whether an extension should be granted of the 30 day deadline following the discontinuance to bring a motion for costs, whether it is appropriate to award the defendant its costs if an extension is granted, the quantum of those costs and whether the plaintiffs agreed explicitly or by implication to provide a release.

BACKGROUND

[2] On December 24, 2009 five persons, some of whom are plaintiffs in this action, fell from the 13th floor of an apartment building when the scaffolding upon which they were working collapsed. This action was commenced on May 19, 2010[^1] against a number of defendants, three of whom (including Winsafe) were suppliers of scaffolding. At that time the plaintiffs’ investigation was incomplete. They did not know which of the three named defendants had supplied the scaffolding in issue, in part because there was an ongoing criminal proceeding and the Crown was resisting production of the crown brief. The plaintiffs claim Winsafe was included as a defendant based on “information” they received at the time of the accident, but the source and particulars of that information were not put into evidence.

[3] Shortly after service of the statement of claim Winsafe advised it was not involved in providing the scaffolding. On May 25, 2010 the plaintiffs’ lawyer advised Winsafe that it was not required to file a defence or take any other action in the lawsuit pending their further investigation. Winsafe did not file a defence, but it was copied with correspondence and participated in at least one case management conference.

[4] Winsafe ultimately retained counsel, Eric Appotive. On April 21, 2011 Mr. Appotive wrote to plaintiffs’ counsel and advised that the AGF Group Inc., which includes Winsafe, was engaged in a significant refinancing and that the lawsuits had given rise to difficulties in completing the financing. Winsafe demanded the immediate dismissal of the actions without costs, failing which costs and damages may be sought.

[5] At some point the defendant Swing N’ Scaff Inc. admitted that it was the supplier of the scaffolding in issue.

[6] A series of emails was exchanged between Mr. Appotive and Judy Hamilton, counsel for the plaintiffs between April 29 and July 28, 2011. The plaintiffs were not prepared to dismiss the action, but were prepared to discontinue the action without costs. Winsafe was prepared to consent to discontinuance against it without costs but conditional on the delivery of a release. The plaintiffs wanted to leave the door open to commence a fresh action against Winsafe should facts be discovered in the future establishing Winsafe’s liability, for example when the crown brief was ultimately received. By agreeing to discontinue, the plaintiffs wanted Winsafe’s agreement not to raise a limitations defence should a fresh action be started, a condition which Winsafe appeared to accept. There was an exchange of correspondence about holding the releases in escrow for a period of time after which they could be released to Winsafe, but there was disagreement about when Winsafe’s lawyers were entitled to release the releases from escrow. Ms. Hamilton arranged for the consent of all other parties, including those crossclaiming against Winsafe to the discontinuance without costs.

[7] On July 28 Ms. Hamilton told Mr. Appotive that she had the consent of all counsel to discontinue against Winsafe without costs “with the exception of you.” She asked for his consent so she could “proceed to file the discontinuance.” Mr. Appotive replied the same day that Ms. Hamilton had Winsafe’s consent but he repeated that he required a release. Ms. Hamilton was leaving on holidays and told Mr. Appotive she would review the release with her clients upon her return as she needed to have it translated into Uzbeki and Russian.

[8] On July 29, 2011 the plaintiffs served the notice of discontinuance. There was no mention whether it was filed pursuant to consent, nor was there any mention of the release.

WAS THERE AN AGREEMENT TO PROVIDE A RELEASE OR TO DISCONTINUE WITHOUT COSTS?

[9] The relevant portions of Rule 23 are set out as follows:

23.01 (1) A plaintiff may discontinue all or part of an action against any defendant,

(a) before the close of pleadings, by serving on all parties who have been served with the statement of claim a notice of discontinuance (Form 23A) and filing the notice with proof of service;

(b) after the close of pleadings, with leave of the court; or

(c) at any time, by filing the consent of all parties.

23.03 (1.1) Where an action against a defendant against whom a crossclaim has been made is discontinued, the crossclaim shall be deemed to be dismissed thirty days after the discontinuance, unless the court orders otherwise during the thirty-day period.

23.04 (1) The discontinuance of all or part of an action is not a defence to a subsequent action, unless the order giving leave to discontinue or a consent filed by the parties provides otherwise.

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.

(2) If a crossclaim or third party claim is deemed to be dismissed, any party to the crossclaim or third party claim may, within thirty days after the deemed dismissal, make a motion respecting the costs of the crossclaim or third party claim.

[10] As can be seen from rule 23.01 an action may be discontinued after the close of pleadings with leave or at any time on filing a consent, but before the close of pleadings the plaintiff can simply serve a notice of discontinuance and can do so without leave or consent. Since Winsafe had yet to file a defence, pleadings were not closed and the plaintiffs were at liberty to file a notice of discontinuance without consent or leave.

[11] I am of the view that since Winsafe’s consent was conditional on a release, and the plaintiffs had yet to agree to provide a release since no agreement had been reached with Winsafe as to the escrow terms for a release, the notice of discontinuance was served not pursuant to Winsafe’s consent, but unilaterally under rule 23.01(1)(a).

[12] I conclude that there was no meeting of minds on the delivery of a release. As there was no agreement on all essential terms I am unable to conclude that the parties had formed an agreement to discontinue without costs in exchange for a release. While settlement of an action can imply an obligation to furnish a release where there have been no express discussions about a release,[^2] here there were express discussions about a release and no agreement was reached. The plaintiffs and Winsafe did not “settle” the action against Winsafe and there can be no implied obligation to provide a release in furtherance thereof. In short, the plaintiffs cannot be compelled to provide a release as a term of any purported settlement or agreement.

[13] This conclusion is supported by communications subsequent to the notice of discontinuance. On August 2 Mr. Appotive sent a draft release and on August 15, after her return from vacation, Ms. Hamilton responded that “as the matter is discontinued as against your client, I do not believe a release is necessary or required”. Mr. Appotive and Ms. Hamilton continued to correspond through the end of August. Mr. Appotive insisted that his consent to discontinue was conditional on a release and that condition could not be waived by the plaintiffs. In the alternative he was prepared to accept an order dismissing the action. Ms. Hamilton continued to insist that the discontinuance and removal of Winsafe from the lawsuit should be sufficient to satisfy the lender. She stated: “I don’t agree that I ever entered into a settlement with you or that my clients would execute a release. The matter was discontinued against your client voiding the need for a release.” She wished to preserve her clients’ rights to institute a fresh action against Winsafe if other facts, currently unknown, should implicate Winsafe.

[14] On August 30, 2011 Mr. Appotive stated that a release was the condition to his client’s consent to a discontinuance without costs. He stated: Your choice was to pay the costs and discontinue or provide the release and no costs.” On September 1, 2011 Mr. Appotive stated he had instructions from his client to bring a motion to enforce “the settlement” and recover costs. He also warned that damages may be sought. That was the last communication between counsel until this motion was served.

[15] Since the notice of discontinuance was served not pursuant to Winsafe’s consent to a discontinuance without costs, but unilaterally under rule 23.01(1)(a), that in turn means that there was no agreement that Winsafe would not seek costs of the discontinuance. Winsafe is entitled to avail itself of rule 23.05(1) and bring a motion respecting costs of the action.

EXTENSION OF TIME TO BRING A MOTION FOR COSTS

[16] A motion for costs of a discontinued action under rule 23.05(1) however is required to be brought within 30 days after the action was discontinued. The action was discontinued on July 29, 2011. The last communication from Mr. Appotive was on September 1, 2011 when he indicated he had instructions to bring the within motion. This motion for costs however was not served until October 1, 2012, more than 14 months after the July 29, 2011 discontinuance and well past the 30 day deadline set out in rule 23.05(1). Rule 23.05(1) does not provide the court with discretion to extend that 30 day deadline; however under rule 3.02 “the court may by order extend or abridge any time prescribed by these rules...on such terms as are just.”

The Test for Granting an Extension of Time

[17] What are the factors a court should consider in determining whether to extend the time for moving for costs under rule 23.05(1)? Neither party has found a precedent for extensions of the deadline under rule 23.05(1). My own research has also failed to discover a case dealing directly with this issue. I therefore look for guidance in the case law dealing with extensions of time under other rules.

[18] When an extension of the time for service of a statement of claim under rule 14.08 is sought, the sole consideration is prejudice, and more specifically: “The basic consideration is whether the extension of time for service will advance the just resolution of the dispute, without prejudice or unfairness to the parties”[^3]. The difficulty in analogizing from that test is that in this case the discontinuance has already resolved the substantive dispute between the parties, and only costs remain to be determined.

[19] More recent authorities have dealt with extensions of time to set an action down for trial at a status hearing under rule 48.14. The court of appeal has made it clear that to permit a party to proceed when an action has not been set down for trial more than two years after a defence has been filed requires both a satisfactory explanation for the delay as well as absence of prejudice[^4] and that test is conjunctive, not disjunctive, requiring satisfaction of both parts of the test.[^5]

[20] While the stakes at a status hearing, dismissal for delay, are much higher than determining a party’s right to seek costs and require a balancing of two important principles, that actions if possible should be decided on their merits and that disputes be resolved in a timely manner[^6], some of the comments made by the court of appeal about respect for rules setting procedural time lines are apposite. The court stated:

Time lines prescribed by the Rules of Civil Procedure or imposed by judicial orders should be complied with. Failure to enforce rules and orders undermines public confidence in the capacity of the justice system to process disputes fairly and efficiently. On the other hand, procedural rules are the servants of justice not its master. We must allow some latitude for unexpected and unusual contingencies that make it difficult or impossible for a party to comply.[^7]

The court added that “the need to ensure that rules are enforced to ensure timely and efficient justice” must be balanced with “the need to ensure sufficient flexibility to allow parties...to provide a reasonable explanation for failing to comply with the rules.”[^8]

[21] The court added that delay leaves a litigant with a claim “hanging over its head” and as such fairness requires that “barring exceptional or unusual circumstances, litigation time lines will be enforced. Litigants are entitled to have their disputes resolved quickly so that they can get on with their lives”.[^9]

[22] Finally, the court stated with respect to the deadlines under rule 48.14: “It is surely not too much to expect a party to either set a matter down for trial within two years of the close of pleadings or be able to offer a reasonable explanation for why that is not possible to do so”[^10] and that two years is “viewed as being ample time” to set an action down “absent some satisfactory explanation.”[^11] (emphasis in all quoted passages are mine)

[23] Extrapolating the concerns of the court of appeal to rule 23.05, I am of the view that for the court to grant an extension of the 30 day deadline following a notice of discontinuance to seek costs of the action, the party moving for costs must not only provide evidence that the plaintiff would not be prejudiced by an extension, but must also provide a reasonable and satisfactory explanation for the delay in moving. He should provide evidence as to the circumstances that prevented him from moving within the deadline set by rule 23.05.

[24] If an action could be brought to an end (dismissed for delay) when a party does not satisfactorily explain why he failed to comply with the deadline in the rules for setting an action down, it is far less draconian to refuse to allow a party to seek costs of an action already brought to an end (discontinued) when he fails to explain why he did not comply with the deadline in the rules for seeking those costs. Analogizing from the rule 48.14 cases, it should not be too much to expect a defendant, against whom an action is discontinued, to bring a motion for costs within the 30 day deadline under rule 23.05 or offer a reasonable explanation why it was not done.

[25] Rule 23.05 as it existed before rule amendments in 2009 read: “Where a plaintiff discontinues an action against a defendant, (a) the defendant is entitled to the costs of the action...unless the court orders otherwise.” If an action were discontinued against a defendant, that defendant had a right to costs unless the court ordered otherwise. The former rule did not specify any deadline for the defendant to enforce that right.

[26] In my view rule 23.05 was amended not only to provide more discretion in the award of costs of a discontinued action, but by establishing a deadline for seeking those costs, to provide some finality to the litigation at least as between the plaintiffs and those against whom the action was discontinued. A plaintiff should after the passage of the prescribed deadline feel free to move on with his life, or with the litigation against others, or with settlement of that litigation, without concern that a stale claim may be advanced against him for costs by a defendant against whom the action had long been discontinued.

[27] In my view, a party seeking costs of a discontinuance after the 30 day deadline in rule 23.05(1) must provide satisfactory evidence to explain the delay in bringing the motion, explain why they could not have brought the motion within the 30 day deadline set out in the rule and satisfy the court that the plaintiffs have not been prejudiced by the delay. The onus of explaining the delay grows stronger with the passage of time since the discontinuance.

Should an Extension of Time be Granted?

[28] I am satisfied that there would be no prejudice to the plaintiffs if the defendant Winsafe is permitted to seek its costs. Despite the passage of time there have yet to be examinations for discovery and the plaintiffs have not settled their claims with any of the defendants. The plaintiffs are still in a position to seek recovery of any costs that may be awarded to Winsafe in the continuing action against the other defendants.

[29] On other hand, no explanation whatsoever has been proffered by Winsafe of the 14 month delay after the discontinuance before seeking costs, let alone evidence that is reasonable or satisfactory. There has been no explanation of any circumstances that could have prevented Winsafe from moving within the 30 day deadline or within a reasonable time after that.

[30] Although there was ongoing communication between Mr. Appotive and Ms. Hamilton about the release throughout August 2011, with Mr. Appotive seeking his client’s release and Ms. Hamilton denying any agreement to provide a release, it ended with Mr. Appotive letter of September 1, 2011 advising that Winsafe would be moving to enforce the settlement as well as recovery of costs. I have not been advised of any further communication between the parties until 13 months later when the motion was served. In my view the delay has not been explained, adequately or at all and the plaintiffs are now entitled to rely on the discontinuance as bringing matters between Winsafe and the plaintiffs to an end.

[31] An extension of time to bring a motion under rule 23.05(1) is refused.

WOULD COSTS OF THE ACTION BE AWARDED IF AN EXTENSION WERE GRANTED?

[32] In the event I am wrong, I consider whether costs would be awarded if an extension of time to bring this motion had been granted. As noted, under rule 23.05 as it existed before 2009, there was a presumption that a defendant against whom an action was discontinued would be entitled to his costs. The new rule providing for a party to bring a motion for costs within 30 days does not contain any presumption or guidelines with respect to those costs. Costs of a discontinued action are now a matter of the court’s discretion. Section 131 of the Courts of Justice Act provides that “costs of and incidental to a proceeding or a step in the proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.” In addition, the general principles set out in rule 57.01 apply and the overriding principle is reasonableness.[^13]

[33] Under former rule 23.05 a plaintiff could avoid the presumption in favour of costs if a three part test was met. The party seeking to avoid the presumption “ had to satisfy the court that: (1) the material filed disclosed a bona fide cause of action; (2) that the action was not frivolous or vexatious; and (3) he or she was justified in commencing a law suit”[^14]. Although the presumption no longer operates and the general principles of rule 57.01 apply, the three parts to that test can still be considered as relevant factors under rule 57.01(j).[^15]

[34] When a plaintiff commences an action against a defendant in case their investigation may lead to the liability of that defendant but then elects to discontinue that claim, the defendants can be considered as having been successful in the action even though there has been no adjudication on the merits.[^16] While a plaintiff has a right to bring any parties into an action as named defendants and later release them, the party responsible for bringing them into the action should in most circumstances be responsible for their costs.[^17] While prudent to name all possible tortfeasors against whom a cause of action might reasonably be asserted, and to keep them in the action until their liability has been ruled out by admissions from other defendants or subsequent investigation or trial, the defendant should prima facie be entitled to the costs it has incurred as a result of being brought into an action and required to participate.

[35] There never was a bona fide claim against Winsafe. Winsafe was only one of three possible suppliers of scaffolding and the plaintiffs had no evidence to tie in Winsafe as the supplier. Although the plaintiffs claim they had “information” that Winsafe may have supplied some materials involved in the accident, that information was not shared with the court. The plaintiffs, facing a pending limitation period, cannot be faulted for being cautious and naming all possible suppliers as defendants, however there is no compelling reason why they should not pay the costs of the defendant subsequently released from the action once the correct supplier was discovered. The fact that the plaintiffs prudently did not require a defence goes only to quantum.

[36] Although Winsafe was never required to file a defence and they were let out on a timely basis before productions or discovery, Winsafe did incur some costs. Most defendants would agree to wait and be let out without costs in due course as long as they did not have to defend, but as indicated, the exceptional circumstances in which Winsafe found itself as a result of its refinancing caused it to incur legal costs despite not being required to file a defence.

[37] Had I granted the extension of time, I would have awarded costs of the action to Winsafe.

QUANTUM OF COSTS OF THE ACTION

[38] In terms of quantum Winsafe has presented a bill of costs indicating actual costs incurred of $10,471 for costs of the action to August 30, 2012 (in addition to costs of the motion). On a substantial and partial indemnity basis the costs of the action (exclusive of costs of the motion) are said to be respectively $9,427 and $6,294. These sums include HST and $27 in disbursements. There was no reprehensible behaviour on the part of the plaintiffs and there is no basis to have awarded costs to Winsafe other than on the partial indemnity scale. The fixing of costs however is not merely an arithmetic exercise of multiplying hours by an hourly rate and the court must award costs of the action that are fair and reasonable in all the circumstances and within the reasonable expectations of the losing party, rather than providing indemnity to the winning party.[^18]

[39] Costs in the above amounts of a defendant who was never required to file a defence, provide an affidavit of documents or attend examinations for discovery even on a partial indemnity scale seem excessive. There is no doubt some work was done. The lawyers had to communicate with their client to confirm that Winsafe had no liability, review the statement of claim and the pleadings of other parties, communicate with plaintiff’s counsel and other parties’ lawyers, attend one telephone case conference, negotiate the settlement of the claims against Winsafe and draft a release. Having reviewed the dockets and the bill of costs and considering all of the circumstances, if I were to have awarded Winsafe its costs of the action I would have awarded on a partial indemnity basis the sum of $3,500 plus HST.

[40] As noted, however, the court has refused to grant to Winsafe an extension of time to bring this motion for costs and as a result the court orders that no costs of the action are payable to Winsafe.

COSTS OF THE MOTION

[41] The plaintiffs were successful on the motion. The court found there was no agreement respecting the terms of the discontinuance and the plaintiffs were not required to deliver a release. They were also not required to pay to Winsafe the costs of the action because of the delay in bringing the motion. The plaintiffs are entitled to their costs of the motion.

[42] The plaintiffs provided a costs outline claiming costs on a substantial indemnity basis of $2,271, inclusive of fees of $1,885 plus HST and disbursements and on a partial indemnity basis of $1,935.95, inclusive of fees of $1,640 plus HST and disbursements. There is no basis for costs other than on a partial indemnity scale. The motion was of moderate complexity given the absence of authority directly on the issue of the extension of time. While both parties considered as important the issue of providing or not providing a release, the motion for costs must be considered at the lower end of the range of importance. The actions of Winsafe waiting more than 14 months to bring this motion after the action was discontinued against it has caused an unnecessary complication leading to increased costs to the plaintiffs.

[43] In my view the costs claimed by the plaintiffs are fair and reasonable and proportionate to the complexity and importance of the matter, however a small reduction to $1,800 inclusive of disbursements and HST is in order to reflect more appropriate hourly rates on a partial indemnity scale. That sum would certainly be within the reasonable expectations of Winsafe who, had it been awarded costs of this motion, presented a costs outline of $9,835 on a full indemnity basis, $8,976 on a substantial indemnity basis and $6,400 on a partial indemnity basis.

[44] After writing these reasons I opened a sealed envelope containing an offer by Winsafe dated October 11, 2012 to settle the motion by paying to Winsafe its costs of the action in the sum of $2,500 payable forthwith or in the alternative $3,500 within six months, both apparently inclusive of HST and disbursements. The quantum of costs of the action I would have awarded to Winsafe if an extension of time had been granted was $3,500 plus HST, a better result than set out in Winsafe’s offer. This means that if the extension of time had been granted and Winsafe had been awarded its costs of the action, then Winsafe would have been entitled to its costs of the motion, and given the offer to settle, costs of the motion would have been on the substantial indemnity scale. The offer however has no relevance to the result since Winsafe was not successful on the motion either to obtain a release or costs of the action and was not entitled to its costs of the motion on any scale.

ORDER

[45] I hereby order as follows:

(1) The motion by the defendant Winsafe Corp. for leave to bring this motion, for costs of the action and for delivery of a release is dismissed.

(2) The defendant Winsafe Corp. shall pay to the plaintiffs their costs of the motion within 30 days fixed in the sum of $1,800.00

DATE: February 20, 2013
Master R. Dash

[^1]: The action was originally commenced in Newmarket as action CV-10-994391, was transferred to Toronto on November 26, 2010, assigned to case management and on February 14, 2011 consolidated with other related actions.

[^2]: Umholtz v. Umholtz, [2004] O.J. No. 1762 (S.C.J.) at para. 7

[^3]: Chiarelli v. Weins (2000), 2000 3904 (ON CA), 46 O.R. (3d) 780 (C.A.) at para. 12

[^4]: Khan v. Sun Life Assurance Co. Of Canada, 2011 ONCA 650, [2011] O.J. No. 4590 (C.A.) at para. 1

[^5]: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544, 112 O.R. (3d) 67 (C.A.) at para 32

[^6]: 1196158 Ontario Inc., supra at para. 18

[^7]: 1196158 Ontario Inc., supra at para.19

[^8]: 1196158 Ontario Inc., supra at para. 20

[^9]: 1196158 Ontario Inc., supra at para. 44

[^10]: 1196158 Ontario Inc., supra at para.35

[^11]: 1196158 Ontario Inc., supra at para.36, quoting with approval Riggitano v. Standard Life Assurance Co., [2009] O.J. No. 19976 at para. 45

[^12]: Courts of Justice Act, R.S.O. 1990, Chap. C.43 as amended

[^13]: Bulloch-MacIntosh v. Browne, 2011 ONSC 1210, 2011 O.J. No. 780 (S.C.J.) at paras. 14-16

[^14]: Bulloch-MacIntosh, supra at para.18

[^15]: Bulloch-MacIntosh, supra at para. 19

[^16]: Ferrari v. Hanse, 2004 O.J. No. 5632 (SCJ – Master) at para. 9. In that case I was considering the consequences of a dismissal on consent where costs had not been agreed, but the principle is the same.

[^17]: Ferrari, supra at para. 10.

[^18]: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) at paras. 26 and 38