ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-12-0438
DATE: 2013-12-02
B E T W E E N:
Allan Curle, Bruce Johnson, Jeanette Johnson, Norall Group Inc. and Norall Group Contracting Inc.,
Christopher D.J. Hacio, for the Plaintiffs
Plaintiffs
- and -
Gina Gustafson, Juanita Curle, Holly LeBrun, Carl Gustafson, and D.J. Gustafson Engineering Ltd. c.o.b. as Aegus Contracting,
Morris J. Holervich, for the Defendants Gina Gustafson and Juanita Curle
Daniel Matsen, for the Defendants Carl Gustafson, D.J. Gustafson Engineering Ltd. and Holly LeBrun, not appearing on this motion
Defendants
HEARD: November 21, 2013,
at Thunder Bay, Ontario
Mr. Justice F.B. Fitzpatrick
Decision On Motion
[1] The defendants, moving parties, Juanita Curle (“Juanita”) and Gina Gustafson (“Gina”), bring a motion for an order seeking an equitable set-off of two interim costs orders owed by them to the five plaintiffs in this matter (the “First Costs Award”). They ask that the First Costs Award be set off, against a series of interim costs orders owed by one of the five plaintiffs, Alan Curle, (“Alan”) to Juanita (the “Second Costs Award”) in a separate matrimonial matter. In the alternative, Juanita and Gina ask that enforcement of the First Costs Award be stayed.
[2] It is important to note that the First Costs Award arises from the present action, which is essentially a shareholder dispute where a myriad of relief is sought both by way of damages claimed and declaratory relief in regard to the operation of the corporate plaintiffs including a claim for an oppression remedy under the Ontario Business Corporations Act, R.S.O. 1990, c. B.16. The Second Costs Award arises from matrimonial litigation.
[3] In my view, this motion was completely without merit for the following reasons.
[4] To begin, the parties who are indebted to each other in regard to the respective costs awards are completely different. Juanita vs. Alan for the First Costs Award, and Alan, Bruce Johnston, Jeanette Johnson, Norall Group Inc. and Norall Group Contracting Inc. vs. Juanita and Gina in respect of the Second Costs Award. It seems to me a fundamental requirement of a set-off is for the parties to be the same, at a minimum.
[5] Second, the matters in which the costs awards arise are completely different. One is matrimonial litigation conducted under the Family Law Act and the other is a corporate matter which deals with the relationship of shareholders and has aspects involving the Ontario Business Corporations Act. In my view, in order to even consider a set-off, the debts have to have some connection or nexus. Interim costs awards in two completely different types of litigation seem to me to be the furthest thing from being described as “connected matters”.
[6] Third, I do not agree with the submissions of counsel for the moving parties that the current law of equitable set-off supports them in this motion. Counsel for Juanita refers to the decision of the Supreme Court of Canada in Holt v. Telford, 1987 18 (SCC), [1987] 2 S.C.R. 193, at p. 212 c or para. 35 (QL) [Holt v. Telford], as the leading case on the test for the granting of an equitable set-off. The Supreme Court held:
The party relying on a set-off must show some equitable ground for being protected against his adversary’s demands: Rawson v. Samuel, [1841] Cr. & Ph. 161, 41 E.R. 451 (L.C.).
The equitable ground must go to the very root of the plaintiff’s claim before a set-off will be allowed: . . . [Br. Anzani (Felixstowe) Ltd. v. Int. Marine Mgmt (U.K.) Ltd., [1980] Q.B. 137, [1979] 3 W.L.R. 451, [1979] 2 All E.R. 1063].
A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim: [Fed. Commerce and Navigation Co. v. Molena Alpha Inc., [1978] Q.B. 927, [1978] 3 W.L.R. 309, [1978] 3 All E.R. 1066].
The plaintiff’s claim and the cross-claim need not arise out of the same contract: Bankes v. Jarvis, [1903] 1 K.B. 549 (Div. Ct.); Br. Anzani.
Unliquidated claims are on the same footing as liquidated claims: [Nfld. v. Nfld. Ry. Co., [1888] 13 App. C. 199 (P.C.)].
[7] The Holt v. Telford test was recently affirmed in a decision of the Ontario Divisional Court in Nicolou v. McLennan & Associates, 2013 ONSC 1622. This case was referred to me by counsel for Juanita and Gina. In that case, several other Ontario decisions were cited but one passage in particular from Holt v. Telford, (which was the Supreme Court of Canada adopting the reasoning of Lord Denning from an English authority), in my view has particular bearing on this matter. Lord Denning, as cited with approval by Wilson J. in Holt v. Telford at p. 213 i or para. 36 (QL) stated:
We have to ask ourselves: what should we do now so as to ensure fair dealing between the parties? ... This question must be asked in each case as it arises for decision; and then, from case to case, we shall build up a series of precedents to guide those who come after us. But one thing is quite clear: it is not every cross-claim which can be deducted. It is only cross-claims that arise out of the same transaction or are closely connected with it. And it is only cross-claims which go directly to impeach the plaintiff's demands, that is, so closely connected with his demands that it would be manifestly unjust to allow him to enforce payment without taking into account the cross-claim.
[8] Fundamentally in order for a court to grant relief by way of equitable set-off, there must first be a finding of a close connection between the claims and a finding that it would be manifestly unjust not to permit such a set-off.
[9] In this case, first, I find there to be no such close connection between the costs awards at issue. Second, I do not find that it would be manifestly unjust to allow the five plaintiffs to continue to pursue their right to collect an interim costs award without a set-off of the costs owed by Alan to Juanita.
[10] In my view, Juanita and Gina have failed to satisfy the first, second and third portions of the Holt v. Telford test. With regard to the first portion of the test, I find that Juanita and Gina have not shown any equitable ground for being protected from the claims of their five adversaries. Only one of the five plaintiffs, Alan, is indebted to only one of the moving parties, Juanita. The other persons do not have costs debts against which a set-off can be made. There may be meritorious claims between the parties in the within action, but I cannot see how Gina should be able to get any relief from owing costs to Bruce Johnston, Jeanette Johnson, Norall Group Inc. and Norall Group Contracting Inc. simply because she is a co-defendant with Juanita who is owed costs by Alan in an unrelated action. These costs awards simply are not connected.
[11] Regarding an equitable basis to allow set-off, the moving parties argue that really the only parties involved are Juanita and Allan. The moving parties argue that the corporate plaintiffs should not have commenced this action in the first place. They argue that therefore the costs awards in their favour ought not to have been made in the first place. In the affidavit filed in support of the motion, the plaintiff states:
I believe that the costs which Gina Gustafson and I are now liable to pay to the plaintiffs in this proceeding should not be paid to the Corporations. As explained below, the Corporations should never have been plaintiffs in this proceeding.
[12] Her affidavit then goes on to explain that counsel for the Corporation has a conflict acting for all five plaintiffs and there was no proper corporate authority for the Corporations to commence this litigation. This is an argument that should have been made at the time costs were awarded or on any appeal of the award. However it is neither persuasive nor helpful to me on this motion. The Corporations in fact have an interim award against Juanita and Gina. The issue of their authority to commence the litigation is irrelevant to a consideration of a set-off of an award in matrimonial litigation.
[13] In my view, this argument highlights the fact that this motion was a kind of end run appeal or a backdoor attempt to deal with a financial obligation imposed by the Court following a motion or a series of motions. It is wrongly-founded. There is no equitable basis for relief among all of the parties involved.
[14] There being no equitable ground to consider a set-off, it cannot be said that the second portion of the Holt v. Telford test can be satisfied.
[15] Third, the fact that all the parties are different for both sets of costs that are sought to be set off, I cannot find that there is a clear connection so as to create a situation where it would be manifestly unjust to allow the five plaintiffs to enforce payment without taking in to consideration the claim of just one of the plaintiffs against just one of the defendants.
[16] Juanita and Gina argue that this lack of mutuality is not fatal to their argument as the law of equitable set-off does not require the debts to be mutual. However we are dealing with a very particular type of a debt in this matter, costs awards. In my view, the decision of the Ontario Court of Appeal in 677933 Ontario Ltd. v. Dical Investments Ltd., [1992] O.J. No. 1583 (Ont. C.A.) [Dical], is dispositive of the issue of the requirement for mutuality when a set-off of costs is sought. In that decision, the appellants sought to have the order of the Court of Appeal settled so as to provide a set-off of costs awarded to the individual defendants at trial against the costs awarded to the appellants on the appeal and at trial. The Court found “there is no legal basis to apply the equitable rule of setoff, there being no mutual debts between the individual defendants and Dical.
[17] The Dical decision reinforces the very fundamental requirement that before a set-off can be granted, the parties to the set-off must be the same or be somewhat closely connected in a respect of the debts at issue. The arguments by counsel for Juanita and Gina that context must be considered in order to assess the degree of connection were not persuasive. Quite simply, the people involved were not the same and no amount of context was sufficient to connect costs awards in two completely different matters where the parties are all different. I am not persuaded that fair dealings between the parties requires an order of set-off. In fact, I think such an order would be manifestly unfair to the majority of those litigants who are not involved in both matters. In my view, it would take a trial to prove that the corporate litigation and the matrimonial litigation are in any way connected. The motion material filed is insufficient to permit me to make such a finding.
[18] I am also mindful of a quotation from the leading text on the matter of costs in Ontario, Mark Orkin’s The Law of Costs (looseleaf (Toronto, On.: Canada Law Book, updated 2013). At s. 213.1 on p. 2-161, entitled “Set Off of Costs against Costs” the text states: “In Ontario, however, the cases have held that there could be no set off of costs in separate actions even between the same parties”. The authorities cited in favour of this proposition admittedly are dealing with taxations under the old rules of civil procedure, however, in my view, the principle is sound where the parties are clearly different in the two actions at issue. The fact that these costs awards are interim would also militate against any attempt to have them set off on an interim basis.
[19] In my view, the current practice regarding the awarding of interim costs, particularly where they are ordered to be paid forthwith, serves a meaningful purpose as they can be, among other things, an effective control on the conduct of the litigants and the litigation. In some instances, interim costs awards are a safeguard which have the practical effect of discouraging frivolous motions. An interim award of costs where a party has to pay the other side has an occasional beneficial effect. It can alert the party to the very real need to focus on the essence of the dispute between them, rather than being enticed to waste both their and the court’s time in tactical maneuvering at motions court on matters which do nothing to move the case towards ultimate resolution or trial.
[20] In addition to the general lack of merit of the arguments of the moving parties, I agree with the submission of the respondents that there is no procedural authority for me to grant the relief requested by way of an interim motion. This is not a motion for summary judgment of a portion of a claim under Rule 20. The costs awards do not form part of any of the respective claims of any of the parties in either action. They are additional obligations imposed by the Court as the result of findings made in the proceedings. I can find no authority in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, for such a claim to be made at this stage in the litigation. I find there was no procedural basis for this motion. There is also no basis I can find, at law or in equity, based on the facts of this case to stay the enforcement of the costs award in either action.
[21] Motion dismissed with costs payable forthwith by Juanita and Gina to the five plaintiffs. If parties cannot agree on costs, either may apply to the trial coordinator within thirty days for an appointment to argue the same, failing which costs will be deemed to have been settled.
“original signed by”
The Hon. Mr. Justice F.B. Fitzpatrick
Released: December 2, 2013
COURT FILE NO.: CV-12-0438
DATE: 2013-12-02
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
ALLAN CURLE, BRUCE JOHNSON, JEANETTE JOHNSON, NORALL GROUP INC. AND NORALL GROUP CONTRACTING INC.,
Plaintiffs
- and –
GINA GUSTAFSON, JUANITA CURLE, HOLLY LEBRUN, CARL GUSTAFSON, AND D.J. GUSTAFSON ENGINEERING LTD. C.O.B. AS AEGUS CONTRACTING,
Defendants
DECISION ON MOTION
Fitzpatrick J.
Released: December 2, 2013
/mls