SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BASSETT & WALKER INTERNATIONAL, INC.

v.

HAPAG-LLOYD (CANADA) INC.

2014 ONSC 4838

COURT FILE NO.: CV-13-476445

BEFORE: MASTER R.A. MUIR

COUNSEL: Christopher J. Somerville for the plaintiff Robert Love for the defendant

HEARD: August 19, 2014

ENDORSEMENT

[1] There are two motions before the court. The defendant brings a motion pursuant to Rule 23.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”) for an order requiring the plaintiff to pay the costs of this discontinued action. The plaintiff seeks an order for costs in respect of an appearance before the assessment officer on April 8, 2014.

[2] The plaintiff started this action on March 18, 2013. It seeks compensation from the defendant for the loss of seven containers of butter. The butter was lost in 2008 when it was shipped by Hapag-Lloyd AG from Buenos Aries Argentina to St. Petersburg Russia. The butter was apparently confiscated by Russian customs officials upon its arrival in St. Petersburg.

[3] The plaintiff made a claim for compensation in the German Hamburg District Court. That claim was dismissed by the German trial court on April 30, 2010. An appeal of that decision was dismissed by the German Court of Appeal on June 28, 2011.

[4] Shortly after this action was commenced, the defendant’s lawyer (not Mr. Love) wrote to the plaintiff’s lawyer and advised that the defendant was taking the position that the Ontario action was res judicata, brought out of time and that the courts of Ontario lacked jurisdiction. The defendant’s lawyer demanded that the action be discontinued and that the plaintiff pay the defendant’s costs. The plaintiff declined on both counts.

[5] The defendant then scheduled a motion to strike the statement of claim pursuant to Rule 21. It prepared and served its motion material. The parties attended at motions scheduling court. A timetable was established and the date for the Rule 21 motion was fixed for May 16, 2014.

[6] After all of this had been done, the plaintiff decided that it would discontinue this action. It served a notice of discontinuance on September 4, 2013 pursuant to Rule 23.01(1)(a). The notice of discontinuance was filed a month later on October 4, 2013.

[7] The defendant’s lawyer had been advised of the plaintiff’s intention to discontinue this action by way of a telephone call from Mr. Somerville on September 4, 2013. During that call the defendant’s lawyer stated that his client would likely seek costs.

[8] Rule 23.05 requires any party seeking the costs of a discontinued action to make a motion respecting those costs within 30 days after the action is discontinued. Notice of this motion was not served until April 8, 2014, approximately five months late.

[9] The defendant’s lawyer was fully aware of the requirements of Rule 23.05 from the outset. However, he chose not to follow the procedure set out in Rule 23.05. At paragraph 20 of his affidavit sworn August 5, 2014, the defendant’s lawyer states, in part, as follows:

I believed that, as an alternative to the motion procedure in Rule 23.05, an assessment of the costs of a discontinued action could be scheduled with an assessment officer directly and that there was no deadline to do so.

[10] As it turned out, this belief was incorrect. On April 8, 2014, the assessment officer declined to hear the defendant’s assessment of costs. She held that she did not have jurisdiction and that the defendant should have brought a motion under Rule 23.05.

[11] It was only then that the defendant served its notice of motion. Pursuant to Rule 23.05 the defendant should have served its notice of motion by November 4, 2013 at the latest.

[12] The defendant does not dispute that it initially followed the wrong procedure or that its notice of motion was served late. However, the defendant argues that this court should exercise its discretion to extend the time for serving the notice of motion and fix the costs of the discontinued action on a full indemnity basis.

[13] Both sides agree that the applicable test to extend the time for a motion under Rule 23.05 is set out in the decision of Master Dash in Marupov v. Metron Construction Inc., 2013 ONSC 609 (Master). At paragraph 23 of Marupov Master Dash articulates the test as follows:

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.

[14] It is important to note that Rule 23.05 was amended in 2009. The substance of the amendments and the applicable policy considerations are set out by Master Dash in Marupov at paragraphs 25 and 26 as follows:

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.

[15] These are the factors and principles I have applied and considered in determining the issues on the defendant’s motion. I have come to the conclusion that the defendant’s request for an extension of time to bring this motion should not be granted.

[16] I accept that the defendant has satisfied its onus with respect to prejudice. There is no suggestion that the plaintiff is unable to respond to the defendant’s claim for costs either because an important witness is unavailable or documents have been lost. All of the alleged prejudice identified by the plaintiff is easily compensable through the payment of costs. Moreover, the finality principle is not particularly strong in this case. The plaintiff waited for 30 days to file its notice of discontinuance. The deadline for the defendant to bring its motion under Rule 23.05 was therefore extended to November 4, 2013. The defendant made its request of the plaintiff for costs just one month later on December 3, 2013.

[17] However, in my view the defendant has not satisfied the second element of the test. The defendant has not provided a reasonable and satisfactory explanation for its failure to bring this motion in a timely manner. The defendant has not provided any evidence of any circumstances that may have prevented it from complying with the Rule. That is because there are none. This is not a situation where the deadline was missed due to inadvertence because the defendant miscalculated the time or forgot to diarize the applicable date. The defendant was fully aware of the Rule and made a deliberate decision to follow another path. It was only when it turned out that the defendant was wrong in its interpretation of the jurisdiction of the assessment officer that it chose to bring this motion. A simple reading of Rule 58.01 would have made it clear to the defendant that the assessment officer only has jurisdiction where a rule or order of the court provides that a party is entitled to costs. In my view, it is not appropriate for the court to grant an extension of time under Rule 23.05 in these circumstances.

[18] I do not view this result as particularly harsh. This is not a situation where a defendant is being denied its right to defend itself in court in response to the substantive claim being made against it. This is a motion about costs.

[19] I therefore decline to exercise my discretion to grant the extension of time requested by the defendant. The defendant’s motion is dismissed.

[20] The plaintiff’s motion seeks an order for the payment of its partial indemnity costs of the assessment hearing. It is requesting $10,388.55 inclusive of HST and disbursements. The defendant argues that the plaintiff should be denied those costs entirely. It submits that the plaintiff’s underlying action is an abuse of process as its claim is res judicata, brought out of time and outside the jurisdiction of this court. The defendant argues that those factors should inform the court’s decision regarding the costs of the assessment hearing. Alternatively, the defendant argues that the costs requested by the plaintiff are excessive.

[21] I do not accept the defendant’s argument that the court should look to the merits of the underlying claim when determining the costs of the assessment hearing. Regardless of the nature of the plaintiff’s claim, the plaintiff was entirely successful at the assessment hearing. The defendant employed the wrong procedure and the plaintiff was put to some expense in order to respond to the assessment appointment. The defendant persisted in pursuing the assessment hearing option even after the plaintiff had clearly raised the issue of the assessment officer’s jurisdiction as early as December 6, 2013. In my view, the plaintiff is entitled to costs.

[22] However, I agree with the defendant that the costs requested are excessive in the circumstances. First, only the costs related to the jurisdiction issue should be recoverable. Any time spent responding to the defendant’s costs request generally is properly a matter for the costs of these motions. Second, the attendance at the assessment hearing was unnecessary. The plaintiff should have accepted the defendant’s offer on April 4, 2014 to have the costs of the assessment hearing dealt with by way of a motion to the court rather than making its unsuccessful request to the assessment officer. Finally, it is my view that the jurisdiction issue was not complex from a factual or legal standpoint. For these reasons, it is my view that it is fair and reasonable for the defendant to pay the plaintiff’s costs of the assessment hearing fixed in the amount of $2,000.00, inclusive of HST and disbursements.

[23] If the parties are unable to agree on the issue of the costs of these motions, they may make brief submissions in writing by no later than September 22, 2014.

Master R.A. Muir

DATE: August 22, 2014