Greta Energy Inc. v. De Lange, 2015 ONSC 3027
COURT FILE NO. : CV-12-457816
MOTION HEARD: 20150420
REASONS RELEASED: 20150522
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
GRETA ENERGY INC.
Plaintiff
- and-
ROBERT DE LANGE, LEVEL UP SA
and MICHAEL FRANK BURGESS
Defendants
BEFORE: MASTER D. E. SHORT
COUNSEL: Mark Crane Fax: (416) 862-7661
- for the Plaintiff (moving party)
Chris Houser- Fax: (416) 362-2211
- for the Moving Defendant, de Lange
RELEASED: May 22, 2015
Reasons for Decision
I. Overview
[1] In this motion, the plaintiff, Greta Energy Inc. ("Greta"), is seeking an order to strike out the statement of defence of Robert de Lange ("de Lange") due to his ongoing refusal to pay two costs orders owed to Greta by virtue of Orders made by this Court, totalling $40,000.
[2] By Order dated August 6, 2013, the Honourable Justice Moore ordered de Lange to pay costs to Greta fixed at $25,000, after dismissing de Lange's motion to stay the within action. While almost two years have elapsed since that Order was made against Mr. De Lange it remains unpaid.
[3] By order dated January 31, 2014, the Court of Appeal for Ontario ordered de Lange to pay costs to Greta in the amount of $15,000, after dismissing de Lange's appeal of the order of Justice Moore dated August 6, 2013. Mr. De Lange has also failed to pay this costs order.
[4] In this action, Greta has pleaded, in part, that the defendants, de Lange, Michael Burgess ("Burgess") and Level Up SA ("Level Up") were co-conspirators with respect to the theft of 2 million Euros deposited by Greta as part of an alternative energy Project Investment. (the "Initial Deposit").
[5] Greta has recovered some of its funds which were the subject of this conspiracy in previous related litigation in Ontario (the "Previous Related Litigation"). In this action, Greta now seeks to recover the balance of those funds that it asserts were wrongfully received by de Lange pursuant to the conspiracy.
II. Background
[6] . The facts of this case are complicated. They describe commercial and banking transactions encompassing several people and countries. However, many of these facts are not to date contested.
[7] Greta is an Ontario corporation. It carries on business in the renewable energy industry.
[8] The defendant, de Lange, resides in Pretoria, South Africa. De Lange is the directing mind of the corporate defendant, Level Up.
[9] During the relevant time period, de Lange was an officer and director of lnnovatis, Inc., along with the defendant Burgess, and Erwin Lasshofer ("Lasshofer"). De Lange is also an owner of lnnovatis Asset Management along with Lasshofer.
[10] The defendant, Level Up, is a Swiss corporation. During the relevant time period, Level Up marketed itself as having a relationship with the lnnovatis Group of Companies.
[11] The defendant, Burgess, was the managing director of Prosperity International LLC ("Prosperity"), and its directing mind. During the relevant time period, Burgess was also an officer and director of lnnovatis, Inc., along with de Lange and Lasshofer.
[12] Burgess is currently serving a 15 year prison sentence in the United States due to, in part, crimes committed against Greta.
III. Prior Decisions
[13] Justice. Moore released his reasons almost two years ago. The following extracts from his decision found in full at 2013 ONSC 3086, set out the salient findings which I found helpful in reaching my conclusion on this motion”:
- This is an application by the defendant, Robert de Lange ("de Lange"), for an order staying the action or, in the alternative, striking the statement of claim and setting aside its service upon de Lange.
2 The principal complaint raised by de Lange is that this court lacks jurisdiction over the subject matter of the action, as there is no real and substantial connection between said subject matter and Ontario. De Lange resides in South Africa and has few, if any, connections with Ontario, apart from those alleged in this action.
4 The facts of this case are complicated as they describe commercial and banking transactions encompassing several people and countries and allegations of deceit and criminal conduct on the part of some of the actors involved. At its essence, however, this is a pleadings motion brought at a time early on in the development of the facts available to support the allegations pleaded.
Background
5 Many of the known facts are not greatly contested. The parties involved in this action and in a recently settled action brought in this court, were involved in a wind power generation project ("the project") in Estonia, the financing for which was assembled in Euros through banks in Europe and Dubai.
6 Greta Inc. ("Greta") is an Ontario corporation[^1] that contracted to finance a portion of the project by assembling an initial deposit of money and moving it from its bank account to an account in the name of Innovatis Asset Management SA ("Innovatis"). The financing contract was required by its terms to be governed by the laws of Ontario.
9 A portion of the money initially advanced by Greta was transferred to Innovatis and therefrom to de Lange's personal bank account. The parties disagree upon the business and legal implications flowing from transfers to de Lange's bank account but the fact that funds did flow is supported through banking information generated during the course of the related litigation in which Greta sued other people and companies related to de Lange and Innovatis.
10 This court issued a tracing order in September of 2010 requiring the defendants in that action to account, report and advise as to the whereabouts of Greta's initial deposit. This generated information put to de Lange in his cross examination in aide of this motion. In the result, he admitted to receiving, in his personal capacity, 423,763 Euros. He further allowed that he directed certain additional Greta funds be transferred to individuals.
27 Greta alleges that it was the victim of a conspiracy and that the tort of conspiracy necessarily involves deceitful conduct alleged against defendants in an action before the court. Such conduct can be difficult to prove. Here, de Lange denies any involvement in such conduct. Accordingly, Greta has had to marshal evidence from a variety of sources aided by the terms of the tracing order issued in the companion action and has obtained and produced evidence that de Lange received, directly or indirectly, 522,665 Euros of Greta's money, without Greta's knowledge or consent.
28 Greta had no knowledge that these transfers occurred until the tracing order brought this information to light.
29 Greta has produced evidence connecting de Lange and Burgess as business associates, of Burgess actively involved in assembling Greta funds for the project, that he both corporately and personally guaranteed the safety of and in transferring two million Euros, of what Greta asserts was its money, into de Lange's personal account. Greta insists that the transfer of money into de Lange's account confirms misuse of funds according to the initial deposit funding contract and completes the conspiracy alleged involving de Lange and Burgess and damages sustained is a necessary component to complete the cause of action for conspiracy.
Disposition
40 De Lange has not persuaded me that this case must be stayed, that the statement of claim needs be struck or that an order should issue setting aside the service of the statement of claim. [my emphasis throughout]
[14] When the costs of that motion came to be decided Justice Moore, in reasons found at 2013 ONSC 4931 determined in part:
2 Counsel confirm that costs outlines were exchanged before the motion was argued. As such, the parties were aware that Greta would seek costs of $28,844.43 and the defendant, Robert de Lange ("de Lange") would seek $19,566.71, each on a partial indemnity basis….
6 De Lange requests that costs be ordered payable at the end of the proceeding, to the plaintiff in the cause, fixed in the sum of $15,000.00….
13 The overriding principle in fixing costs is reasonableness. So, after considering all relevant factors and having taken a step back to consider the amounts of fee and disbursement items to reflect a fair and reasonable costs award, I fix Greta's costs at $25,000.00, inclusive of fees disbursements and H.S.T.. [my emphasis]
[15] My reading of his reasons indicates that the Motion Judge appreciated that the losing defendant wanted costs to be paid at the end of the proceeding and that Justice Moore did not include such a delayed payment provision in his determination of the amount payable. In the circumstances I conclude the Judge considered and by his silence rejected the defendant’s delayed payment proposal.
[16] De Lange appealed to the Court of Appeal from Justice Moore’s decision on the motion. A court made up of R.G. Juriansz, P.D. Lauwers and G.I. Pardu JJ.A. heard the appeal on January 31, 2014.and at 2014 ONCA 107 delivered a brief endorsement which read in part:
1 THE COURT (orally):-- The only ground of appeal advanced at the hearing of the appeal is that the motion judge erred by finding the Ontario courts have jurisdiction over the respondent's action against the appellant for conspiracy to commit fraud. We are satisfied the motion judge did not err in reaching this conclusion….
7 We are not persuaded that the motion judge made any error in concluding the court had jurisdiction and the appeal is dismissed. Costs in favour of the respondent fixed in the amount of $15,000 all-inclusive as agreed.
[17] Again there appears to be no indication that the Court of Appeal in any way intended that there was to be any extraordinary delay attached to the payment requirement with respect to these costs.
IV. Background
[18] De Lange has admitted to receiving, in his personal capacity, €423,763 of Greta's monies. It would seem that his continued refusal to pay the above two costs orders is motivated by his desire to delay and avoid the consequences of this litigation.
[19] De Lange has failed to swear an affidavit in response to this motion.
[20] The factum of the moving party asserts in part:
FACTS OF THE CONSPIRACY
In 2009, Greta entered into a contract with Prosperity International LLC ("Prosperity"), a corporation that was controlled by Burgess. The purpose of this contract was for Greta to obtain financing to facilitate the development of a wind turbine project (the "Project"). The contract provided that it was to be governed pursuant to the laws of the Province of Ontario. No funding for the Project was ever received by Greta, and the contract was breached by Prosperity.
It is undisputed that Burgess wrongfully arranged for the transfer of €2 million of Greta's funds from a Greta bank account into a bank account in the name of lnnovatis Asset Management SA ("lnnovatis Asset Management").
lnnovatis Asset Management is owned and controlled by de Lange and Erwin Lasshofer. [supporting references omitted]
V. Present Motion to Strike
[21] The motion in this matter seeks to strike out the statement of defence of Robert de Lange. That defence was served April, 2014.
[22] In an affidavit filed in opposition to this motion sworn by de Lange’s present counsel these paragraphs are included;
The plaintiff in this action has not delivered an affidavit of documents or scheduled examinations for discovery of any party. I am not aware that the plaintiff has served the co-defendant Level Up SA with the statement of claim in the action ( or amended statement claim). There has been no notice of discontinuance against Level Up SA served by the plaintiff. Pleadings have not been completed against all parties.
As set out in my letter of April 16, 2014 … the firm of Bennett Best Burn LLP has not been placed in funds to pay the cost awards which are the subject of this motion. This continues to be the case today. In addition, without in any way waiving solicitor client privilege, I can advise that our firm's client Robert de Lange is well over-due in payments owing to our firm for defence of the action.
Our-firm's foreign client does not want his statement of defence struck. Assuming the action proceeds our client wishes the claim to be disposed of on the merits.
[23] I understand why a defendant would hope for such a result. I further appreciate the candor of Mr. de Lange’s counsel. However, I am not convinced, in an action that has already in its third year, and where no explanation has been provided for why the plaintiff’s funds that ended up without any apparent legitimate justification in that defendant’s bank account provides any credible support for de Lange’s position. I note in passing that apparently no one has sought to interplead the balance of the Initial Deposit.
[24] Counsel in defending the present motion also raises issues of international comity. In an effort to be totally transparent I set out their sworn position on this issue in its entirety:
“20. The conditions governing the taking of jurisdiction by the courts of one province (or country) and those under which they are enforced by the courts of another province (or country) should be viewed as correlative. With a correlative view, any decision made against a foreigner in a Canadian court, must be one Canadians would accept as fair had it been against a Canadian citizen at a foreign court.
Courts ought to consider the standards of jurisdiction, recognition and enforcement that prevail elsewhere. In particular the rules governing location in which the defendant is situated, where judgment is likely to be enforced.
The current Ontario practice of significant cost awards is not replicated in the United States of America and is not a general feature of civil courts around the world. Ontario should not strike defences against foreign litigants for failure to pay cost awards. Alternatively Ontario should act with extreme reserve before taking such a step.
A domestic court enforcing a judgment has a heightened duty to protect the interests of defendants when the judgment to be enforced is a foreign one. Fair process is one that, in the system from which the judgment originates, reasonably guarantees basic procedural safeguards such as judicial independence and fair ethical rules governing the participants in the judicial system. The rules of natural justice, including the opportunity to defend, are an essential element of fair process.” [my emphasis, footnotes omitted]
[25] In support of these submissions counsel refers specifically to extracts from three cases. The first is a 1988 decision of the Supreme Court of Canada in Morguard Investments Ltd. v. De Savoye , 1990 CanLII 29 (SCC), 1990 CarswellBC 283, 1990 CarswellBC 767, [1990] 3 S.C.R. 1077, [1990] S.C.J. No. 135, (1991] 2 W.W.R. 217, 15 R.P.R. (2d) 1, 2 W.D.C.P. (2d) 2, 46 C.P.C. (2d) 1, , 76 D.L.R. (4th) 256. In that case (with my emphasis added throughout) Justice La Forest observed:
26 Before going on, I should observe that academic writers have now engaged the issue on a broader plane than reciprocity: see Robert J. Sharpe, Interprovincial Product Liability Litigation (1982); John Swan, "Recognition and Enforcement of Foreign Judgments: A Statement of Principle," in Springman and Gertner, c. 16, at pp. 691 et seq.; John Swan, "The Canadian Constitution, Federalism and the Conflict of Laws" (1985), 63 Can. Bar Rev. 271; Vaughan Black, "Enforcement of Judgments and Judicial Jurisdiction in Canada" (1989), 9 Oxford J. Legal Studies 547. Their approaches are not identical, but in a broad sense it may be said that their thesis is that the conditions governing the taking of jurisdiction by the courts of one province and those under which they are enforced by the courts of another province should be viewed as correlative. If it is fair and reasonable for the courts of one province to exercise jurisdiction over a subject matter, it should as a general principle be reasonable for the courts of another province to enforce the resultant judgment. For a number of these writers there are constitutional overtones to this approach: see also Peter W. Hogg, Constitutional Law of Canada, 2nd ed. (1985), at pp. 278-80. It is fair to say that I have found the work of these writers very helpful in my own analysis of the issues.
[26] Morguard was a case dealing with the enforcement of an Alberta judgment in British Columbia. The court described that situation in this way:
41 A similar approach should, in my view, be adopted in relation to the recognition and enforcement of judgments within Canada. As I see it, the courts in one province should give full faith and credit, to use the language of the United States Constitution, to the judgments given by a court in another province or a territory, so long as that court has properly, or appropriately, exercised jurisdiction in the action. I referred earlier to the principles of order and fairness that should obtain in this area of the law. Both order and justice militate in favour of the security of transactions. It seems anarchic and unfair that a person should be able to avoid legal obligations arising in one province simply by moving to another province. Why should a plaintiff be compelled to begin an action in the province where the defendant now resides whatever the inconvenience and costs this may bring and whatever degree of connection the relevant transaction may have with another province? And why should the availability of local enforcement be the decisive element in the plaintiffs choice of forum?
[27] Counsel for the Defendant particularly drew my attention to the paragraph that followed the above extract:
42 These concerns, however, must be weighed against fairness to the defendant. I noted earlier that the taking of jurisdiction by a court in one province and its recognition in another must be viewed as correlatives, and I added that recognition in other provinces should be dependent on the fact that the court giving judgment "properly" or "appropriately" exercised jurisdiction. It may meet the demands of order and fairness to recognize a judgment given in a jurisdiction that had the greatest, or at least significant, contacts with the subject matter of the action. But it hardly accords with principles of order and fairness to permit a person to sue another in any jurisdiction; without regard to the contacts that jurisdiction may have to the defendant or the subject matter of the suit: see Joost Blom, "Conflict of Laws - Enforcement of Extraprovincial Default Judgment - Reciprocity of I Jurisdiction: Morguard Investments Ltd. v. De Savoye" (I 989), 68 Can. Bar Rev. 359, at p. 360. Thus fairness to the defendant requires that the judgment be issued by a court acting through fair process and with properly-restrained jurisdiction.
[28] The defendant also relies upon the decision of the Ontario Court of Appeal in Muscutt v. Courcelles, 2002 CanLII 44957 (ON CA), 60 O.R. (3d) 20; [2002] O.J. No 2128 (ONCA). There Sharpe, J.A. undertook a detailed examination of the principles of the real and substantial connection test. In particular he referred to the decision in Morguard:
[96] In Morguard, at pp. 1098 and 1101 S.C.R., La Forest J. held that the "considerations underlying the rules of comity apply with much greater force between the units of a federal state", that a federation "implies a fuller and more generous acceptance of the judgments of the courts of other constituent units of the federation", and that "the rules of comity or private international law as they apply between the provinces must be [page50] shaped to conform to the federal structure of the Constitution". At pp. 1099-1100 S.C.R., La Forest J. mentioned several features that foster consistency and uniformity between provinces and thereby minimize the risk of unfairness within Canada:
The Canadian judicial structure is so arranged that any concerns about differential quality of justice among the provinces can have no real foundation. All superior court judges -- who also have superintending control over other provincial courts and tribunals -- are appointed and paid by the federal authorities. And all are subject to final review by the Supreme Court of Canada, which can determine when the courts of one province have appropriately exercised jurisdiction in an action and the circumstances under which the courts of another province should recognize such judgments. Any danger resulting from unfair procedure is further avoided by sub-constitutional factors, such as for example the fact that Canadian lawyers adhere to the same code of ethics throughout Canada.
Further, while La Forest J. held at p. 1103 S.C.R. that "fairness to the defendant requires that the judgment be issued by a court acting through fair process and with properly restrained jurisdiction", he also held that "fair process is not an issue within the Canadian federation".
[97] In Tolofson,[ 1994 CanLII 44 (SCC), [1994] 3 S.C.R. 1022] at p. 1048 S.C.R., La Forest J. noted that the Supreme Court of Canada's superintending role over the interpretation of all laws is capable of ensuring "the harmony that can only be achieved on the international level in the exercise of comity". He also drew a distinction between interprovincial and international cases with respect to choice of law, holding that there is less need to worry about sovereignty or the difficulty of applying "foreign" law where the act in question occurs in another province rather than another country.
[29] In dealing with “Comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere” Justice Sharpe again referred to Justice La Forest’s decision:
[101] In Morguard at p. 1096 S.C.R., La Forest J. adopted the following formulation of comity expressed in Hilton v. Guyot, 159 U.S. 113 at pp. 163-64 (1895):
[T]he recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws . . .
[30] Counsel for de Lange relies upon the next paragraph of the judgment in Muscutt:
[102] One aspect of comity is that in fashioning jurisdictional rules, courts should consider the standards of jurisdiction, recognition and enforcement that prevail elsewhere. In interprovincial cases, this consideration is unnecessary, since the same standard necessarily applies to assumed jurisdiction, recognition and enforcement within Canada. However, in international cases, it may be helpful to consider international standards, particularly the rules governing assumed jurisdiction and the recognition and enforcement of judgments in the location in which the defendant is situated. [my emphasis]
[31] Here there was no evidence put before me as to any significant differences between the manner of enforcement of judgments under the law of South Africa as contrasted to Ontario.
[32] The other case relied upon in support of the defendant’s position on this aspect of the motion was Beals v. Saldanha, 2003 SCC 72; [2003] 3 S.C.R. 416; 234 D.L.R. (4th) 1; 39 B.L.R. (3d) 1; 39 C.P.C. (5th) 1.
[33] That was a case of a successful plaintiff in Florida seeking to enforce that judgment (obtained on default) in Ontario. The appellants, residents of Ontario, sold a vacant lot situated in Florida to the respondents. A dispute arose as a result of that transaction and in 1986 the respondents sued the appellants and two other defendants in Florida. A defence was filed but the appellants chose not to defend any of the subsequent amendments to the action. Pursuant to Florida law, the failure to defend the amendments had the effect of not defending the action. The appellants were subsequently noted in default.
[34] The Florida jury awarded the respondents compensatory and punitive damages. Upon receipt of the notice of the monetary judgment against them, the appellants sought legal advice. They were advised by an Ontario lawyer that the foreign judgment could not be enforced in Ontario. Relying on this advice, the appellants took no steps to have the judgment set aside or to appeal the judgment in Florida. The damages were not paid and an action was started in Ontario to enforce the Florida judgment. By the time of the hearing in 1998, the foreign judgment with interest had grown to approximately C$800,000. The trial judge dismissed the action for enforcement primarily on the ground that there had been fraud in relation to the assessment of damages. The Court of Appeal allowed the respondents' appeal. On appeal to the Supreme Court there was a split decision with dissenting reasons delivered on behalf of Iacobucci, Binnie and LeBel JJ.
[35] The majority consisting of McLachlin C.J. and Gonthier, Major, Bastarache, Arbour and Deschamps JJ. held that the judgment of the Florida court should be enforced. Their decision was based on the view that “International comity and the prevalence of international cross-border transactions and movement call for a modernization of private international law.” Subject to the legislatures adopting a different approach, the "real and substantial connection" test, which has until then only been applied to interprovincial judgments, should apply equally to the recognition and enforcement of foreign judgments. The test requires that a significant connection exist between the cause of action and the foreign court. Here, the "real and substantial connection" test was made out. The appellants entered into a property transaction in Florida when they bought and sold land. As such, there exists both a real and substantial connection between the Florida jurisdiction, the subject matter of the action and the defendants. Since the Florida court properly took jurisdiction, its judgment must be recognized and enforced by a domestic court provided that no defences bar its enforcement.
[36] Counsel for de Lange relies on paragraphs 61.62 and 64 in these portions of Justice Major’s reasons for the majority:
60 A domestic court enforcing a judgment has a heightened duty to protect the interests of defendants when the judgment to be enforced is a foreign one. The domestic court must be satisfied that minimum standards of fairness have been applied to the Ontario defendants by the foreign court.
61 The enforcing court must ensure that the defendant was granted a fair process. Contrary to the position taken by my colleague LeBel J., it is not the duty of the plaintiff in the foreign action to establish that the legal system from which the judgment originates is a fair one in order to seek enforcement. The burden of alleging unfairness in the foreign legal system rests with the defendant in the foreign action.
62 Fair process is one that, in the system from which the judgment originates, reasonably guarantees basic procedural safeguards such as judicial independence and fair ethical rules governing the participants in the judicial system. This determination will need to be made for all foreign judgments. Obviously, it is simpler for domestic courts to assess the fairness afforded to a Canadian defendant in another province in Canada. In the case of judgments made by courts outside Canada, the review may be more difficult but is mandatory and the enforcing court must be satisfied that fair process was used in awarding the judgment. This assessment is easier when the foreign legal system is either similar to or familiar to Canadian courts.
63 In the present case, the Florida judgment is from a legal system similar, but not identical, to our own. If the foreign state's principles of justice, court procedures and judicial protections are not similar to ours, the domestic enforcing court will need to ensure that the minimum Canadian standards of fairness were applied. If fair process was not provided to the defendant, recognition and enforcement of the judgment may be denied.
64 The defence of natural justice is restricted to the form of the foreign procedure, to due process, and does not relate to the merits of the case. The defence is limited to the procedure by which the foreign court arrived at its judgment. However, if that procedure, while valid there, is not in accordance with Canada's concept of natural justice, the foreign judgment will be rejected. The defendant carries the burden of proof and, in this case, failed to raise any reasonable apprehension of unfairness.
[37] I do not see how these concepts provide much assistance to the defendant in this case. While admittedly as a member of the Ontario Court I may have a specific perspective, I nevertheless see no procedural unfairness with respect to Mr de Lange’s treatment by the Ontario Courts to date and note the absence of evidence which would “raise any reasonable apprehension of unfairness”.
[38] Justice Major observed that in Canada, natural justice has frequently been viewed to include, but is not limited to, the necessity that a defendant be given adequate notice of the claim made against him and that he be granted an opportunity to defend. Before the Supreme Court the appellants submitted that they were denied natural justice because they were not given sufficient notice to enable them to discover the extent of their financial jeopardy. Justice Major rejected this position and in particular addressed a concern raised in his colleague’s dissenting reasons:
68 LeBel J. would expand the defence of natural justice by interpreting the right to receive notice of a foreign action to include notice of the legal steps to be taken by the defendant where the legal system differs from that of Canada's and of the consequences flowing from a decision to defend, or not defend, the foreign action. Where such notice was not given, he would deny enforcement of the resulting judgment. No such burden should rest with the foreign plaintiff. Within Canada, defendants are presumed to know the law of the jurisdiction seized with an action against them. Plaintiffs are not required to expressly or implicitly notify defendants of the steps that they must take when notified of a claim against them. This approach is equally appropriate in the context of international litigation. To find otherwise would unduly complicate cross-border transactions and hamper trade with Canadian parties. A defendant to a foreign action instituted in a jurisdiction with a real and substantial connection to the action or parties can reasonably be expected to research the law of the foreign jurisdiction. The Saldanhas and Thivys owned land in the State of Florida and entered into a real estate transaction in that state. When served with notice of an action against them in the State of Florida, the appellants were responsible for gaining knowledge of Florida procedure in order to discover the particularities of that legal system.[my emphasis]
[39] The transactions in issue in the matter before me have a real and substantial connection to Ontario. If a person chooses to do business in this province they are deemed to adopt our Rules of Civil Procedure and the potential costs consequences contained therein.
[40] A possible difficulty in enforcing the award elsewhere is not a valid reason to undermine the normal consequences of failing to pay valid costs awards.
VI. Appropriate Consequences
[41] Against that background I come to assessing the appropriate consequences for failing to pay a costs award in this case.
[42] Rule 57.03(1)(a), with my emphasis added throughout, provides as follows:
On the hearing of a contested motion, unless the court is satisfied that a different order would be more just, the court shall,
(a) fix the costs of the motion and order them to be paid within 30 days;
[43] Rule 57.03(2) provides in part:
(b) Where a party fails to pay the costs of a motion as required under subrule (1), the court may dismiss or stay the party's proceeding, strike out the party's defence or make such other order as is just .
[44] Similarly Rule 60.12 provides as follows:
Where a party fails to comply with an interlocutory order, the court may, in addition to any other sanction provided by these rules,
(a) stay the party's proceeding;
(b) dismiss the party's proceeding or strike out the party's defence; or
(c) make such other order as it is just .
[45] Here neither court specifically stated that the costs were to be paid within thirty days. What flows from that silence?
[46] That issue was addressed by the Divisional Court in Sears v. Sears, 2005 CanLII 5863 (ON SCDC), [2005] O.J. No. 922; 195 O.A.C. 376; 9 C.P.C. (6th) 29 at para. 18 of their reasons, which read in part:
“The language of the Rule is mandatory. For all contested motions, the court is required to make costs payable in 30 days, unless satisfied that a different order would be just… Given the wording of the new Rule, it is no longer the norm that the costs will not be recoverable until the end of the litigation. On the contrary, the norm is that all costs will be payable within 30 days. It seems to us that in the light of this mandatory language, if a judge fails to say anything about when costs are payable, the presumption will be that they are payable in 30 days since the judge is required to make that order absent reasons for doing otherwise.” [my emphasis]
[47] Justice Wilton-Siegel in Stewart v.Oribine, [2010] O. J. No. 1230; 2010 ONSC 1688; 2010 CarswellOnt 1804; considered the Divisional Court’s findings in Sears and held:
12 First, as the Divisional Court stated, under Rule 57.03, … the norm is that costs are payable forthwith -- that is, judges are to make costs payable on this basis unless the judge chooses to exercise his or her discretion to do otherwise. In the present case, both the form of her order and the exchange of correspondence with counsel indicates that Pollak J. did not turn her mind to the issue and therefore cannot be said to have exercised her discretion to defer the time for payment. Nothing in Rule 57.03 prevented the plaintiffs from bringing a motion asking her to address whether it was appropriate to exercise her discretion in this manner. They have not done so, however. Unless and until her order is so varied, I think the order of Pollak J. should be understood to be consistent with what a judge is required to do in these circumstances -- namely, make costs payable forthwith.
13 Second, while I agree with Osborne J.A. that the avoidance of confusion is important, this objective is also achieved by the presumption articulated by the Divisional Court. Osborne J.A.'s other concern -- the need for uniform treatment of fixed costs and assessed costs -- has been resolved by Rule 57.03. As Rule 57.03 requires that both fixed and assessed costs be payable within 30 days of their determination, there is no longer any basis for a rule requiring that fixed costs be payable at the end of the litigation in the absence of an express statement to the contrary.”
[48] In the circumstances of this case, Justice Moore turned his mind to de Lange's request that costs be payable at the end of the litigation and he choose not to make such an Order. It is thus clear to me that this costs order became payable 30 days after the dismissal of de Lange's appeal on January 31, 2014. Given the clear default what consequences ought to flow?
VII. Should the Court Exercise Its Discretion to Strike Out the Statement of Defence?
[49] Relatively recently, T.A. Heeney, R.S.J. considered similar issues, in Hillier v. Hutchens, [2014] O.J. No. 1186; 2014 ONSC 1579. In that case the Plaintiffs sued various defendants concerning alleged roles in fraudulent advance fee loan scam. The claim against one of the defendants was dismissed on an interlocutory motion due to plaintiffs' failure to pay a previous costs order.
[50] In reviewing the applicable law on this issue Regional Senior Justice Heeney observed :
- In Bottan v. Vroom, [2001] O.J. No. 2737 (S.C.J.), Nordheimer J. dealt with an identical motion. In that case, the plaintiff claimed impecuniosity, and argued that the matter should be determined on the merits at trial. At para. 23 Nordheimer J. pointed out that failing to give effect to a costs order made by another judge amounts to second-guessing that judge's order, which he lacks jurisdiction to do:
Third, even assuming that these parties are impecunious, I do not know of any authority, and I was not referred to any, which would permit one judge, on the basis of a party's impecuniosity, to relieve against an order made by another judge that costs be paid forthwith. To do so, I would either have to be sitting in appeal from the order (which I am not) or I would have to have a basis to vary the order. The grounds upon which an order may be varied are set out in rule 59.06 and none of those are applicable here. Further, assuming there remains a residual authority to do so in order to prevent an injustice or to reflect extraordinary circumstances, I find none here. The orders for costs which were made by Somers J., Then J. and B. Wright J. were made with full knowledge of the facts and circumstances of this case. They clearly viewed it as appropriate to order that the costs be paid forthwith in the circumstances. I am not in a position to second guess the exercise of their discretion regarding the payment of costs nor would it be appropriate for me to do so.
- As to the argument that it would be unjust to dismiss the plaintiff's action absent a trial on the merits, Nordheimer J. said this, at para. 26:
Finally, the submission that the striking out of pleadings is not justified because it results in a determination of an action other than on its merits is one which is contradicted by the very existence of rules 57.03(2) and 60.12. The rationale for those rules is predicated on the fact that there will be situations where a party's position ought to be determined for procedural reasons arising from the failure of that party to abide by orders made by the court. If it was the case that the merits of the matter always had to be determined before such remedies could be imposed, there would be little room for the effective application of either of these rules. [my emphasis]
[51] His Honour concludes his examination of this area quoting one of my present colleagues:
- In Baksh v. Sun Media, 2003 CanLII 64288 (ON SC), [2003] O.J. No. 68 (S.C.J. Master), Master Dash thoroughly reviewed the caselaw under rule 57.03(2), before ordering that the plaintiff's action be dismissed for non-payment of costs. He said this, at para. 19:
For orders of the court to have any meaning they must be enforced. I am not satisfied by cogent evidence that the plaintiff is impecunious. Even if I were so satisfied, a party should not be able to set up his own impecuniosity as a shield against costs sanctions. To allow that would mean that a plaintiff could bring, resist, or appeal motions with no fear of consequences, and would emasculate the powers provided in rules 57.03(2) and 60.12.
- I agree with those comments. I am not persuaded that there is any order that is more "just" in these circumstances than an order dismissing the action. Given that costs have been in default for more than one year, there is little point in granting an extension, nor have the plaintiffs asked for one.
[52] Justice D.G.Price struck a defence where a costs award was not paid in Doherty v. Clarkson Manors Inc.,[2012] O.J. No. 4297; 2012 ONSC 5193. In his legal analysis he observed:
11 Striking out is a severe remedy and ought not be the one of first resort, at least without providing the defendant an opportunity to cure the default. See: Bell Express Vu Limited Partnership v. Torroni, (2009), 2009 ONCA 85, 304 D.L.R. (4th) 431, 94 O.R. (3d) 614 (C.A.).
12 The Divisional Court in Starland Contracting Inc. v. 1581518 Ontario Ltd., 2009 CanLII 30449 (ON SCDC), in allowing an appeal from a decision of the Master striking a statement of defence for failure to comply with court orders, and in particular a "last chance" order requiring the fulfilment of undertakings, referred to the objectives to be balanced by the Court when exercising its discretion as to whether to strike a statement of defence for breach of a procedural rule. It cited with approval the following statement of Gray J. in Broniek-Harren v. Osborne, [2008] O.J. No. 1690 (S.C.J.):
The Rules reflect a balance. The litigant does not have an untrammelled right to have his or her case heard. In order to be heard, a case must be processed in accordance with the Rules. By the same token, adherence to the Rules must not be slavish in all circumstances. They are, after all, designed to ensure that cases are heard. Throughout the Rules, the principle is reflected that strict compliance may be dispensed with where the interests of justice require it: see for example, Rule 1.04(1), 2.01, 2.03, 3.02, and 26.01. The difficult issue, in any particular case, is to determine when non-compliance reaches the point that it can no longer be excused. The Court, and society as a whole, have an interest in ensuring that the system remains viable. If the Rules can be ignored with impunity, they might as well not exist.
13 The Divisional Court, at paragraph 29, also cited Master Dash's decision in Eloro Resources Ltd. v. Sovereign Capital Group (Ont.) Ltd., 2004 CanLII 14047 (ON SC), [2004] O.J. No. 387, 2004 CarswellOnt 544, at paragraph 6, where Master Dash describes the exercise of discretion as follows:
The court clearly has a discretion to strike a defence in appropriate cases for repeated procedural breaches, particularly when the breaches are in violation of court orders, since the rules otherwise become meaningless and the court becomes a paper tiger. However, striking a defence is an extreme remedy and a last resort. It should only be ordered when the defence of the action is no longer viable and appropriate because the defendant has by its failure or refusal to be bound by the rules and orders of the court effectively abandoned its right to participate in the court process or when the breaches have become contumelious such as to demonstrate an utter disregard by the defaulting party for the court's orders or when the moving party can demonstrate prejudice.
[53] In the present case there is no suggestion the defendant is impecunious. No reason for the failure to pay the costs awards (or his counsel)is offered. Nor is any justification for the failure to interplead the funds that made their way to the bank account of Mr. de Lange. In light of my review of the facts in this case I am forced to conclude that the defence of the action by Mr. de Lange is no longer viable and appropriate because the defendant has by his failure or refusal to be bound by the rules and orders of the court effectively abandoned his right to participate in the court process. He has demonstrated an utter disregard for the court's orders
VIII. Recent Guidance from the Court of Appeal
[54] Subsequent to the argument of this motion the Ontario Reports published the January 29, 2015 decision of the Court of Appeal for Ontario, in Koohestani v. Mahmood, 2015 ONCA 56, 124 O.R. (3d) 205; 2015 ONCA 56. There the panel consisting of G. Epstein, van Rensburg and Benotto JJ.A. considered a case where the motion judge made an order striking the statement of defence for failure to pay damages and costs awarded to plaintiffs on a previous motion for partial summary judgment. On appeal the order striking the defence was set aside.
[55] The Court of Appeal acknowledged that it was open to the motion judge to consider striking the statement of defence based on the defendants' failure to pay the amounts ordered by Justice Roberts on the earlier motion.
[56] However the panel determined that “striking out a defence is a severe remedy and should generally not be imposed as a remedy of first resort. The defaulting party should, at least, be provided with an opportunity to cure the default.”
[57] In the appellate court’s reasons G. Epstein J.A. in particular noted:
[54] Notwithstanding the legitimate concerns raised before Spence J., my difficulty with his decision to strike the appellants' defence is that he failed to apply the principles relevant to such a request, particularly those set out by this court in Bell ExpressVu Limited Partnership v. Torroni (2009), 94 O.R. (3d) 614, [2009] O.J. No. 356, 2009 ONCA 85. In Bell ExpressVu, at para. 35, the majority identified striking out a defence as a severe remedy and made it clear that it should generally not be imposed as a remedy of first resort. The defaulting party should, at least, be provided with an opportunity to cure the default.
[55] Such was not done in this case.
[57] In addition to the primary principle identified in Bell ExpressVu, that striking out a defence should not be the remedy of first resort, additional factors should be taken into account in deciding whether to strike a defence for failure to comply with court orders.
[58] First, the action should be examined with particular attention to the merits of the defence: Bell ExpressVu, at para 36. The pleading and any evidence relevant to the defence may demonstrate a strong defence supporting the conclusion that the interests of justice warranted finding another way to sanction the misconduct. On the other hand, a blatantly unmeritorious defence may give rise to the inference that the defendant's refusal to comply with a court order is part of a deliberate strategy to delay a decision on the merits -- conduct that may justify the imposition of a more severe sanction.
[59] In my view, it cannot be said that the appellants' defence in this case is obviously without merit.
[60] Second, the context of the misconduct relied upon is relevant to the determination of a response that is not only proportional to the severity of the misconduct but also in keeping with the overarching objectives that guide the application of the rules, namely, that set out in rule 1.04 that the rules should be interpreted to secure the just determination of each civil proceeding on its merits.
[58] In my view the facts before me are clearer and I see no clear evidence of any meritorious defence in the absence of an explanation for the deposit of funds to the de Lange account.
[59] While I was inclined to strike the defence of Mr. de Lange at this time, it seems appropriate in light of the most recent case law to give one last chance to comply with the Orders of the Ontario Courts. However, in the circumstances of this case I see no need for a further motion in the event of non-payment.
IX. Costs of Motion
[60] There was no suggestion of impecuniosity, with respect to Robert de Lange before me.
[61] In my view, the plaintiff was fully justified in bringing this motion, and in light of the default to date ought to be awarded more than partial indemnity costs of this motion. The Costs Outline filed on Mr. de Lange’s behalf on the Motion before me sought partial indemnity costs, in the event he was successful, totaling $2859.
[62] The Costs Outline of the plaintiff sought partial indemnity costs of $7,394.87 and substantial indemnity costs of $10,419.21.
[63] I have determined to fix the costs, on an all in basis, at $9,500. This amount is to be paid by June 30, 2015, which is a period slightly more than 30 days from the release of these reasons.
X. Disposition
[64] The Statement of Defence of Robert de Lange in this action shall be struck as of July 3, 2015 pursuant to Rules of Civil Procedure, unless the following sums are received by counsel for the plaintiff by Noon, Toronto time on Tuesday, June 30, 2015:
a) The costs awarded by Justice Moore in the amount of $25,000.00, inclusive of fees disbursements and H.S.T.;
b) the costs awarded by the Court of Appeal in the consent amount of $15,000.00; and
c) $9500.00 on account of the costs of this motion.
[65] If $49,500 is paid by June 30, 2015 any accrued interest on that sum will not be required to be paid. Otherwise, the amounts will continue to be owed and interest will accrue from the dates of the awards.
[66] In my view, if payment is not received within the time period I have established, there will be no other order in the circumstances of this case that is "more just" than an Order of this Court striking of the defence of Robert de Lange.
R.97/DS __________________
Master D.E. Short
[^1]: that contracted to finance a portion of the project by assembling an initial deposit of money and moving it from its bank account to an account in the name of Innovatis Asset Management SA ("Innovatis").