Court File and Parties

Court File No.: CV-10-8839-00CL Date: 2017-05-30 Superior Court of Justice – Ontario

Between:

Western Steel and Tube Ltd., Plaintiff

– and –

Technoflange Inc. and Canadian Tire Corporation, Limited and Jiangsu Sainty Sumex Tools Corp. Ltd. also known as Jiangsu Sainty International Group also known as JMET Corporation carrying on business in North America as Sainty International LLC, Defendants

Before: F.L. Myers J.

Counsel: David A. Seed, counsel for the Plaintiff Peter J. Henein, Shane Hardy, and Stefanie A. Holland, counsel for the defendant Canadian Tire Corporation, Limited A.J. Esterbauer and Dale E. Schlosser, counsel for the defendant Jiangsu Sainty Sumex Tools Corp. Ltd.

Heard: May 29, 2017

Endorsement

[1] By reasons dated May 2, 2017, reported at 2017 ONSC 2697, the court set aside the default judgment obtained by the plaintiff without notice to the defendants. In addition, the court set aside the noting in default of the defendant Sainty Sumex Tools Corp. Ltd. The lifting of the noting in default however is conditional upon Sainty Sumex fulfilling terms designed to ensure that despite its prior avoidance of the litigation, it now participates fully, efficiently, and with no risk that Sainty Sumex will prejudice the plaintiff should it retreat behind foreign borders.

[2] The plaintiff seeks costs of the motion in light of the default of Sainty Sumex which the plaintiff argues is the ultimate cause of the need for a motion. It submits that the court can make a Sanderson order to have Sainty Sumex pay directly any costs that might otherwise be payable by the plaintiff to the co-defendant Canadian Tire.

[3] I agree with the plaintiff that Sainty Sumex defaulted and has engaged in a game of cat and mouse. I would not award it with costs as I view its conduct to have been deliberately inefficient and tactical. It played games to avoid being served and then to avoid participating in the litigation on the merits once it was served. However, as noted in my prior reasons, the conditions imposed on Sainty Sumex will ameliorate any prejudice caused by Sainty Sumex to date. While Sainty Sumex succeeded in having the default judgment set aside, the outcome was decidedly mixed from its perspective in light of the conditions imposed on the lifting of the noting in default.

[4] I order no costs in favour of or against Sainty Sumex.

[5] That is where my agreement with the plaintiff’s submissions ends. The motion was not caused just by Sainty Sumex’s default. Had the plaintiff limited the relief it sought at the default trial to in personam relief against Sainty Sumex; had it made full and fair disclosure of all material facts to Penny J.; and had it provided notice of the trial to counsel for Sainty Sumex and Canadian Tire, then it might be able to blame the need for a motion and the outcome on the default of Sainty Sumex.

[6] In my view, the plaintiff bears full responsibility for the need for Canadian Tire to have moved and Canadian Tire was fully successful in its motion.

[7] Moreover, Mr. Seed continues to play word games. Twice in his costs submissions, he argues that the defendants had warnings of all steps. The findings that I made did not involve amorphous warnings. Rather, I found expressly that the plaintiff failed to give notice of the default trial to the defendants as it was required to do. Mr. Seed denies violating the Advocate’s Society’s Principles of Civility despite my express holding to the contrary. It is ironic that in the costs submissions Mr. Seed seems to rely upon unsworn evidence that he gave some form of oral warning to the defendants during a proposed mediation session before Prothonotary Aalto of the Federal Court. At the hearing of the motion, Mr. Seed objected to the use by the defendants of any information that was conveyed at that mediation session and the court upheld the objection.

[8] It is the plaintiffs’ failure to schedule and move for judgment appropriately and then its own inappropriate behaviour at the trial that led to the motion by Canadian Tire regardless of whatever complaints the plaintiff had against Sainty Sumex.

[9] Moreover, having obtained relief that plainly bound Canadian Tire inappropriately, the plaintiff declined to consent to settlement offers made by Canadian Tire whereby it would agree to refrain from challenging the default judgment against Sainty Sumex provided that the plaintiff simply removed from the judgment the declarations that purported to bind Canadian Tire. The plaintiff’s response was to try to leverage its wrongfully obtained judgment against Canadian Tire to pressure it to help have Sainty Sumex pay the plaintiff the damages awarded by Penny J. In its material for the motion before me, the plaintiff realized that it could not hold its judgment binding Canadian Tire. It made a half-hearted admission to that effect. But at the hearing of the motion, Mr. Seed volunteered a full throated undertaking on behalf of the plaintiff to refrain from enforcing the default judgment against Canadian Tire. If it knew that the judgment could not be maintained against Canadian Tire, the plaintiff should have consented to set it aside. By trying to extract terms, it relied inappropriately on an ill-gotten judgment to try to better its position.

[10] I readily understand cases where the court declines to reward a defendant with costs where a default judgment is set aside. The order is often seen as an indulgence to a defaulting defendant. This type of argument would apply to Sainty Sumex for example. But Canadian Tire was not in default. There was no valid basis for the plaintiff to seek relief before Penny J. that bound Canadian Tire. There was no valid basis for the plaintiff to move before Penny J. for relief that affected Canadian Tire without notice to counsel for Canadian Tire. There was no valid basis for the plaintiff to fail to disclose to Penny J. the relevant facts outlined in my reasons.

[11] While Canadian Tire’s offers to settle were not in the form required for Rule 49 to apply as of right, I am entitled to consider them under the court’s broad discretion as to costs under Rule 49.13 and s. 131 of the Courts of Justice Act.

[12] In my view the plaintiff ought to pay Canadian Tire its costs of the motion. Nothing done by Sainty Sumex caused the issues on which Canadian Tire moved. It was the plaintiff’s own misconduct that led to Canadian Tire having a need to have its rights vindicated.

[13] The fixing of costs is a discretionary decision under section 131 of the Courts of Justice Act. That discretion is generally to be exercised in accordance with the factors listed in Rule 57.01 of the Rules of Civil Procedure. These include the principle of indemnity for the successful party (57.01(1)(0.a)), the expectations of the unsuccessful party (57.01(1)(0.b)), the amount claimed and recovered (57.01(1)(a)), and the complexity of the issues (57.01(1)(c)). Overall, the court is required to consider what is “fair and reasonable” in fixing costs, and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice: Boucher v Public Accountants Council (Ontario), (2004), 71 O.R. (3d) 291, at paras 26, 37.

[14] I have reviewed the Costs Outlines of the plaintiff and Canadian Tire. The total hours incurred are quite similar with the exception of a junior who apparently spent 100 hours preparing motion materials in addition to the 66 spent by senior counsel. I agree that an unsuccessful party cannot complain that the other party has used counsel who is more expensive provided that the rates charged are reasonable and proportional. Moreover, the use of juniors to do the work of seniors is often efficient. But I do not see how it would have been reasonably anticipated by the plaintiff that Canadian Tire would incur costs in the order of $100,000 on this motion. However, in this case, the plaintiff’s strategic approach has required two or three letters on each point instead of engaging in simple, clear communication. Mr. Seed’s nitpicking on the meaning of expressions like “ex parte default judgment” or his deliberate refusal to answer simple questions when asked by counsel have increased costs inefficiently and that falls on the plaintiff’s side of the ledger. So too does the failure to accept Canadian Tire’s reasonable offers to accept an outcome that the plaintiff ultimately conceded at the hearing. All things considered, the plaintiff ought to have expected that Canadian Tire would bring all weapons to bear and that the motion would be fully fought with expensive consequences. In all, considering reasonableness overall, Canadian Tire’s success, its offers to settle, and the plaintiff’s failure to make full disclosure to Penny J. in addition to its other misconduct delineated above, in my view the plaintiff ought to pay Canadian Tire forthwith its costs fixed in the amount of $75,000 all-inclusive.

[15] The plaintiff argues that Canadian Tire may be indemnifying Sainty Sumex. If one or the other of the defendants is an indemnifier, as would not be unusual, then the misconduct of Sainty Sumex may well be part of a strategy between both defendants to whipsaw the plaintiff. While I considered making Canadian Tire’s costs payable to it only if it wins the main litigation (in the cause) I ultimately reject that approach. There is no assurance that the trial judge will necessarily inquire into or learn about the true economic relationship as between the defendants. Were I to defer costs pending a subsequent judge satisfying herself that Canadian Tire is not complicit with Sainty Sumex, I may be creating new issues or creating an insoluble issue. Moreover, even if it is true that Canadian Tire is the puppet master that has been pulling Sainty Sumex’s strings throughout, that still does not excuse the plaintiff from adopting the inappropriate approach that it took in obtaining the default judgment without notice, purporting to bind Canadian Tire to relief, and failing to disclose material facts to Penny J. The non-disclosure alone is an independent basis on which I am satisfied that it is fair and reasonable to exercise the discretion to award costs against the plaintiff in favour of Canadian Tire.

F.L. Myers, J. Date: May 30, 2017