Court File and Parties
Citation: Tan-Jen Ltd. v. Di Pede, 2017 ONSC 6800 Court File No.: CV-08-00360246-0000 Date: 2017-11-15 Superior Court of Justice - Ontario
Re: Tan-Jen Ltd., Plaintiff, Defendant to the Counterclaim And: Lisa Di Pede a.k.a. Elisa Di Pede, Tony Di Pede and Di Pede Design Group Inc., Defendants, Plaintiffs by Counterclaim
Before: P.J. Monahan, J.
Counsel: Monique Jilesen, Margaret Robbins and Jeffrey Silver, for the Plaintiff Gordon Hearn and James Manson, Defendants
Heard: October 17, 2017
Endorsement
[1] The parties have been engaged in litigation since 2008 (the “Underlying Litigation”) over the rights to certain custom-built moulds that were used in the construction of the home of the Defendants Lisa and Tony Di Pede (the “Di Pedes”). The parties settled the Underlying Litigation in 2016 when the Defendants accepted the Plaintiff’s settlement offer. However the Defendants subsequently brought a motion seeking to find the Plaintiff in contempt (the “Contempt Motion”) for allegedly violating certain interlocutory orders that had been issued during the course of the Underlying Litigation. The present motion (the “Motion to Strike”) is brought by the Plaintiff, seeking an order striking the Contempt Motion pursuant to Rules 21.01(1)(b) and 25.11(b) and (c) of the Rules of Civil Procedure.
[2] For the reasons that follow, I would grant the relief sought by the Plaintiff, strike the Defendants’ Contempt Motion pursuant to Rule 25.11, without leave to amend, on grounds that it is frivolous and vexatious and an abuse of process.
Background Facts
[3] The Plaintiff Tan-Jen Ltd. (“Tan-Jen”) designed a number of a number of pre-cast moulds (the “Moulds”) used in the construction of the Di Pedes’ residence. After the completion of the project, Tan-Jen remained in possession of the Moulds. In 2006, the Di Pedes borrowed a number of the Moulds in order to finish elements of the interior of the residence. These Moulds remained in the possession of the Di Pedes.
[4] In July 2008, a dispute arose between the parties with respect to a claim by the Di Pedes that some of the Moulds had been used by Tan-Jen to produce pre-cast elements on another home. When the parties could not resolve this dispute, Tan-Jen commenced the Underlying Litigation, bringing an action for damages, injunctive relief, the return of the Moulds in the Di Pedes’ possession and claiming copyright in all of the Moulds. The Di Pedes subsequently delivered a statement of defence and a counterclaim in which they sought an injunction preventing Tan-Jen from using the Moulds in any other project, damages and copyright in the Moulds.
[5] During the course of the Underling Litigation, a number of interlocutory orders were made in relation to the Moulds. On September 2, 2008, Justice Echlin signed an Endorsement on consent (the “Echlin Order”), directing that “the moulds in each parties’ possession shall be stored and not used prior to determination of [the] motion.” Pursuant to the Echlin Order, on September 4, 2008, representatives of Tan-Jen attended at the Di Pedes’ residence to wrap and seal the Moulds in the Di Pedes’ possession. On September 5, 2008, representatives of the Di Pedes attended at the premises of Tan-Jen to wrap and seal the Moulds in Tan Jen’s possession.
[6] On November 13, 2008, Kelly J. signed an order on consent directing the following (the “Kelly Order”):
That the moulds in each party’s possession shall continue to be stored and not used and that they shall remain wrapped and sealed pending the determination of the motions or until such further order of the court.
[7] On May 25, 2010, Tan-Jen made an offer to settle the proceedings. The offer to settle proposed two options, the first whereby the Moulds in the possession of the Di Pedes would be returned to Tan-Jen, the second whereby the Moulds in possession of Tan-Jen would be delivered to the Di Pedes. Under the second option, in return for receiving the Moulds from Tan-Jen, the Defendants would pay Tan-Jen the sum of $92,500. The Defendants would also pay the Plaintiff’s costs on a partial indemnity basis. The offer to settle did not require any representations or warranties from either party with respect to the condition of the Moulds.
[8] On April 28, 2016, six years after the offer to settle was made and eight years after the Moulds had been wrapped and sealed, the Di Pedes accepted the offer and elected option two, whereby they would be entitled to possession of all the Moulds in return for a payment of $92,500. On June 24, 2016, Morgan J. signed an order finalizing the settlement agreement (the “Settlement Agreement”) and, on July 26, 2016, the Di Pedes obtained the Moulds in Tan-Jen’s possession and made the required payment.
[9] On August 19, 2016, the Defendants brought the Contempt Motion, alleging that Tan-Jen had deliberated violated the terms of the Echlin Order and/or the Kelly Order (collectively, the “Orders”). In addition to a finding of contempt against Tan-Jen, the Contempt Motion also sought the imprisonment of Stephen Latanville (“Latanville”), the principal of Tan-Jen, payment of a fine, both general and punitive damages, and costs of both the Contempt Motion as well as the Underlying Litigation.
[10] On February 14, 2017, Tan-Jen brought the Motion to Strike on the basis that the Contempt Motion discloses no reasonable cause of action under Rule 21.01(1)(b), that it is frivolous or vexatious under Rule 25.11(b), and an abuse of process under Rule 25.11(c). Tan-Jen accepts that for purposes of the Motion to Strike it must assume the facts as alleged in the Contempt Motion to be true but maintains that, even on this assumption, it is plain and obvious that the Contempt Motion cannot succeed and should be struck in its entirety without leave to amend.
[11] On June 6, 2017, the parties attended a case conference before Morgan J. to determine the order of proceedings and, in particular, whether the Motion to Strike should be heard in advance of the Contempt Motion. Morgan J. agreed with Tan-Jen that the fair and efficient way to proceed would be for the Motion to Strike to be argued first.[^1] Given the long and hard fought nature of the litigation, Morgan J. observed that “it is in everyone’s interest that this not be any more protracted than need be.” If Tan-Jen is correct in its argument that there is no possibility of the Contempt Motion succeeding, this should be determined first since this will resolve the dispute and spare the parties further time and treasure.
The Law of Civil Contempt
[12] The rule of law depends upon voluntary compliance with court orders. If defiance of court orders were tolerated or ignored, the inevitable result would be a loss of respect for judicial authority, an increasing resort to self-help and, ultimately, the rule of might rather than right. Thus courts have for centuries sought to maintain their dignity and respect through exercising the power to punish for contempt of court.[^2]
[13] At the same time, courts have recognized that the power to punish for contempt must be approached as an exceptional remedy and utilized only as a last resort.[^3] Courts contemplating a contempt order must be wary of “tiring by its overuse”.[^4] If the use of contempt is not “most jealously and carefully watched and exercised”,[^5] a court’s outrage “might be treated as just so much bluster that might ultimately cheapen the role and authority of the very judicial power it seeks to protect.”[^6] Thus courts have insisted that the requirements for civil contempt are strictissimi juris, that other remedies be exhausted before holding a party in contempt, that the underlying court order be clear and unambiguous, and that the complainant bear the burden of proving the contempt on the criminal standard of proof beyond a reasonable doubt.[^7]
[14] It is well established that there is a three-part test for a finding of contempt of court, as set out by the Supreme Court of Canada in Carey v. Laiken:[^8]
(i) The order that was breached must clearly and unequivocally state what should or should not be done;
(ii) The party who disobeyed the order must have had actual knowledge of it; and
(iii) The party alleged in breach intentionally did the act the order prohibits or intentionally failed to do the act the order compels (collectively, the “Carey v. Laiken test”).
[15] The strictissimi juris approach that must be followed on a contempt motion requires close adherence to procedural requirements, including precision in pleadings, procedure and evidence.[^9] The notice of motion in a contempt proceeding must set out the particulars of the alleged contempt, including the date, place and other facts sufficient to identify the particular acts alleged to constitute contempt.[^10] The power to punish for contempt should be used sparingly and only in serious cases, as “its usefulness depends on the wisdom and restrain with which it is exercised.”[^11]
Positions of the Parties
[16] Tan-Jen argues that on the face of the record the Defendants cannot possibly meet the burden on the first and third elements of the Carey v. Laiken test. With respect to the first element - that the order alleged to have been breached be clear and unequivocal - Tan-Jen argues that the Echlin and Kelly Orders merely require the Moulds to be stored and not used, but do not specify the manner in which the Moulds are to be stored. For example, there is no requirement that the Moulds be stored indoors or, indeed, in any particular manner. The Contempt Motion alleges that Tan-Jen breached the Orders by failing to properly store the Moulds, but the Order is at best ambiguous with respect to the method of storage required, and this ambiguity must be resolved in favour of Tan-Jen.
[17] With respect to the third element of the Carey v. Laiken test – that the alleged contemnor must have intentionally performed the acts prohibited by an unambiguous order – Tan-Jen argues that there are no material facts pleaded which demonstrate or allege intention. There is no evidence suggesting that the Moulds were used by Tan-Jen and the only particularized allegation is that certain of the Moulds have deteriorated. This is insufficient to found a finding that Tan-Jen deliberated breached the Echlin or Kelly Orders.
[18] Tan-Jen argues that the Contempt Motion is, in reality, a disguised attempt to re-litigate the Underlying Action, which has been settled, and to seek damages from both Tan-Jen and Latanville for breach of contract. Tan-Jen claims that this improper intention is disclosed by the fact that, in addition to a finding that Tan-Jen is in contempt of the Orders, the Defendants seek: (i) to have Latanville imprisoned; (ii) a writ of sequestration against Tan-Jen and Latanville, to be enforced against all of their real and personal property; (iii) general damages from Tan-Jen and/or Latanville compensating for the loss of use of the Moulds and for the costs of their repair or replacement; (iv) punitive damages from Tan-Jen and/or Latanville: (iv) costs of the Contempt Motion; and (v) costs of the Underlying Litigation.
[19] In response, the Defendants argue that Rule 21.01(1)(b) has no application on this motion since Rule 21 only applies to “pleadings”. The goal of Rule 21.01(1)(b) is to discern whether an alleged pleading fails to disclose a cause of action. They argue that in the case of the Contempt Motion such an analysis is meaningless since a notice of motion is not a “pleading” and civil contempt is not a “cause of action”.
[20] The Defendants further argue that there is no basis for striking the Contempt Motion under Rules 25.11(b) or (c). They note that the Court of Appeal has stated that a court will strike out a claim only in the clearest of cases, where it is plain and obvious that the case cannot succeed. Courts must guard against converting such motions into summary judgment motions.[^12] Here, Tan-Jen has been provided with ample notice of the alleged contempt, namely, that Tan-Jen and/or Latanville violated the Orders by deliberately allowing some of the Moulds to deteriorate such that they were ultimately destroyed. They object in particular to the fact that Latanville stored two of the Moulds where they were exposed to the elements, in direct violation of the Orders. In the alternative, if the Contempt Motion is lacking in particulars, the Defendants say they should be granted leave to amend rather than have the motion struck out in its entirety.
[21] The Defendants further claim that the court has wide discretion in a contempt proceeding under Rule 60.11 to award such relief as is “just”. This includes general and punitive damages, as well as directions to the costs assessment officer who ultimately disposes of costs in the Underlying Litigation. As such, all of the relief sought in the Contempt Motion is available at law, and cannot serve as the basis for striking out the Motion at this preliminary stage.
Analysis
[22] The Contempt Motion is framed in broad terms, alleging that the Moulds in Tan-Jen’s possession were never wrapped or sealed, were allowed to become unwrapped or unsealed, and/or had been used. But the Defendants acknowledge that their own representatives sealed and wrapped the Moulds in the Tan-Jen’s possession, and there is no evidence suggesting that Tan-Jen unwrapped or unsealed any of the Moulds. Accordingly, counsel for the Defendants conceded in argument that the essence of the complaint against Tan-Jen is that Tan-Jen failed to properly store the Moulds. The Defendants object in particular to the fact that two of the Moulds were stored in such manner that they were exposed to the outdoor elements, which led to their deterioration and eventually rendered them useless. The Defendants claim that the improper storage of these two Moulds was a deliberate and intentional act that breached the Orders, and that Tan-Jen’s conduct cries out for the court’s attention.
(a) Do the Orders Clearly and Unequivocally State What Should or Should Not be done?
[23] The key threshold question on this motion is whether the Orders clearly and unequivocally required Tan-Jen to store the Moulds in a particular way. If the Orders did not so require, this conclusion is fatal to the Contempt Motion, which is founded upon the alleged improper storage of the Moulds.
[24] As noted above, the Eichlin Order stated that the Moulds in each parties’ possession shall be “stored and not used prior to determination of [the] motion”, while the Kelly Order required that the Moulds “shall continue to be stored and not used and they shall remain wrapped and sealed pending the determination of the motions…”
[25] What is clear from the Orders is the following:
(i) The Moulds are to be stored and not used by either party; and
(ii) The Moulds are to remain wrapped and sealed, in accordance with the wrapping and sealing undertaken by the parties on September 4 and 5, 2008.
[26] My reading of the Orders is that, provided the parties comply with these two requirements, they do not expressly mandate any particular procedure or standards to be met in terms of the storage of the Moulds. This interpretation of the Orders is consistent with and supported by the circumstances surrounding their issuance. When the Underlying Litigation was commenced, each party had moved for injunctive relief with respect to the Moulds, which motions were initially to be heard on September 2, 2008. However, on September 2, 2008, the injunction motions were adjourned on consent to November 13, 2008. It was for this reason that the Eichlin Order required the Moulds to be stored and not used “prior to the determination of [the] motion”, the “motion” in question being the motion for interim relief originally scheduled for September 2, 2008.
[27] Thus at the time the Eichlin Order was issued, it was contemplated that the Moulds would remain in storage for approximately two months. This explains why the only requirement in respect of their storage was that they be “stored and not used.”
[28] As the November 13, 2008 date approached, the parties exchanged correspondence in which they agreed that they were not in a position to argue the injunction motions on that date. Accordingly, they agreed to adjourn the motions until sometime early in 2009 and, in the meantime, maintain the status quo by consenting to an order requiring the Moulds to be stored and not used. It was with this timetable in mind that the Kelly Order required that the Moulds remain stored, wrapped and sealed, “pending determination of the motions”, namely, the motions for interim relief.
[29] What this indicates is that, at the time the Orders were made, it was contemplated that the Moulds would remain in storage for a limited period of time, months rather than years, and certainly not for up to eight years. It was thus understandable that the Orders did not mandate any particular procedure or method to be employed in the storage of the Moulds, apart from the fact that they remain wrapped and sealed and not used by either party.
[30] I further find that nothing in the Orders expressly required that either of the parties take positive steps to ensure that the Moulds would not deteriorate over time. The Di Pedes had wrapped and sealed the Moulds in the possession of Tan-Jen, and vice versa. Any inadequacy in the wrapping/sealing was the responsibility of the party who had performed the wrapping/sealing in question. The Orders required the parties not to disturb the wrapping or sealing as performed by the other party, but there was no additional obligation to take positive steps to ensure that the Moulds in their respective possession did not deteriorate over time.
[31] In fact, this reading of the Orders was conceded by counsel for the Defendants on the argument of this motion. Following eight years of storage, a number of the Moulds in the possession of Tan-Jen had deteriorated and could not be used. However, in oral argument, Counsel for the Defendants abandoned any claim for contempt based on the mere fact that certain Moulds in Tan-Jens’ possession had deteriorated and could no longer be used. Counsel argued, instead, that the contempt consisted of the improper storage of two of the Moulds, specifically the fact that these two Moulds had been stored outdoors and/or exposed to the elements.
[32] This amounted to a concession that there was no requirement to store the Moulds in such manner as to ensure that they would not deteriorate. Tan-Jen’s alleged contempt of the Orders consisted of the deliberate storage of two of the Moulds outdoors, which resulted in their deterioration. But because other Moulds in Tan-Jen’s possession which were similarly deteriorated did not give rise to a contempt of court, there can be no requirement that the parties store the Moulds in such manner as to prevent their deterioration.
[33] This concession merely reinforces the conclusion that it is plain and obvious that the Contempt Motion cannot possibly succeed. I have already found that the Orders do not mandate any particular storage method for the Moulds. It goes without saying that the Orders make no reference whatsoever to a requirement that the Moulds be stored indoors versus outdoors. Thus the claim that the Orders “clearly and unequivocally” mandate a storage method for the Moulds, whether indoors, outdoors, or otherwise, has no basis in the wording of the Orders or the context in which they were issued, and must fail.
(b) The Appropriate and Inappropriate Use of the Contempt Power
[34] Apart from concerns that the Orders lack the clarity required to support a finding of contempt, this motion also raises broader issues regarding the appropriate use of the court’s contempt power.
[35] As discussed above, the contempt power must be approached as an exceptional remedy and utilized only as a last resort. It should be reserved for serious cases which threaten the dignity or legitimacy of the courts. It is not merely a tool to be utilized by litigants to secure their private advantage in the context of civil litigation.
[36] Here, the parties engaged in hard fought litigation, extending over eight years, regarding their respective rights in and to the Moulds. The value of the Moulds themselves was relatively modest and the parties undoubtedly spent many times that amount pursuing the Underlying Litigation. The parties voluntarily entered into the Settlement Agreement in 2016 with the intention that it would bring the Underlying Litigation to an end.
[37] In entering into the Settlement Agreement, the Di Pedes assumed that the Moulds in the possession of Tan-Jen would still be usable. But the Di Pedes did not attempt to verify the accuracy of this assumption by, for example, seeking to inspect the Moulds in advance, or requiring Tan-Jen to represent or warrant the condition of the Moulds. They simply accepted an offer to settle that had been made by Tan-Jen six years previously which contemplated, in effect, that the Moulds be delivered to the Di Pedes “as is”.
[38] In fact, the Di Pedes were aware back in 2008 that the Moulds in Tan-Jen’s possession were at risk of deterioration. At that time, counsel for the Di Pedes had raised concerns that a number of the Moulds in Tan-Jen’s possession did not have a fiberglass backing and that certain of the Moulds showed signs of wear. On the record before me, it does not appear that anything further came of this correspondence at the time. In any event, it is clear that, despite this knowledge, the Di Pedes did not take steps prior to accepting Tan-Jen’s offer to ascertain the current condition of the Moulds.
[39] The Di Pedes indicate that they would never have entered into the Settlement Agreement if they had known of the condition of the Moulds. But because they had entered into a binding agreement which did not include representations or warranties as to the condition of the Moulds, the Di Pedes had no basis to claim that Tan-Jen had breached the Settlement Agreement.
[40] Instead, they commenced the Contempt Motion. Although the Motion is framed as one invoking the dignity and respect of the court, it is evident that the Defendants’ primary concern is to obtain monetary and other relief directly from Tan-Jen and/or Latanville. In particular, the Defendants seek compensation for the loss of use of the Moulds, the cost of repairing or replacing them, punitive damages, and costs of the Underlying Litigation. They further seek the imprisonment of Latanville, who was not a party to the Underlying Litigation, as well as a writ of sequestration enforceable against all of the real and personal property of both Tan-Jen and Latanville.
[41] The Defendants claim entitlement to this expansive and intrusive relief due to the improper storage by Tan-Jen of two of the Moulds. But there is simply no connection between the loss of these two particular Moulds, which on the record before me have a modest value, and the expansive relief claimed by the Defendants. For example, there is no nexus between the improper storage of these particular Moulds and the Defendants’ claim for damages flowing from their loss of use of all the Moulds, or for their entire costs of the Underlying Litigation.
[42] In reality, the Defendants are attempting to leverage the alleged improper storage by Tan-Jen of two of the Moulds into a re-opening of the entire Underlying Litigation. The effect, if not the purpose, of the Contempt Motion is to avoid the binding effect of the Settlement Agreement.
[43] The courts are rightly wary of the overuse of the contempt power, for fear that this would trivialize the very dignity and legitimacy that the power is intended to protect. I find this concern of particular relevance here, where the Defendants invoke the court’s contempt power to accomplish indirectly what could not be done directly. This ignores the public law dimension of the court’s civil contempt power, reducing it to a mere instrument to be deployed in civil litigation in furtherance of private rather than public ends.
Conclusion
[44] For these reasons, I would strike the Contempt Motion, on the basis that; (i) it is plain and obvious that it has no prospect of success, and therefore is frivolous and vexatious in accordance with Rule 25.11(b); and (ii) it is an attempt to accomplish indirectly what cannot be done directly, namely, to reopen the Underlying Litigation despite the Settlement Agreement, and is therefore an abuse of process in accordance with Rule 25.11(c).
[45] On this basis, it is unnecessary for me to consider whether the Contempt Motion should also be struck on the basis of Rule 21.01(1)(b).
[46] The Plaintiff’s Bill of Costs indicates that a substantial amount of time was spent in the preparation of this Motion to Strike. I find this appropriate in light of the significance of the motion and, in particular, the attempt by the Defendants to have Latanville imprisoned. I further have regard to the fact that I have found the Contempt Motion to be frivolous and vexatious and an abuse of process. I therefore award Tan-Jen its costs of the motion on a partial indemnity basis in the amount of $41,476.32, inclusive of H.S.T. and disbursements.
P.J. Monahan, J.
Date: November 15, 2017
[^1]: See Tan-Jen Ltd. v. Di Pede, 2017 ONSC 3476 at para. 6. [^2]: See United Nurses of Alberta v. Alberta (Attorney General), 1992 99 (SCC), [1992] 1 S.C.R. 901 at para. 20. [^3]: St. Elizabeth Home Society v Hamilton (City), 2008 ONCA 182 at para. 42 (per Sharpe J.A.). [^4]: Karen Jolley, “Sanctions for Civil Contempt – A National Survey and a Critique”, in Archibald and Echlin (eds) Annual Review of Civil Liigation 2013 (Thomson Canada 2013) 361 at p. 366. [^5]: Re Clements, (1876) 46 L.J. Ch. 375 (Eng. C.A.). [^6]: Centre commercial Les Rivières ltée v. Jean bleu inc. 2012 QCCA 1663 (“Centre commercial”) at para. 7 (Que. C.A.). [^7]: Centre commercial, at para. 7. [^8]: 2015 SCC 17, 2015 S.C.C. 17 (“Carey v. Laiken”) at paras. 33-35. [^9]: Friedlander v. Claman, 2016 BCCA 434 at para.26 (B.C.C.A.). [^10]: Toronto Transit Commission v. Ryan, 1998 14635 (ON SC), [1998] O.J. No. 51 at para. 29 (Ontario Court of Justice, General Division). [^11]: Parashuram Detaram Shamdaani v. the King Emperor, [1945] A.C. 264 (P.C.) at 70. [^12]: See Baradaran v. Alexanian, 2016 ONCA 533 at paras. 15-17.