Court File and Parties
COURT FILE NO.: CV-18-589464 MOTION HEARD: 09042018 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Nam Commodities Inc., Plaintiff/Responding Party AND: Central Valley AG Exports Inc., Defendant/Moving Party
BEFORE: Master P. T. Sugunasiri
COUNSEL: Maurer, M., Counsel for the Defendant/Moving Party Augruso, D., for the Plaintiff/ Responding Party
HEARD: April 9, 2018
Reasons for Decision
[1] This is a motion brought by the Defendant seeking its costs of this action after the Plaintiff discontinued it and immediately commenced a new action with added parties. For the reasons that follow, I dismiss the motion. These are not the circumstances in which costs of an action are warranted. The discontinuance was merely a procedural step that re-started the litigation to add new parties.
Facts
[2] The facts are straight forward. Nam Commodities Inc. (“Nam”) is an Ontario corporation that carries on business as a broker and exporter of crops, grains and other products. Central Valley AG Exports, Inc. (“CV”) is a California corporation and is in the business of selling crops, grains and other products.
[3] The dispute between Nam and CV arises from a series of commodity sales agreements (“contracts”) related to the sale and export of chick peas. Nam alleges breach of those contracts. Nam commenced the action in Ontario on the basis that the contracts were made in Ontario. This is specifically pleaded in paragraph 23 of the Statement of Claim (“January claim”).
[4] Nam issued its claim on January 4, 2018 and served it shortly after. On January 31, 2018, counsel for CV (“Mr. Schein”) wrote to Nam’s counsel to indicate that CV intended to bring a motion to stay the action on the basis of lack of jurisdiction and forum non conveniens. At this point there was clearly a material dispute as to where the contracts were formed.
[5] At the time the issue was raised, Nam’s counsel was Michael Miller. Miller was away when the Schein letter came in. Having not heard from Mr. Miller, Mr. Schein sent an email on February 12, 2018 indicating that May motion dates were available.
[6] On February 13, 2018, Mr. Miller’s colleague, Mr. Augruso, responded to Mr. Schein and advised him that Mr. Miller was away from the office and that they were still in the process of receiving instructions from Nam about the proposed motion. On the same day, Mr. Schein wrote back indicating that he would await a response for the time being and confirmed that no steps would be taken against CV.
[7] After the January claim was served Nam became aware of new causes of action against other entities and individuals involved in the execution of the contracts.
[8] Rather than bringing a motion to amend the claim to add new parties, Nam’s counsel decided to discontinue the January claim and commence a new one, this time with the additional parties. On March 23, 2018, Nam discontinued the January claim and issued a new claim (“March claim”). The March claim preserves its breach of contract claim against CV and again continues to take the position that the contracts were formed in Ontario.
[9] Nam served Mr. Schein with the Notice of Discontinuance and March claim by email on March 22, 2018. From February 13, 2018 when Mr. Schein indicated that he would await Nam’s response, until March 22, 2018, there was no communication between the parties.
[10] On March 26, 2018, Mr. Schein advised that CV was seeking its costs of responding to the January claim. According to CV’s affiant, the firm had been preparing the stay motion materials between January 14, 2018 and March 14, 2018 despite being advised in February that Mr. Miller and Mr. Augruso were still in the process of seeking instructions, and Mr. Schein’s agreement to await the response. In other words, CV chose to proceed with the preparation of its motion without knowing whether or not Nam was going to capitulate to its position and despite Nam’s assurance that it would not take any steps that would prejudice CV.
[11] The issue in the within motion is whether CV should recover its costs for the work done in “responding to the claim.”
Law and Analysis
[12] Both parties agree on the law. Rule 23.05(1) of the Rules of Civil Procedure allows a party to seek costs of a discontinued action within 30 days of the discontinuance. There is no issue that CV brought its motion in time.
[13] To be relieved of costs, Nam must satisfy the court that the material filed discloses a bona fide cause of action that is not frivolous or vexatious and that it was justified in commencing the lawsuit. [1]
[14] In awarding costs the court ought to consider the principles set out in Rule 57.01(1) and conduct a fact-specific analysis of the circumstances giving rise to the initiation of the action and its discontinuance. The overriding principle is reasonableness. [2] In this particular instance, the fact that the discontinuance did not end the litigation is relevant. In the normal course, discontinuing an action ends the litigation and one can see how it can be open to a defendant to claim costs of the action. The discontinuance can be regarded as a retreat by the plaintiff and a victory for the defendant. As a general principle, those who are successful in litigation may be compensated for some of their costs. This explains why under the new rule the factors in Rule 57.01 come into play as do overriding considerations of fairness. These are the same considerations when determining costs of the successful party on a motion or at the end of an action. As such, whether or not Nam has a bona fide cause of action is less relevant here because the identical litigation continues on in the form of a newly constituted claim.
[15] In any event, there is no doubt that Nam has disclosed a bona fide cause of action. Indeed CV does not argue that Nam’s action is vexatious or frivolous in and of itself, but rather that it ought not to have been brought in Ontario. CV outlines in its factum the five issues to be decided by a court if the action were to proceed. CV’s singular argument is that Nam’s erroneous decision to commence the action in Ontario required CV to go to significant expense to prepare a stay motion for which it should be compensated now instead of waiting for the motion to play out in the March claim. On that point, CV was strategically coy in indicating whether or not it had retained Minden, Gross LLP as its counsel on the March claim and whether or not it would proceed with its stay motion.
[16] With respect, I disagree with CV’s argument. First, it is inappropriate for the purposes of this motion to determine whether or not Nam has improperly brought this action in Ontario or make any determination as to where the contracts were formed. That is squarely the subject of the stay motion and is a material issue in the action. Considering the merits of those issues would force Nam to meet a higher threshold than required under the rule. Nam must only demonstrate that it has a bona fide cause of action. Even if that includes having a bona fide claim that the appropriate forum is Ontario, it does not mean that Nam has to prove that its position is likely to succeed. Without deciding the merits of the issue, the evidence in the record and vigorous arguments from both sides with supporting case law on contract formation demonstrates that there is certainly a bona fide issue on where and how the contracts were formed. That is all that is needed even if such claims are, as CV submits, weak or tenuous.
[17] Second, it was CV’s choice to go ahead and have materials prepared and research conducted in the absence of Nam’s position on the matter. No evidence was presented that the stay motion was of such urgency that CV had to start preparing its materials to protect its interests before hearing from Nam. The decision to take such steps should not be born on Nam.
[18] Third, it is important that the same dispute between Nam and CV over the performance of the contracts alleged in the January claim continues in the March claim, and that the discontinuance and commencement of the new claim occurred on the same day. Nam’s decision to discontinue and immediately commence a new action does not trigger a right to costs to CV for work done in responding to the January claim. The March claim encompasses the allegations made by Nam against CV in the January claim. But for the few minutes between the filing of the discontinuance and the issuing of the March claim, the action is continuous against CV. As such, it is unreasonable at this juncture to compensate CV for the cost of defending the action as if the matter was over. While the January action was procedurally discontinued, substantively it continues.
[19] I agree with Nam that any work done thus far to respond to the January claim can be used to continue CV’s defence against the March claim as if there was no discontinuance. If CV brings a stay motion in the newly constituted action and is successful, it can claim the costs it seeks now from the master hearing that motion. If CV decides not to bring such a motion, it amounts to a substantive withdrawal of its position unrelated to Nam’s decision to stop and restart the action. It would not in those circumstances be entitled to the cost of the preparation of that motion much like it would not recover such costs if Nam had chosen to continue the January action and CV decided to withdraw the motion before it was served.
[20] To find otherwise in the facts of this case could lead to significant mischief in the use of Rule 23.05(1). Even more seriously, it would discourage parties from choosing the most efficient and cost effective procedure to advance their claims. In my view it was laudable for Nam to avoid the cost of a Rule 26 motion to amend the claim when its January claim was so newly issued that it could simply be discontinued and commenced again with the added parties. In the present case, CV sits in the same position now as it did before Nam discontinued the January claim. There are no defence costs that it ought to recuperate now. It would be different if Nam discontinued its claim against CV altogether and simply pursued the other parties. Then CV could reasonably argue that it was put to unnecessary expense to respond.
Disposition
[21] For the reasons noted above, I dismiss CV’s motion with costs.
Costs
[22] Both parties submitted costs outlines. There is no reason to deviate from the principle that costs follow the event and should be awarded to the successful party. Little time was spent on Nam’s adjournment request of the hearing. I do not consider my dismissal of that request a divided success on the motion such that Nam’s costs should be reduced. The amount claimed by Nam is within the reasonable contemplation of CV given that its costs claim is higher. As such, I have no hesitation in awarding partial indemnity costs to Nam in the all-inclusive amount of $4,918.33 payable within 30 days of the date of these reasons.
Original Signed Master P.T. Sugunasiri
Date Released: July 20, 2018
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