Court File and Parties
COURT FILE NO.: CV-12-469769 DATE: 2020-03-12 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: HENRY SMITH and SUSYN SMITH Plaintiffs – and – GCAT GROUP INC., DANIAL HADIZADEH and AKBAR HADIZADEH Defendants
Counsel: Brian Starkman, for the Plaintiffs Pavle Masic, for the Defendants
Before: R.F. Goldstein J.
Reasons for Judgment on Motion to Dismiss the Claim
[1] The Plaintiffs own a house. In 2011 they hired the GCAT, the defendant construction company, to do some outdoor renovations. GCAT was to install some limestone. The Plaintiffs say that the Defendant construction company supplied inferior synthetic limestone as opposed to the natural imported Italian limestone that they contracted for. In 2017 they sued the GCAT and its principal director and officer (collectively, “the Defendants”). The Defendants denied in their statement of defence that they supplied inferior limestone.
[2] The key issue in the lawsuit was the nature of the limestone. Early in the lawsuit, the Plaintiffs had it tested. They supplied expert reports about the quality of the limestone to the Defendants. In December 2017 counsel for the Defendants raised the issue of having their own expert inspect the limestone. Counsel for the Defendants raised the issue again in July 2018. Counsel for the Plaintiffs responded and imposed conditions. Counsel for the Defendants replied shortly after and discussed resolving the conditions in his letter. The sticking points appeared to be the identity of the stonemason, the post-inspection remediation, and the testing protocol.
[3] The Defendants then brought a motion to permit inspection of the limestone. The defendants objected, making several arguments as to why inspection should not be permitted. The plaintiffs were almost completely successful. Master Jolley found that an inspection was necessary. She found that the Defendants were not required to submit a testing protocol. She sensibly ordered the Defendants to pay the Plaintiffs $6000 for remediation, rather than have the Defendants do it. She ordered the Plaintiffs to pay $10,000 in costs.
[4] The testing did not take place. The Plaintiffs complained that the Defendants failed to show up to do the inspection. They also did not pay the costs order. The Plaintiffs did not appeal Master Jolley’s ruling. Instead, the Plaintiffs brought a motion to vary the original order, and to compel some answers to undertakings.
[5] Master Jolley heard the motion on May 8, 2019. She released her endorsement on May 9, 2019. Her comprehensive reasons are highly enlightening. The Plaintiffs argued that that the Defendants had failed to comply with undertakings – which had nothing to do with the inspection (or non-inspection, as it turned out). Master Jolley rejected that argument.
[6] More seriously, the Plaintiffs argued that the Defendants had perpetrated a fraud on the court by failing to disclose information that showed they were, in fact, lying about the source of the limestone. The Master rejected that argument. She found that there was no evidence that the Defendants had lied about anything. Moreover, the Plaintiffs had been in possession of the supposedly false information when the original motion was brought and did not file it.
[7] The Master also rejected that the argument that the Defendants themselves had lost their right to inspect because they had failed to attend at the Plaintiff’s property (see Smith v. CGAT Group Inc., 2019 ONSC 2889 at para. 14).
[8] I note parenthetically that Mr. Starkman, counsel for the Plaintiffs, made the same argument to me: that the Defendants had failed to comply with Master Jolley’s order by failing to inspect prior to April 30, 2019. That argument was decisively – and my respectful view, correctly – rejected by Master Jolley.
[9] Ultimately, Master Jolley said the following about this second motion:
The motion was ill conceived. It smacked of an attempt to appeal my order after the appeal period had expired. Further, the plaintiffs failed to pay the costs that were ordered as part of that order in the amount of $10,000, relying on this motion to vary. On this motion to vary, the defendants sought their full indemnity costs in the amount of $12,538.46. Given the unproven allegations of fraud levied at the defendants, I find this level of costs appropriate and the amount reasonable.
[10] The Plaintiffs appealed from Master Jolley’s second decision. Justice Koehnen heard the appeal. He found that the appeal was “entirely without merit”. He awarded full indemnity costs, as did Master Jolley. It is worth reproducing Justice Koehnen’s comments about the appeal (unreported decision dated August 21, 2019) at paras. 48-41:
As noted earlier the appeal was entirely devoid of merit. The factum filed on appeal raised on identifiable error of law, discretion, or fact. In oral argument, Plaintiff’s counsel did not identify any error or even something that might be arguable as an error. The matters he submitted were errors, simply made no sense.
This was not a case of a party making a submission that something was an error and a judicial officer having a different view. This is a case where the arguments were entirely without foundation and made no sense. I can only infer that the Plaintiffs do so to avoid implementing the inspection order of Master Jolley.
The appeal was completely frivolous. Frivolous or not, the defendants were still required to devote significant time to it as was I. The defendants’ time leaves them out of pocket. My time amounts to a waste of public resources. While everyone has their right to their day in court, that right is predicated upon arguing about a real issue, not simply taking up public resources to avoid implementing a court order.
[11] Justice Koehnen ordered that the Plaintiffs pay full indemnity costs.
[12] I would have thought that after smack-downs by a Master and a Superior Court judge, the Plaintiffs would have shown some contrition and facilitated the inspection. After all, it was their lawsuit. I also would have thought that since the quality of the limestone was the key issue, the Plaintiffs would have recognized that an inspection by the Defendant’s expert was necessary and inevitable. Instead, the Plaintiffs doubled down on intransigence and blamed the Defendants. There are several examples of this behaviour.
[13] After the appeal period expired counsel for the Plaintiffs refused to pay costs, as ordered, unless the Defendants signed a “satisfaction piece”. The Defendants found this demand puzzling, given that nothing in the Rules of Civil Procedure requires a party to sign a “satisfaction piece”. Nonetheless, the Defendants were willing to do so and signed a “satisfaction piece”.
[14] The orders of Master Jolley and Justice Koehnen did not say “the Plaintiffs will pay costs once the Defendants sign a document to the satisfaction of the Plaintiffs”. The orders required the payment of costs, period. What should have been forthcoming was a cheque, or a bank draft, or a transfer of some kind without any conditions whatsoever.
[15] I find that this demand for a “satisfaction piece” was a form of game-playing by the Plaintiffs. The Defendants sent a process server to pick up the bank draft and deliver a copy of the “satisfaction piece”. The Plaintiff’s counsel’s law clerk sent the following email to the junior counsel for the Defendants:
Your process server was just here and unfortunately he did not have an original signed Satisfaction Piece with him and I could not give him the bank draft. Please have the original signed Satisfaction Piece delivered to our office. We require an original in order to file same with the Court. The Court will not accept a scanned/copied version.
[16] Under the Rule 539 of the former Rules of Practice a satisfaction piece was required to acknowledge satisfaction of a judgment. The satisfaction piece was to be filed in the court office using Form 138.
[17] The only problem with requiring a signed copy of the “satisfaction piece” was that the Rules of Practice were replaced by the Rules of Civil Procedure in 1985. In other words, the Plaintiffs made a demand under a Rule that had not been in force for well over thirty years. No “satisfaction piece” was required. No original signed copy of a “satisfaction piece” has had to be filed in court since 1985. Moreover, under the old Rules of Practice a “satisfaction piece” applied to a judgments, not to costs orders.
[18] When Defendant’s counsel wrote to Plaintiff’s counsel querying the nature of a “satisfaction piece”, the Plaintiff’s counsel wrote back on October 17, 2019:
A satisfaction piece is not unusual and is provided for in the Rules.
[19] I find it very difficult to believe that Plaintiff’s counsel believed that the pre-1985 Rules of Practice were still in force in 2019. I note this was after Justice Koehnen’s negative comments about the Plaintiffs’ appeal. As well, I checked the electronic case history report that logs documents filed in an action. It is not a perfect record, but it is usually reasonably accurate. There is no sign that the Plaintiffs ever filed a “satisfaction piece” with the Court. I infer that the Plaintiffs continued to play games.
[20] Perhaps Plaintiff’s counsel was concerned that his clients might pay costs and the Defendants counsel might deny that they had been paid. In that unlikely event, I have no doubt that cancelled cheques, bank drafts, electronic funds transfer forms, or other forms of proof of payment could have easily been recovered and placed into evidence. Such financial documents are entered into evidence in this court in family, civil, and criminal matters every single day.
[21] The Defendants also made the entirely sensible suggestion to Plaintiff’s counsel that the $6000 for the inspection be set off against the approximately $37,000 in costs owed by the Plaintiffs. Plaintiff’s counsel, in a letter dated November 12, 2019 indicated that to do so would be inconvenient and impose an obligation on the Plaintiffs. This was nonsense. A set-off made sense; exchanging bank drafts did not.
[22] The Defendants continued to try to schedule an inspection. The Plaintiffs continued to throw up obstacles to that inspection. Plaintiff’s counsel insisted that the Defendants had no right to an inspection. That was because the Defendants had failed to conduct the inspection by April 30, 2019 as required by the order of Master Jolley. The Defendants were therefore out of time. Master Jolley rejected that argument at para. 14 of her second decision:
Lastly, I am certainly not satisfied that the defendants' failure to attend at the plaintiffs' property by 30 April 2019, the date set out in my order, is some demonstration either that the defendants were not serious about the inspection or have waived their right to it. It was a precondition of the inspection that the defendants deliver to the plaintiffs an ISO certification concerning the lab which would do the testing. The defendants provided that information to the plaintiffs on 28 March 2019, in plenty of time to have the inspection done by April 30. The plaintiffs immediately wrote to say that they were going to seek to vary my inspection order based on the defendants' "failure to prove they had purchased the limestone on the plaintiffs' property". I expect the plaintiffs would have taken a dim view had the defendants attempted to access their property in the face of that letter, even though the plaintiffs did not move to stay the order pending the hearing of this motion. The defendants are not to be faulted for not attempting to use my order to access the plaintiffs' property after Mr. Starkman's letter of 28 March 2019.
[23] Notwithstanding Master Jolley’s emphatic rejection of this nonsensical argument, and Justice Koehnen’s dismissal of the frivolous appeal from it, Plaintiff’s counsel continued to rely on it in correspondence with the Defendant’s counsel. For example, in a letter dated October 17, 2019 Plaintiff’s counsel wrote:
The inspection order requires that the inspection take place before April 30, 2019. You took no steps to conduct the inspection and have not paid the Plaintiffs the monies required to be paid as a precondition to the inspection. The time has elapsed for your client to conduct the inspection.
[24] In fact, the Plaintiffs failed to comply with Master Jolley’s order to facilitate the inspection. Plaintiff’s counsel continued to make the startling argument that the Defendants, not they, were in breach – despite the findings of Master Jolley and Justice Koehnen. I leave aside the fact that the Defendants had tried on several occasions to pay the $6000 for remediation but the Plaintiff’s counsel had found multiple reasons to reject the funds.
[25] Correspondence between the Plaintiff and Defendant continued fruitlessly as the Defendants tried to schedule an inspection, and the Plaintiffs threw obstacles in the way. Eventually the Defendants decided that had had enough. They brought a motion for, among other things, an order to dismiss or stay the action as a result of the “failure and/or refusal of the Plaintiffs to comply with the Orders of Master Jolley dated February 12, 2019 and May 9, 2019 and the Endorsement of Justice Koehnen dated August 21, 2019.”
[26] The motion came before me on January 24, 2020. I made the following endorsement:
For reasons to follow, the motion is granted. The action is dismissed pursuant to Rule 60.12(b). In my view, the litigation has reached the point where it is clear that the plaintiffs have no intention of permitting an inspection. The defendant will file a Notice of Abandonment (on a without costs basis) of the counterclaim. Costs submissions on the motion and the action will be submitted in writing within 10 days of the release of my reasons for the plaintiffs, and 10 days after that for the defendant.
[27] Rule 60.12 provides:
60.12 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 is just.
[28] Rule 60.12 exists to determine an action where a party has failed to comply with interlocutory orders of the Court. The purpose of the Rule is instrumental: the Court has the power to end or stay an action (or strike a defence) essentially as an enforcement mechanism. As Nordheimer J. (as he then was) observed in Botton v. Vroom, 2001 CarswellOnt 2382, [2001] O.J. No. 2737 at para. 26:
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.
[29] Nordheimer J. further went on to quote Southin J.A. of the British Columbia Court of Appeal:
… the court has to be alive to the possibility that its process is being abused by a party. In Household Trust Co. v. Golden Horse Farms Inc. (1992), 65 B.C.L.R. (2d) 355 (B.C.C.A.) Southin J.A. said, at pp. 361-362:
In my opinion, the Supreme Court of British Columbia has an inherent jurisdiction and a corresponding duty to exercise that jurisdiction to protect a petitioner or plaintiff who seeks relief in that Court from proceedings by a defendant who is vexatiously abusing the process of the court. That it is a jurisdiction to be exercised with great caution, I have no doubt. But not to exercise it where there is no other way to bring reason into proceedings is, in effect, to deprive the plaintiff or petitioner of justice according to law. The court if it fails to act becomes but a paper tiger.
[30] In Rana v. Unifund Assurance Company, 2016 ONSC 2502, Dunphy J. set out the key principles for the exercise of discretion under Rule 60.12 at para. 50. I reproduce the most salient principles:
a. Where there has been non-compliance with an order of the court, the court should be alive to the possibility that its process is being abused; failing to act may deprive the moving party of justice according to law and risks rendering the court a paper tiger: Botton v. Vroom;
d. The court may have regard to a pattern of unnecessary and unreasonable steps taken in the proceeding, including appealing numerous orders without chance of success or knowing the risk thereby imposing costs upon the other party: Visic v. University of Windsor, 2013 ONSC 2063;
e. If the orders of the court are "cavalierly ignored" and if a litigant "continuously fails to comply with her obligations as a litigant and then fails to abide by the costs consequences attendant upon that behavior, the court is justified in bringing some finality to the action": Burrell v. Peel, 2007 CarswellOnt 6992 per Master Dash; affirmed 2020 ONSC 1387.
[31] Striking out a defence (or dismissal of an action), however, is a remedy that should only be imposed after providing the defaulting party with an opportunity to cure the default: Bell ExpressVu Ltd. Partnership v. Torroni, 2009 ONCA 85 at para. 35.
[32] Many of the cases decided under this section concern self-represented litigants. Many of those litigants have failed to pay costs awards and claimed impecuniosity. As Myers J. observed in Badaran v. Tarion Warranty Corp., 2014 ONSC 6870 at para. 7: “Impecuniosity is not a shield for unreasonable conduct of litigation…” The arguments often centre around whether the self-represented litigants can pay and are just abusing the Court’s process, or really are impecunious.
[33] That is not the case here. Impecuniosity is clearly not an issue for the Plaintiffs. They are homeowners who contracted to buy high-quality Italian limestone and were able to pay substantial costs awards.
[34] In my view, the behaviour of the Plaintiffs disentitles them to access to the court in order to deal with their claim. The one thing that is necessary for the resolution of this dispute is the determination of the nature of the limestone. The one thing that is necessary for that determination is access to the limestone for testing by the Defendants. Frankly, nothing else in the lawsuit is of importance. As Justice Koehnan pointed out, access to the paper trail for the alleged purchase of limestone in bulk will not resolve the ultimate question.
[35] The Plaintiffs have done whatever they could to prevent the Defendants from carrying out an inspection. They originally forced the Defendants to go to court to obtain an order when it was obvious that an inspection order would be granted. Then, instead of facilitating the inspection, they threw up more obstacles. They forced the Defendants to go back to court for another motion before Master Jolley, one completely without merit. It is their right to appeal, of course, but it was not their right to bring a frivolous appeal.
[36] I find that no matter how many times the Plaintiffs are told that they must permit an inspection, they will not do so – otherwise, they would have done so after Justice Koehnen’s decision. I draw the inference that they have no case and they must know it.
[37] The motion, as I said, is granted. The action is dismissed. As I mentioned in my endorsement of January 24, 2020, costs submissions on the motion and the action will be submitted in writing within 10 days of the release of my reasons for the plaintiffs, and 10 days after that for the defendant.
R.F. Goldstein J.