COURT FILE NO.: CV-17-581825
DATE: 2021 07 23
SUPERIOR COURT OF JUSTICE - ONTARIO
IN THE MATTER OF the Construction Act, RSO 1990, c C.30, as amended
RE: NORTHSTONE HOMES LTD., Plaintiff
- and -
XIAOHONG WU and ROYAL BANK OF CANADA, Defendants
BEFORE: Master Todd Robinson
COUNSEL: F. Souza, for the plaintiff
PARTIES: X. Wu, in person (not appearing)
HEARD: June 18, 2021 (by videoconference)
REASONS FOR DECISION
Overview
[1] Trial in this action is scheduled for September 2021. All primary affidavit evidence-in-chief in support of the claim and counterclaim was to have been exchanged by April 30, 2021. Disputes over admissibility of unproduced documents or refused evidence were anticipated, so this hearing was pre-emptively scheduled to hear motions to strike affidavit evidence or motions for leave to tender evidence refused on discovery.
[2] Northstone Homes Ltd. (“Northstone”) served its affidavits and will-say statements by the ordered deadline of March 31, 2021. Xiaohong Wu failed to deliver any affidavit evidence-in-chief in defence of Northstone’s claim or in support of his counterclaim by the ordered deadline of April 30, 2021. Mr. Wu remains in breach of my order.
[3] Although represented by counsel through most of this action, Mr. Wu is now self-represented, having served a notice of intention to act in person on April 1, 2021. Mr. Wu has expressed his intention to oppose Northstone’s claim at trial. However, he has provided no indication to Northstone or the court regarding if and when he intends to comply with my order.
[4] Northstone moves to strike Mr. Wu’s statement of defence and counterclaim in its entirety and for judgment on its claim. Northstone relies on Mr. Wu’s non-compliance with my orders, non-disclosure of relevant documents, and refusal to answer relevant discovery questions (particularly regarding Mr. Wu’s set-off defences and counterclaim). Mr. Wu has filed no responding materials, provided no position on the motion, and did not ultimately appear.
[5] At the hearing, Mr. Wu’s former counsel, without instructions, sought an adjournment. He had attended the hearing solely because Mr. Wu has yet to formally file his notice of intention to act in person. Northstone opposed. I denied the adjournment request for reasons given orally at the hearing and outlined in my endorsement of that date. Mr. Wu’s former counsel was thereafter excused at his request, since he was no longer retained and had no instructions.
[6] Prior to the adjournment request, Mr. Wu’s former counsel had facilitated a call with Mr. Wu’s son (who was with Mr. Wu at the time). I gave Mr. Wu an opportunity to attend himself, or have someone else attend on his behalf. Following the denied adjournment request, argument commenced and continued until the early afternoon, at which point I reserved my decision. Neither Mr. Wu nor anyone on his behalf attended.
[7] I have determined that Xiaohong Wu’s set-off defence and counterclaim should be struck. However, I have also determined that it would be neither fair nor just to deny Mr. Wu any defence to Northstone’s claim, particularly where there are triable issues on the validity of Mr. Wu’s termination of the contract, the scope of work completed, and the value of services and materials supplied.
[8] Trial will accordingly proceed, and Mr. Wu will be afforded one final opportunity to comply with my order to serve his affidavit trial evidence. If he does not, then his role at trial will be limited to cross-examination, objections, and making submissions.
Analysis
Should Xiaohong Wu’s set-off defence and counterclaim be struck?
[9] Northstone moves under Rule 60.12 of the Rules of Civil Procedure, RRO 1990, Reg 194, which provides me with discretion to stay or dismiss a proceeding, strike a defence, or make such other order as is just where a party fails to comply with an interlocutory order. Northstone concedes that my discretion to strike a pleading should only be exercised when the circumstances warrant it and as a “last resort”, but argues that Mr. Wu has been given every opportunity to provide necessary disclosure and come before the court to seek relief permitting his defence and counterclaim to continue, yet has not done so.
[10] Mr. Wu has already breached various court orders in the course of this reference. At the hearing for trial directions on February 2, 2021, Northstone’s asked that Mr. Wu be barred from testifying at trial given the extent of his refusals to written discovery questions. I did not grant that relief, but specifically put Mr. Wu (through his counsel) on notice that his refusals could result in Mr. Wu not being able to lead the refused evidence at trial.
[11] Northstone correctly points out that, notwithstanding my warning, Mr. Wu has failed to seek leave to tender refused evidence despite this hearing being scheduled, in part, for that purpose. Mr. Wu has also failed to deliver ordered trial evidence, and has failed to take any steps to remedy his breaches or even take a position on Northstone’s motion.
[12] Mr. Wu’s pleaded position is, in brief, that Northstone breached their construction contract, was validly terminated, charged Mr. Wu for unapproved extras that are not recoverable (although admits he agreed to $200,000 in extras), and is liable for the costs of rectifying deficiencies and completing the contract scope of work. Since Mr. Wu has tendered no responding evidence on this motion, and has tendered no trial evidence, the means by which he intends to prove these allegations is unknown.
[13] Leave for documentary and oral discoveries was granted on consent. Nevertheless, despite repeated opportunities to comply with disclosure obligations, Mr. Wu has failed to produce documents and answer questions directly relevant to his set-off defence and counterclaim.
[14] The Scott Schedule produced by Mr. Wu identifies 377 items of allegedly incomplete work that appear to have been completed by Mr. Wu’s completion contractor, Beta Construction Inc. I agree with Northstone that all of the listed items seem to be in the nature of incomplete work, not deficiencies. Evidence before me is undisputed that Mr. Wu has failed to produce any documentary support for deficiencies in Northstone’s work.
[15] Mr. Wu has further refused the vast majority of questions put to him by written examination for discovery, including what appears to be all questions about alleged deficiencies and incomplete work. I acknowledge that 4,086 written questions were put to him, but examination of Mr. Wu by written questions was agreed by the parties and it appears that a large portion of the questions asked were the same series of questions about each line item of alleged incomplete work outlined by Mr. Wu in the Scott Schedule.
[16] Significantly, clearly relevant questions regarding the location and particulars of incomplete work identified in the Scott Schedule, alleged deficiencies, and identification and production of supporting documentation were refused with the statement, “I do not believe that this is relevant to this litigation.” No effort has been made to rescind those refusals. Mr. Wu’s default in his disclosure obligations has been compounded by his failure to serve ordered trial evidence supporting his defences and counterclaim, failure to provide any explanation for that breach, and failure to seek leave to tender refused evidence.
[17] Northstone argues that, in these circumstances, fairness and respect for the integrity of the administration of justice requires that Mr. Wu’s defence and counterclaim be struck and judgment granted on Northstone’s claim. In support of that position, I was directed to the recent decision of my colleague, Master Wiebe, in New Generation Woodworking Corp. v. Arviv, 2021 ONSC 228. In Arviv, Master Wiebe considered the failure of the defendant to serve affidavit evidence, along with other misconduct during the litigation, and ultimately struck the defendant’s set-off claims and counterclaim.
[18] Master Wiebe accepted that Rule 52.01(2)(b) applied on the motion in addition to Rule 60.12(b). Rule 52.01(2)(b) provides that the court may dismiss a defendant’s counterclaim and allow the plaintiff to prove its claim where a defendant fails to appear at trial. My colleague held that the rule applied since trial had already effectively begun with service of the affidavit evidence-in-chief of the plaintiff (and other trial materials). He further held that the defendant’s failure to tender ordered trial evidence amounted to a failure to appear at trial for the purpose of that rule: Arviv, supra at para. 21.
[19] I agree with the view of my colleague and am satisfied that trial as contemplated in Rule 52.01 had effectively commenced upon service of Northstone’s trial affidavit evidence. Xiaohong Wu’s failure to tender trial affidavit evidence-in-chief as ordered is equivalent to failing to attend at trial. Rule 60.12(b) and Rule 52.01(2)(b) are accordingly both applicable. Each of them grants me discretion to strike Mr. Wu’s defence and counterclaim, in whole or in part.
[20] Striking a pleading is a severe penalty of last resort. It should only be granted when a party’s failure to comply with its obligations and the rules prevents the orderly and fair hearing of the matter: Rock Precast Erectors Ltd. v. Canadian Precast Limited, 2012 ONSC 5924 (DivCt) at para. 5. I must also consider my statutory directive to ensure that the conduct of this lien action is as far as possible of a summary character having regard to the quantum and issues in dispute: Construction Lien Act, s. 67(1) (which applies by operation of s. 87.3 of the Construction Act).
[21] Xiaohong Wu has failed to pursue his set-off defence and counterclaim in any meaningful way. He has not complied with disclosure obligations, refused relevant questions on discovery, and has provided no indication of when, if at all, he intends to provide evidence supporting his positions on deficiencies, incomplete work, and other claims. Trial has effectively commenced with delivery of Northstone’s trial evidence. In these circumstances, there cannot be an orderly or fair adjudication of Mr. Wu’s set-off defence or counterclaim. It is appropriate that, at this point, they be struck.
Should Xiaohong Wu’s defence be struck and judgment issued?
[22] The broader question still remains to be addressed: has Mr. Wu by his conduct demonstrated an intention not to further engage in this proceeding or defend the action, such that he should be denied his right to defend at all?
[23] As discussed by the Divisional Court in Rock Precast, supra at para. 14, self-represented parties are often extended courtesies and provided direction on keeping their case on track, when circumstances permit, but they are not free to disregard court orders or procedural rules with impunity. Tolerance and sympathy wane with ongoing defaults in procedural obligations and breaches of court orders.
[24] Northstone relies on Rock Precast in arguing that Xiaohong Wu’s failure to comply with his disclosure obligations and court orders warrants striking his pleading entirely, particularly given the number of opportunities he has been given and in the face of the pending trial.
[25] Mr. Wu elected to become self-represented on April 1, 2021. It appears he returned to Canada from China in May 2021, after which he was personally served with Northstone’s motion materials and trial materials at his house. He has failed to serve ordered trial evidence, failed to provide any indication of when compliance is anticipated, failed to advise Northstone of his position on this motion, and failed to attend the motion hearing after being afforded an opportunity to relay a position or attend.
[26] Mr. Wu’s conduct since electing to represent himself demonstrates what appears to be a laissez-faire attitude to the proceeding, court orders, and the court’s processes. When denying the adjournment request of this motion made by Mr. Wu’s former counsel, I commented on Mr. Wu’s apparent indifference. I stated in my endorsement, “In short, there is [no] basis upon which to justify extending the requested indulgence of a last-minute adjournment to a defendant that frankly appears not to be taking this motion seriously.”
[27] I am mindful, however, that perception can be skewed by your vantage point. Although there is evidence before me that Xiaohong Wu can speak some English, it is undisputed that English is not his first language. He is not fluent. He has become self-represented at a point in the litigation where summary trial evidence is being prepared. Trial preparation is neither simple nor straightforward, perhaps even more so for a self-represented litigant.
[28] I accept that Mr. Wu is seeking new counsel (as I was advised by his former counsel). During the brief submissions made by Mr. Wu’s son, I was advised that Mr. Wu is unfamiliar with the court and its processes, and that Mr. Wu’s mother was suffering from a medical condition requiring Mr. Wu to return immediately to China.
[29] In Arviv, the defendant’s conduct showed much greater disregard for the court process than that of Mr. Wu. Master Wiebe specifically commented that the defendant in that case demonstrated “arrogance and recalcitrance” (para. 17). Nevertheless, Master Wiebe struck only the defendant’s set-off claim and counterclaim, not his defence. In doing so, Master Wiebe found no evidence that the plaintiff would be prejudiced by being required to prove its case with its already-filed evidence.
[30] Xiaohong Wu has failed to put any evidence of his current circumstances before the court, let alone offer any explanation for breaching my trial timetable order. However, in all the circumstances, I am not satisfied that it would be fair or just to strike Mr. Wu’s defence entirely without first providing one final opportunity to remedy his breach. I see no prejudice to Northstone from permitting Mr. Wu the opportunity to dispute Northstone’s claim and satisfy the court that the contract termination was valid or that some or all of Northstone’s claim cannot be made out. The trial hearing is not scheduled to commence for nearly two months.
[31] Taking into account that Mr. Wu has already had some four months to retain new counsel (if that is his intention) and nearly three additional months to serve his trial evidence beyond the ordered deadline, I am providing Mr. Wu with three additional weeks (i.e., until August 13, 2021) to comply with my order in paragraph 6 b) (ii) of Trial Directions #5 regarding his trial evidence. Given non-compliance with required production obligations and refusal of discovery questions, Mr. Wu shall not tender evidence on any matter for which he has failed to make production or refused production or answers during discoveries, including refused questions about alleged incomplete work outlined in the Scott Schedule.
[32] For greater certainty, if Mr. Wu fails to comply and serve his trial evidence by August 13, 2021, he shall be deemed to have elected to tender no responding evidence at trial in support of his defences. He will still be entitled to participate at trial to cross-examine Northstone’s witnesses, make objections, and make submissions.
[33] I am reinforced in my view that it is in the interests of justice to permit Mr. Wu the opportunity to defend Northstone’s claim, regardless of whether he tenders his own trial evidence, by the nature of triable issues for determination in Northstone’s claim. These include the extent and scope of work included in the agreed fixed base contract price; the nature and extent of changes and extras to the contract; actual or deemed authorization and approval for changes and extras; and the amount properly chargeable and recoverable for completed base contract scope and approved changes and extras. Mr. Wu should be permitted to challenge Northstone’s evidence on those matters through cross-examination and submissions, even if he ultimately elects to tender no evidence himself.
[34] In Trial Directions #5, I ordered further evidence-in-chief from Northstone in defence of the counterclaim. Since I have struck Mr. Wu’s set-off defence and counterclaim, no such further affidavit evidence is needed. The balance of the trial timetable in Trial Directions #5 shall accordingly continue to apply without amendment.
Costs
[35] I have not granted judgment, so Northstone has only been partly successful on this motion. Nevertheless, in my view, Northstone has still been substantially successful and is entitled to costs. In obtaining an order striking Mr. Wu’s set-off defence and counterclaim, the issues for trial have been significantly narrowed and the trial inevitably shortened.
[36] Northstone seeks its substantial indemnity costs of the motion in the amount of $20,965.30. In the alternative, Northstone seeks partial indemnity costs of $13,950.08.
[37] Costs of this motion are governed by s. 86 of the Construction Lien Act, which provides me with broad discretion to award costs against Mr. Wu, including on a substantial indemnity basis as sought by Northstone. Rule 57.01 of the Rules of Civil Procedure also applies in the court’s exercise of its discretion under s. 86. It outlines non-mandatory and non-exhaustive considerations in assessing costs. A costs award here should reflect what I view as a fair and reasonable amount that should be paid by Mr. Wu rather than any exact measure of the actual costs to Northstone: Zesta Engineering Ltd. v. Cloutier, 2002 CanLII 25577 (ON CA), [2002] OJ No. 4495 (CA) at para. 4; Davies v. Clarington (Municipality), 2009 ONCA 722 at para. 52. My overall objective is to fix an amount that is fair and reasonable in this particular motion, having regard to the expectations of the parties on the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 OR (3d) 291 (CA) at paras. 26 and 38.
[38] I accept that only a small portion of Northstone’s claimed motion costs relate to the judgment relief. Trial affidavits (listed in Northstone’s notice of motion) were primarily relied upon by Northstone to support its arguments for judgment. I have considered the trial affidavits to also be affidavits on this motion, but costs of those affidavits are not claimed in Northstone’s costs outline. I accept that the motion costs claimed predominantly relate to the relief granted.
[39] Given the nature and importance of the motion, I find the hours and rates claimed in Northstone’s costs outline to be reasonable and proportionate. I agree that an affidavit outlining the procedural history was necessary, as was time spent reviewing trial briefs to direct me to relevant portions. The legal research performed and factum prepared were reasonably necessary and helpful. Disbursements claimed are modest and reasonable.
[40] Northstone argues that Mr. Wu’s breaches of court orders and conduct demonstrates disrespect to the court and its processes, making this case appropriate for substantial indemnity costs. While I am not satisfied that Mr. Wu’s conduct demonstrates genuine disrespect to the court or its processes, his ongoing failure to comply with disclosure obligations and court orders has exacerbated costs in this lien action, which is to be as far as possible of a summary character: Construction Lien Act, s. 67(1). Indeed, a large portion of litigation steps to this point have focused on the set-off defence and counterclaim allegations.
[41] I find that substantial indemnity costs are appropriate. This motion was necessitated entirely by Mr. Wu’s breaches of court orders and continuing non-compliance with his disclosure obligations. Mr. Wu was aware of the hearing, and was afforded an opportunity to attend, yet did not do so, despite his son advising me that Mr. Wu wants to proceed to a trial. Mr. Wu has staunchly maintained his set-off claim and counterclaim while failing entirely to do what is necessary to maintain or substantiate them. Such conduct is contrary to the summary nature of lien proceedings as well as the intent behind the provisions of the Construction Lien Act that permit such claims to be advanced by a defendant in response to a lien claim.
[42] I find that the fair and reasonable amount of costs payable by Xiaohong Wu to Northstone in respect of this motion is $16,000 plus HST, on a substantial indemnity basis, plus $114.63 in disbursements, for a total of $18,194.63, payable within thirty (30) days.
Disposition
[43] I accordingly order as follows:
(a) Xiaohong Wu’s set-off defence and counterclaim are hereby struck.
(b) Xiaohong Wu shall comply with my order in para. 6 b) (ii) of Trial Directions #5 regarding his evidence-in-chief at trial by August 13, 2021, failing which Mr. Wu shall be deemed to have elected to tender no responding evidence in support of his defences. This deadline is peremptory against Mr. Wu.
(c) Xiaohong Wu is hereby denied leave to tender at trial any undisclosed document or evidence on matters for which discovery was refused.
(d) The timetable for trial materials in ordered in Trial Directions #5 shall continue to apply, save and except that delivery of further affidavit evidence by Northstone in para. 6 b) (iii) thereof is hereby set aside.
(e) Xiaohong Wu shall pay to Northstone its costs of this motion, fixed on a substantial indemnity basis in the amount of $18,194.63, including of HST and disbursements, within thirty (30) days.
(f) This order is effective without further formality.
MASTER TODD ROBINSON
DATE: July 23, 2021