Superior Court of Justice - Ontario

COURT FILE NO.: CV-20-652329

RELEASED: 2021/10/22

RE: Leonardo Teixeira Cartage Movers v. Bad Boy Furniture Warehouse Limited

BEFORE: Associate Justice Graham

HEARD: October 18, 2021

COUNSEL: G. Sills for the plaintiff T. Totan for the defendant (moving party)

REASONS FOR DECISION

(Re: defendant’s motion for costs of a discontinued action)

[1] On May 22, 2019, Leonardo Teixeira issued a statement of claim (action no. CV-19-620378) against Bad Boy Furniture Warehouse Limited (“Bad Boy”) claiming damages for wrongful dismissal on the basis that he was an employee of Bad Boy. On December 1, 2020, Leonardo Teixeira Cartage Movers (“LTC Movers”) issued the statement of claim in this action, again naming Bad Boy as a defendant and claiming, in the alternative to Leonardo Teixeira’s personal wrongful dismissal claim, that LTC Movers was an employee or a dependent contractor of Bad Boy. I will refer to these two actions as “the 2019 Teixeira action” and “the 2020 LTC Movers action.”

[2] On January 15, 2021, following the commencement of the 2020 LTC Movers action, and ensuing correspondence between counsel, LTC Movers agreed to discontinue its action and on March 2, 2021 served a Notice of Discontinuance. Bad Boy then requested costs of $1,000.00 in respect of the discontinuance of the 2020 LTC Movers action, and LTC Movers refused to pay costs. Bad Boy now moves under rule 23.05(1) for its costs of this now discontinued action. This rule is set out below.

[3] The relevant steps between the issuing of the statements of claim in the two actions are:

May 22, 2019: Statement of claim issued in the 2019 Teixeira action.

July 19, 2019: Service of statement of defence in the 2019 Teixeira action.

November, 2019: Exchange of unsworn affidavits of documents in the 2019 Teixeira action.

January 7, 2020: Parties attend mediation in the 2019 Teixeira action.

January 7, 2020: Plaintiff Leonardo Teixeira sets the 2019 Teixeira action down for trial by serving a notice of readiness for pre-trial conference.

January 13, 2020 – June 23, 2020: Bad Boy attempts on six occasions to have Mr. Teixeira provide a sworn affidavit of documents and to examine him for discovery. On June 23, 2020, Mr. Teixeira’s counsel said that he was “working on it”.

September 24, 2020: Mr. Teixeira’s counsel served a sworn affidavit of documents and requested Bad Boy’s consent to an amendment to the statement of claim in the 2019 Teixeira action to add LTC Movers as a plaintiff on the basis that it was a dependent contractor of Bad Boy.

November 27, 2020: Counsel for Bad Boy informed counsel for Mr. Teixeira that they would not consent to the proposed amendments because Mr. Teixeira had set the 2019 Teixeira action down for trial and was therefore precluded by rule 48.04(1) from initiating or continuing “any motion or form of discovery without leave of the court.”

December 1, 2020: LTC Movers issued its statement of claim in the 2020 LTC Movers action. On November 27, 2020, plaintiffs’ counsel had sent a copy of this (presumably unissued) statement of claim directly to Bad Boy and not to Bad Boy’s counsel.

[4] Counsel for the parties then exchanged emails on December 14, 2020. Bad Boy’s counsel took exception to Teixeira’s counsel sending the LTC Movers statement of claim directly to Bad Boy, objected to the issuing of this second statement of claim as an abuse of process after Teixeira had set the 2019 action down for trial, and asked Teixeira’s counsel to discontinue the 2020 LTC Movers action failing which he would move to strike it. Teixeira’s counsel responded that he commenced the 2020 action owing to the pending expiry of the limitation period and offered his consent to a motion consolidating the two actions.

[5] On December 21, 2020, Bad Boy’s counsel replied with an even longer email reiterating his objection to Teixeira’s attempts to add a new plaintiff and bring motions after setting the action down for trial, disputing that there was any impending limitation period, opposing the suggestion that the two actions be consolidated, and restating his intention to bring a motion to strike the statement of claim in the 2020 LTC Movers action.

[6] On the same date, plaintiffs’ counsel responded that he did not want to waste time litigating the issue over email and asked Bad Boy’s counsel for his suggestion as to how to resolve the matter.

[7] This exchange was followed by the correspondence that is at the heart of the dispute on this motion.

[8] By email of January 7, 2021, Bad Boy’s counsel wrote to plaintiffs’ counsel as follows:

“For all of the reasons stated in my email below dated December 21, 2020, Bad Boy Furniture will not consent to “a motion consolidating” Mr. Teixeira’s existing action with Leonardo Teixeira Cartage Movers’ new action.

Bad Boy Furniture Warehouse is prepared to agree to the following:

If you:

1. discontinue Leonardo Teixeira Cartage Movers’ new action against Bad Boy Furniture Warehouse Limited; and

2. you rescind Mr. Teixeira’s Notice of Readiness for Pre-trial Conference dated January 7, 2020 in Mr. Teixeira’s existing action,

Bad Boy Furniture Warehouse Limited will consent to the amendments underlined in the attached Amended Statement of Claim in Mr. Teixeira’s existing action.

Please contact me if you have any questions, comments or concerns.”

[9] By email of January 15, 2021, plaintiffs’ counsel responded:

“Mr. Teixeira agrees to your proposal below [referring to Bad Boy’s counsel’s January 7, 2021 email “below” in the email chain].

A notice of discontinuance will follow, and we will rescind the previous Notice of Readiness.

Given that your client has already determined that it has no potential liability in this action, I would recommend that we agree the mediation previously held will count for Rule 24.1 purposes. However, the decision is up to you. If you feel otherwise, let me know.”

[10] The next correspondence was as follows:

March 2, 2021: Plaintiffs’ counsel sent Bad Boy’s counsel the Notice of Discontinuance in the 2020 LTC Movers action.

March 8, 2021: Bad Boy’s counsel requested costs of $1,000.00 for having to review and respond to the 2020 LTC Movers action, failing which they would bring this motion under rule 23.05.

March 8, 2021: Plaintiffs’ counsel responded to the request for costs stating “obviously, that is not happening” and that Bad Boy’s counsel’s email of January 7, 2021 contained “no mention of costs and if there had been we would have never agreed.”

March 11, 2021: Bad Boy’s counsel responded that his client had not agreed to a discontinuance of the 2020 LTC Movers action without costs, or to waive its rights under rule 23.05(1). He proposed that this motion be heard in writing.

March 11, 2021: Plaintiffs’ counsel responded that he would not consent to the motion being brought in writing.

[11] The applicable Rules of Civil Procedure are 23.01(1) and 23.05(1):

23.01(1) A plaintiff may discontinue all or part of an action against any defendant,

(a) before the close of pleadings, by serving on all parties who have been served with the statement of claim a notice of discontinuance (Form 23A) and filing the notice with proof of service;

(b) after the close of pleadings, with leave of the court; or

(c) at any time, by filing the consent of the parties.

23.05(1) If all or part of an action is discontinued, any party to the action may, within thirty days after the action is discontinued, make a motion respecting the costs of the action.

[12] As stated above, the defendant Bad Boy now moves under rule 23.05(1) to recover its costs of the 2020 LTC Movers action.

[13] After the exchange of materials with respect to its motion for costs of the discontinuance of this action, Bad Boy brought a supplementary motion to strike 16 paragraphs from the responding affidavit of plaintiffs’ counsel Jonathan Pinkus on the basis that he had put himself in the position of being both an advocate and a witness in the action. Subsequent to the service of Bad Boy’s supplementary motion record, the plaintiff served an affidavit of a legal assistant (the Chowdhury affidavit) attaching as exhibits the documents on which they rely on this motion. Plaintiffs’ counsel was content to rely solely on the Chowdhury affidavit and counsel for Bad Boy did not object to the use of that affidavit or the plaintiffs’ reliance on the exhibits. On this basis, the parties proceeded to argue Bad Boy’s motion for costs.

Submissions of the defendant

[14] Bad Boy submits that their counsel’s email of January 7, 2021 proposing a resolution of the issues arising from the commencement of the 2020 LTC Movers action did not address the costs of the discontinuance of that action and did not prelude them from bringing this motion seeking costs under rule 23.05(1).

[15] Bad Boy relies on the decision of Master Dash in Marupov v. Metron Construction, 2013 ONSC 609. The plaintiffs in Marupov had fallen from the 13th floor of an apartment building when the scaffolding on which they were working collapsed. They named three defendants, including the defendant Winsafe, as suppliers of the scaffold. Another defendant eventually admitted that they had supplied the scaffold in issue.

[16] The defendant Winsafe informed the plaintiffs that it “was prepared to consent to a discontinuance against it without costs but conditional on the delivery of a release” (Marupov, para. 6). The plaintiffs served a notice of discontinuance but neither provided nor otherwise addressed the issue of the requested release. When counsel for Winsafe subsequently provided a draft release for the plaintiffs’ signature, plaintiffs’ counsel denied that the parties had settled the matter or that there was any agreement to provide a release, and stated that the discontinuance of the action voided the need for a release. Winsafe then moved for costs of the discontinued action under rule 23.05(1).

[17] In his decision, Master Dash stated (at paras. 11 and 15):

11 I am of the view that since Winsafe’s consent was conditional on a release, and the plaintiffs had yet to agree to provide a release since no agreement had been reached with Winsafe as to the escrow terms for a release, the notice of discontinuance was served not pursuant to Winsafe’s consent, but unilaterally under rule 23.01(1)(a).

15 Since the notice of discontinuance was served not pursuant to Winsafe’s consent to a discontinuance without costs, but unilaterally under rule 23.01(1)(a), that in turn means that there was no agreement that Winsafe would not seek costs of the discontinuance. Winsafe is entitled to avail itself of rule 23.05(1) and bring a motion respecting costs of the action.

[18] Master Dash dismissed the motion in Marupov on the basis that Winsafe did not serve its motion until 14 months following the discontinuance, well after the 30 day period stipulated in rule 23.05(1), and provided no explanation for the delay. However, Master Dash also stated (Marupov para. 37) that had he granted the extension of time, he would have awarded costs of the action to the moving defendant Winsafe.

[19] In addressing whether costs of the discontinued action would be awarded if he had granted Winsafe an extension of time to bring the motion, Master Dash referred to the version of rule 23.05 that predated the motion before him, and stated (Marupov at paras. 32 and 33):

32 In the event that I am wrong, I consider whether costs would be awarded if an extension of time to bring this motion had been granted. As noted, under rule 23.05 as it existed before 2009, there was a presumption that a defendant against whom an action was discontinued would be entitled to his costs. The new rule providing for a party to bring a motion for costs within 30 days does not contain any presumption or guidelines with respect to those costs. Costs of a discontinued action are now a matter of the court’s discretion. Section 131 of the Courts of Justice Act provides that “costs of and incidental to a proceeding or a step in the proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.” In addition, the general principles set out in rule 57.01 apply and the overriding principle is reasonableness.

33 Under former rule 23.05 a plaintiff could avoid the presumption in favour of costs if a three part test was met. The party seeking to avoid the presumption “had to satisfy the court that: (1) the material filed disclosed a bona fide cause of action; (2) that the action was not frivolous or vexatious; and (3) he or she was justified in commencing a law suit”. Although the presumption no longer operates and the general principles of rule 57.01 apply, the three parts of the test can still be considered as relevant factors under rule 57.01(j) (Bulloch-MacIntosh v. Browne, 2011 ONSC 1210 (S.C.J.) at paras. 18 and 19).

[20] Bad Boy submits that there was simply no consideration of the issue of costs in counsels’ exchange of correspondence on January 7 and January 15, 2021. As in Marupov, the notice of discontinuance in this case was served unilaterally without the consent of the parties, so Bad Boy is entitled to seek its costs of the discontinued action on this motion.

[21] Bad Boy further submits, based on paras. 32 and 33 of Marupov, that they are entitled to costs because the 2020 LTC Movers action was not a bona fide action, having been commenced to circumvent rule 48.04 and relying on the same facts as the original action, and was therefore an abuse of process.

[22] Bad Boy now seeks substantial indemnity costs of the discontinuance and of this motion of $7,316.75. They submit that they tried to be reasonable in addressing the issue of costs by seeking only $1,000.00 when they first raised the issue and then by attempting to bring the motion in writing.

Submissions of the plaintiffs

[23] Plaintiffs’ counsel refers to various letters from him to Bad Boy’s counsel seeking their consent to the proposed amended statement of claim in the 2019 action. Owing to the lack of response, LTC Movers issued the 2020 action to avoid the possible expiry of the limitation period in February, 2021.

[24] The plaintiffs submit that they accepted the terms of settlement in Bad Boy’s counsel’s January 7, 2021 email, which included the discontinuance of the LTC Movers action that had not yet been defended and which did not include costs of the discontinued action. Bad Boy’s demand for costs after service of the Notice of Discontinuance was an attempt to change the terms of an agreed settlement.

[25] The plaintiffs also submit that, as no statement of defence was filed in the 2020 LTC Movers action, no costs were incurred in defending that action and therefore no costs should be payable.

[26] The plaintiffs rely on Provincial Crane Inc. v. AMCA International Ltd., [1990] O.J. No. 806, a case in which the court considered a party’s entitlement to costs interpreting the earlier version of rule 23.05 that Master Dash considered in Marupov. In Provincial Crane, Henry J. stated the law as follows (at para. 5):

5 In order to establish that it ought to be relieved of costs in the Court’s discretion, it is my opinion that at this early stage of the action, the plaintiff must satisfy the Court that the material filed discloses a bona fide cause of action that is not frivolous or vexatious which the plaintiff has some justification to commence, having regard to the conduct of the defendant. Since the Court cannot, at this early stage, make final findings of fact or credibility, the Court is left to determine if, notwithstanding conflict, there is some evidence to justify the commencement of the action whether or not it can be said that the action may or may not ultimately succeed.

[27] This statement of the law, based on the pre-2009 version of rule 23.05, is essentially the same as that in paragraph 33 of Marupov, supra.

[28] The plaintiffs submit that Bad Boy has conceded that it has a bona fide cause of action because they consented to the proposed amendments to the 2019 Teixeira action, based on the contents of the 2020 LTC Movers action. As soon as Bad Boy proposed a solution, the plaintiffs agreed.

Issues on the motion

[29] The issues on this motion are:

(1) Whether the parties, in their counsels’ email correspondence of January 7, 2021 and January 15, 2021, reached an agreement that the 2020 LTC Movers action could be discontinued without costs;

(2) If there was no agreement to a discontinuance without costs, can the plaintiff LTC Movers establish that their 2020 action disclosed a bona fide cause of action that is not frivolous or vexatious and that they had some justification to commence (see Marupov, para. 33 and Provincial Crane Inc., para. 5).

Analysis and decision

[30] The first issue is whether, based on Bad Boy’s counsel’s correspondence of January 7, 2021 and plaintiffs’ counsel’s reply of January 15, 2021, the parties had agreed to a resolution of the pending issues in the two actions that included a discontinuance of the 2020 LTC Movers action without costs. Only if I conclude that there was no agreement do I need to address the second issue.

[31] Essentially, Bad Boy submits that the January 7, 2021 proposal was silent on the question of costs so the issue remained to be addressed on this motion under rule 23.05(1). The plaintiffs submit that because the January 7, 2021 proposal was silent on costs, the parties’ agreement was to a discontinuance without costs.

[32] The plaintiffs’ issuing of the statement of claim in the 2020 LTC Movers action gave rise to the dispute contained in counsels’ letters of December 14 and December 21, 2020 summarized above. In his email of January 7, 2021, Bad Boy’s counsel made an offer to resolve this dispute which specifically included the discontinuance of the 2020 LTC Movers action and which did not contain any term requiring payment of costs. Viewed objectively, this was a proposal to resolve all of the pending issues between the parties.

[33] When counsel for Teixeira and LTC Movers accepted the January 7, 2021 offer in his email of January 15, 2021, there was a completed offer and acceptance resolving the issues relating to the discontinuance of the 2020 LTC Movers action and the proposed amendments to the 2019 Teixeira action. At that point, the parties had a deal which did not include the payment of any costs of the discontinued action. By seeking costs following LTC Movers’ discontinuance of the 2020 action, Bad Boy was attempting to add a new term to a completed agreement.

[34] As indicated above, Bad Boy relies on Marupov, supra to argue that where a plaintiff discontinues an action unilaterally under rule 23.01(1)(a), the defendant may move for costs under rule 23.05(1). The flaw in this argument is that in the case before me, the notice of discontinuance was not served unilaterally, but rather, was served with the apparent consent of the defendant Bad Boy, which itself had proposed the resolution of the parties’ dispute based in part on the discontinuance of the 2020 LTC Movers action. The distinction is that in Marupov, counsel for the defendant Winsafe stipulated that the plaintiffs’ discontinuance of the action without costs was conditional on the delivery of a release, and no release was provided. In the case before me, the defendant Bad Boy made a proposal that included the discontinuance of the 2020 LTC Movers action and that contained no term with respect to costs, and which the plaintiffs accepted.

[35] For these reasons, Bad Boy’s motion for costs of the discontinued action is dismissed.

[36] Because I have determined that the parties reached an agreement whereby LTC Movers could discontinue its 2020 action without costs, it is not necessary to consider whether LTC Movers advanced a bona fide cause of action that was not frivolous or vexatious and which it had some justification to commence.

Costs

[37] At the conclusion of the hearing, both counsel made submissions on costs.

[38] Both parties filed costs outlines. The plaintiff’s costs outline sets out partial indemnity costs of $4,456.26 and substantial indemnity costs of $6,644.85, both figures inclusive of HST and disbursements. The defendant’s costs outline sets out total partial indemnity costs of $4,859.00 and substantial indemnity costs of $7,316.75.

[39] During costs submissions, I asked counsel whether in assessing costs, I should consider the proportionality of the costs that they were seeking on the motion to the $1,000.00 in costs initially proposed for the discontinued action. Bad Boy’s counsel submitted that the costs they were seeking were proportional to the issues on the motion, and LTC Movers’ counsel likewise raised no concerns with respect to proportionality. The parties both seek costs in similar amounts, so neither can take the position that the other’s proposed costs are unreasonable. Accordingly, I will assess costs based on the amounts in the costs outlines.

[40] LTC Movers was successful in opposing the motion and should recover their costs of the motion.

[41] In their submissions, both parties sought substantial indemnity costs. In Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3, the court stated (at para. 260) that “Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. Accordingly, the fact that an application has little merit is no basis for awarding solicitor-client costs . . . .” (emphasis added)

[42] The solicitor-client costs referred to in Young are the equivalent of what we now refer to as substantial indemnity costs. In the case before me, the disagreement of Bad Boy as to whether their counsel’s exchange of correspondence in January, 2021 constituted a final resolution of the issues then in dispute, including the costs of the proposed discontinuance of the 2020 LTC Movers action, does not constitute “reprehensible, scandalous or outrageous conduct”. Counsel can be wrong about something without their conduct being characterized in those terms. Bad Boy’s conduct in relation to the motion does not therefore warrant an award of substantial indemnity costs.

[43] Both parties made offers to settle this motion. Bad Boy’s offer was to accept $3,750 in costs. The plaintiff’s offer was to allow Bad Boy to withdraw their motion without costs. The plaintiff’s proposal that Bad Boy withdraw its motion without costs before the hearing was more favourable to Bad Boy than the dismissal of the motion after the hearing, where the plaintiff incurred the additional costs of arguing the motion. This offer would warrant the plaintiff recovering some additional costs of the hearing. However, any such additional costs are offset by the fact that the plaintiff should have agreed to Bad Boy’s proposal that the motion proceed in writing. The net result is that the plaintiff should simply recover the partial indemnity costs calculated in its costs outline.

[44] For these reasons, Bad Boy shall pay LTC Movers’ costs of this motion on a partial indemnity scale, fixed at $4,456.26, payable within 30 days.

ASSOCIATE JUSTICE GRAHAM

October 22, 2021