COURT FILE NO.: CV-14-60497
DATE: 2022/06/14
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 8466718 Canada Inc., Plaintiff
AND:
1779042 Ontario Ltd and 144735 Ontario Inc. and John Ackerman, Defendants
BEFORE: Regional Senior Justice Calum MacLeod
COUNSEL: Stephen Cavanagh as agent for Ken Dunham, for the Plaintiff
M. Edward Key for the Defendant, 1779042 Ontario Ltd.
HEARD: April 1, 2022
ENDORSEMENT
[1] This is a motion to set aside the costs provision in an order made on March 7, 2018, by (now retired) Justice Paul Kane. It is quite clear that the formal order differs from Justice Kane’s endorsement, and it is also clear that the counsel who were involved at the time each failed to give this matter the detailed attention they should have. There was a series of errors leading up to the formal judgment.
[2] The question is what to do about it. Rule 59.06 (1) permits the court on motion to set aside or vary an order that “contains an error arising from an accidental slip or omission or requires amendment in any particular on which the court did not adjudicate”. Rule 59.06 (2) permits a motion to set aside an order on the basis of “fraud or of facts discovered after it was made” or “to obtain relief other than that originally awarded”. On the facts of this case, the court has the jurisdiction to vary this order if it is just and appropriate to do so.
[3] There appear to be two options. Firstly, to do nothing and to let the order stand because it is a final order made four years ago. Secondly, to set aside the costs order and hear the costs argument de novo. The option of matching the order to the endorsement does not appear viable since both parties agree that the communication to the judge that there was a consent to an order against the “defendants” was an error.
[4] For the reasons that follow, I have determined that the second option is appropriate. The costs order is set aside. I will hear argument on the costs of the trial on a date acceptable to counsel. The issue is not the quantum of costs because that was agreed upon. The issue is whether the defendants should be jointly and severally liable for costs. The importance lies in the fact that the second corporate defendant is now bankrupt, and the formal order does not grant judgment for costs against the first defendant.
Background
[5] The facts may be briefly stated. The plaintiff was the purchaser of the assets and undertaking of a bar in Brockville. The defendants were the corporation that owned the bar and another corporation that owned the premises. As they are both numbered companies, I will refer to the former “144” as “the business” and the latter “177” as “the landlord”. The business and the landlord are related corporations with identical ownership and were financially intertwined. The purchaser bought the assets of the business including the name and goodwill and signed a lease agreement with the landlord. After operating the business for several months, the purchaser concluded that there had been misrepresentations by the vendor and breach of contract by both the vendor and the landlord. The plaintiff sued for rescission of the contract and return of the purchase price.
[6] The matter went to trial. At that time, Mr. Hank Witteveen was counsel for the plaintiffs and Mr. Joseph Griffiths was counsel for all three defendants. The plaintiff was largely successful at trial. Justice Kane granted judgment rescinding the agreement of purchase and sale and providing for return of the purchase price subject to certain adjustments. He also made an order terminating the lease effective April 6, 2014. He dismissed the action against the personal defendant. (See 2018 ONSC 1563)
[7] The decision awarded judgment against the business for the return of the purchase money and granted a reference to calculate certain credits. Judgment was also awarded against the landlord terminating the lease and relieving the plaintiff of its obligation to pay rent. Justice Kane dismissed the personal action against Mr. Ackerman, the principal of the defendant corporations. He invited written submissions on costs. It is the latter issue that gives rise to this motion.
The costs award
[8] The costs award is set out in paragraph seven of the formal order. Although the trial decision was released on March 7, 2018, the formal judgment was taken out and entered on November 7, 2018. The events leading up to the entry of the order constitute what can only be described as a series of compounding errors.
[9] Shortly after the trial, Mr. Witteveen retired from practice and carriage of the matter on behalf of the plaintiff was assumed by Mr. J. F. Laberge. In obedience to Justice Kane’s direction that the parties attempt to resolve costs or make written submission, Mr. Laberge entered into negotiations with Mr. Griffiths in order to resolve the question of costs. In an exchange of emails, the parties agreed that the quantum of costs should be $95,000 on a partial indemnity scale to be paid to the plaintiff. On April 6, 2018, Mr. Griffiths sent an email stating “client has confirmed he agrees with your client’s offer re costs fixed at $95k all inclusive”. The communication between counsel did not specifically address by whom the costs were to be paid.
[10] On April 10, 2018, Mr. Laberge wrote to Justice Kane and copied Mr. Griffiths. In the letter he stated that the parties had “agreed to a costs figure”. He went on to say that “the parties respectfully submit that the costs, disbursements and taxes should be fixed in the all-inclusive amount of ninety-five thousand dollars ($95,000.00), payable by the corporate defendants to the plaintiff. Mr. Griffiths received this letter but did not respond to it. There was no reason for Justice Kane not to accept it at face value. On April 13, 2018, he signed a “costs decision” awarding costs to the plaintiff “8466718 Canada Inc. in the amount of $95,000 …against the defendants 1779042 Ontario Ltd. and 1447735 Ontario Inc.” This is unambiguous and is consistent with the letter sent by Mr. Laberge. (See 2018 ONSC 2396)
[11] On October 19, 2018, Mr. Griffiths sent a draft judgment to Mr. Laberge and Mr. Laberge made some editorial changes including a change to paragraph seven which dealt with costs. He did not, however, edit the operative words “the Plaintiff, 8466718 Canada Inc., shall recover from the Defendant, 1447735 Ontario Inc., costs fixed in the amount of $95,000, …”. It was in this form that both counsel then approved the draft as to form and content and it was signed by Justice Kane and then formalized by the Registrar. The entry stamp is dated November 7, 2018.
[12] The reason that Mr. Griffiths prepared the draft order (rather than counsel for the successful party) was because the defendants required the formal order to launch an appeal. Pursuant to Rule 61.09 and 61.10 (1) (c), in order to perfect an appeal, it is necessary to include a copy of the “order or decision appealed from as signed and entered” in the appeal book. There was an appeal brought only by the vendor business and not by the landlord. That appeal was heard on April 3, 2019, and was dismissed with costs “on a partial indemnity scale in the agreed amount of $20,000 inclusive of taxes and disbursements”. (See 2019 ONCA 278) Those costs were only against the business since it was the only appellant.
[13] In July of 2019, a junior lawyer at the Low Murchison law firm attempted to enforce the judgments against the vendor corporation by issuing notices of garnishment and taking further steps. In June of 2020, the vendor corporation filed a bankruptcy application. This meant that as of that date, that defendant was effectively judgment proof. The plaintiff will never recover its money judgment against the business. Its only hope of recovering the costs that were awarded would be to recover against one or more of the remaining defendants. Hence the importance of this motion.
Analysis
[14] Counsel approached this motion in different ways. At first, the moving party sought to rectify the order to reflect the endorsement but ultimately took the position that there had been no meeting of the minds and therefore no real consent to the form and content of the order. The responding party urged the court to approach the order as an agreement evidenced in writing and to reject the attempt of the moving party plaintiff to resile from the words of the written document. It was argued that I should apply the parol evidence rule and also reject any evidence about the subjective intent of the parties.
[15] The law of contractual interpretation in Canada has been profoundly altered by the Supreme Court of Canada in Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53. More recently, the Supreme Court has considered how the Sattva analysis should apply to documents such as releases and in that context discussed the question of subjective belief. (See Corner Brook (City) v. Bailey, 2021 SCC 29 @ para. 49) The subjective belief of one party that is not known to the other is irrelevant because “what is privately in the mind of one party could not affect how that party’s conduct would appear to a reasonable observer in the position of the other”. That is not the situation here. It is apparent from the emails themselves that counsel miscommunicated.
[16] The Parol Evidence Rule prohibits oral evidence by one party to suggest that a written contract means something other than the terms set out in the document. It is subject to many exceptions. Sattva emphasises that what each party subjectively intended a contract to mean, is not probative or admissible. This does not preclude the admission of evidence about the negotiation or errors in drafting. In this case, the affidavit evidence simply confirms that at no time was there any specific agreement between counsel to alter the position communicated by email. The emails themselves show that the parties were at cross purposes. It was through inadvertence that each lawyer overlooked the wording of the various documents.
[17] I am satisfied from the evidence that there was no meeting of the minds. Mr. Griffiths never agreed that costs would be payable by all defendants. Mr. Laberge never agreed that the costs should be borne solely by the vendor business and not by the landlord. It was an error on Mr. Laberge’s part to advise Justice Kane that the parties had agreed to a costs award against both defendants. It was an error on Mr. Griffith’s part not to notice the use of the plural in the letter or in the endorsement. It was also an error on Mr. Laberge’s part to approve a formal order that only awarded costs against one of the defendants. Neither counsel appear to have turned their minds to the importance of this issue when communicating with each other or with the court.
[18] The formal order awarding costs against only one defendant does not match the endorsement which awards costs against defendants. I am satisfied that paragraph seven of the judgment “contains an error arising from an accidental slip or omission” and may be set aside. Consequently, since there was no agreement on costs and since the court did not adjudicate on this question, I agree with Mr. Cavanagh that it is open to the court to set aside that paragraph of the order and to hear argument on costs. I also agree that the discretion given to me under s. 123 of the Courts of Justice Act, is broad enough for me to order a hearing of the question of costs before another judge when a trial judge has retired.
[19] Although the court can set aside the costs award and order a re-hearing, I am not compelled to do so. Notwithstanding the history outlined above, the order should not be made it if it would be unjust to do so or if it would be unfairly prejudicial to the defendant against which the plaintiff now seeks costs. I will consider this issue briefly.
[20] The respondent relies upon the principle of finality and the implied prejudice that exists if a final order is to be set aside after a significant delay.
[21] As noted above, the judgment was formalized in November of 2017, in the face of a pending appeal. The appeal was heard and dismissed in April of 2019. Enforcement efforts began in July of 2019 and there was no effort made at that time to amend the judgment. The defendant business against which the money judgment and costs awards had been made declared bankruptcy in June of 2020 (mid pandemic).
[22] Although the plaintiff’s counsel had communicated its position that costs should have been enforceable against the landlord and the business jointly in March of 2020, nothing was done about it until November of 2021, when this motion was launched. The motion was ultimately heard in April of 2022.
[23] The question is whether it is unjust or disproportionate (a form of injustice) to reopen the question of liability for costs. This motion was launched four years after the judgment was issued. It was also more than two and a half years after the appeal was dismissed and 28 months after attempted enforcement against the defendant business alone. The motion was brought 20 months after the issue of an error in the order was raised for the first time when enforcement efforts against the co-defendant business had been unsuccessful. It was brought 17 months after that co-defendant business declared bankruptcy. The other defendants have not provided evidence of actual prejudice if the question is re-opened. They rely on prejudice implied by the passage of time and delay in seeking the relief that is now before the court.
[24] The defendant cites a number of authorities from the Court of Appeal having largely to do with status hearings and motions to set aside dismissal orders. For example, the defendants cite Kara v. Arnold, 2014 ONCA 871 for the proposition that “the longer the delay” in bringing a motion, the more cogent the explanation must be. Caution must be taken when reading the cases under Rule 48 because they deal with dismissal of actions at a status hearing where there is a reverse onus on the plaintiff to justify the delay in bringing the action to trial. Rule 48 has been amended numerous times as the courts and the Civil Rules Committee have struggled to find the right balance between the fundamental goal of resolving disputes on their merits and the idea that delay is an engine of injustice so that rules intended to promote the timely resolution of disputes must be enforced (Kara, supra @ paras 8 – 11). The case at bar and the motion before me are not matters to be determined under Rule 48 and this is not a status hearing.
[25] On the other hand, there are important principles contained in the extensive jurisprudence around Rule 48. For example, in Marché D'Alimentation Denis Thériault Ltée v. Giant Tiger Stores Limited, 2007 ONCA 695, at paras. 36 – 40, the Court of Appeal dealt with the “finality principle”. The court stated that when an action has been disposed of in favour of a party, that party’s entitlement to rely on the finality of the order grows stronger as the years pass. Moving to restore a dismissed action five years after it had been dismissed was considered to be a delay of such magnitude that “the appellant was entitled to rest on the assurance that the judicial system had disposed of the respondents' claim once and for all”.
[26] In Finlay v. Van Passen, 2010 ONCA 204, the Court of Appeal rejected the idea that a court order issued in error should be treated as a nullity. Delay in bringing a motion to set aside an order which ought not to have been issued would still operate as a bar to setting it aside. In Finlay, the court used an extreme hypothetical example of waiting ten years. In the actual case, however, the delay in bringing the motion had been two years and the Court of Appeal set aside the registrar’s dismissal order.
[27] In the case before me, we are not dealing with an order dismissing the action. What occurred was a money judgment against the business corporation and a declarative order against the landlord corporation terminating the lease. It is only costs award that the plaintiff now seeks to revisit. The issue was not noticed until March of 2020, when the plaintiff first indicated its view that the costs were properly payable by the defendants jointly. The delay in bringing the motion after that was 20 months which is regrettable but not in my view inexcusable. There is no significant prejudice to the defendants whereas the prejudice to the plaintiff if it cannot argue the question is considerable.
[28] The evidence does not persuade me that the defendants did anything on the strength of the judgment which would make it unfair to visit the issue of costs at this time. It is true that the business defendant has declared bankruptcy but that prejudices the plaintiff which cannot recover its judgment rather than prejudicing the landlord which faces possible exposure to costs but not the money judgment.
[29] I am satisfied that the just result would be to set aside paragraph seven of the judgment and to hear submissions on costs and it is so ordered.
Conclusion
[30] For the reasons given, paragraph seven of the order of Justice Kane is set aside. I will entertain submissions on the costs of the trial and the costs of this motion. I invite counsel to confer and advise me whether they wish to make those submissions in writing or to make oral argument.
Mr. Justice C. MacLeod
Date: June 14, 2022
COURT FILE NO.: CV-14-60497
DATE: 2022/06/14
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: 8466718 Canada Inc., Plaintiff
AND:
1779042 Ontario Ltd and 144735 Ontario Inc. and John Ackerman, Defendants
BEFORE: Regional Senior Justice Calum MacLeod
COUNSEL: Stephen Cavanagh as agent for Ken Dunham, for the Plaintiff
M. Edward Key for the Defendant, 1779042 Ontario Ltd.
ENDORSEMENT
Regional Senior Justice C. MacLeod
Released: June 14, 2022