COURT FILE NO.: CV-11-6827
DATE: 2022-06-24
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HANA TRADING COMPANY
Plaintiff
– and –
CCR TECHNOLOGIES INCORPORATED
Defendant
Glenroy K. Bastien for the Plaintiff
Mitchell B. Rosenblatt for the Defendant
HEARD: April 11 – 14, 2022
JUSTICE MILLS
[1] This is a simple debt collection matter made complicated by the conduct of the parties. It has been thirteen years since the events that gave rise to this matter, and it has taken eleven years for the action to come to trial. It does offer a lesson to ensure business dealings are properly documented in writing from the outset of a new relationship. Once the optimism for the future is replaced with distrust from the past, it is too late to formalize the necessary contractual agreements.
[2] The plaintiff, Hana Trading Company (“Hana”), was engaged to act as an agent for the defendant, CCR Technologies Incorporated (“CCR”), in Korea for a three-year period from August 1, 2008 to July 31, 2011. Hana had excellent business contacts in the steel industry. CCR engineered and manufactured parts and automation equipment for that industry. It appeared to be an ideal relationship and for the first few years, it was a lucrative relationship for both parties. It was a relationship established and built on trust. According to Hana, this was the Korean way of doing business, and was in accordance with Korean traditions. It was not the usual way CCR engaged in foreign, or for that matter domestic, business relationships but it was prepared to take the risk for the anticipated rewards. When the rewards quickly flowed, the concerns about the risks quickly faded.
[3] Approximately nine years passed before CCR began to again have concerns about the risks of doing business based solely on trust and oral agreements. Hana also had concerns about the business arrangement when CCR began to delay the payment of supplier accounts and when it failed to pay Hana’s commission remittances. The trust was breaking down. The relationship was fracturing. Both parties began to put into place a written record in the event of future litigation.
Agreement Sales of Product
[4] Hana produced an Agreement Sales of Product dated January 1, 2005 (the “Sales Agreement”) which purports to confirm the business relationship between the parties in respect of commissions paid for the sale of Cast Steel, Cast Iron and Forged Steel Rolls, collectively referred to as China Roll. The products were purchased by CCR from Xingtai Machinery and Mill Roll (Group) Corp. and sold to Dongkuk Steel Mill Co. Ltd. The net profit to CCR from the sale of the China Roll was to be shared with Hana in the form of a commission for acting as agent. Depending on the nature of the sale, the Sales Agreement states the commission is 75% or 85% in favour of Hana, and 25% or 15% for CCR. Hana admits the Sales Agreement was created in November 2009, after the foundation of trust with CCR had begun to crumble. Hana back dated the Sales Agreement to 2005 with the intention of documenting the terms of the business relationship from the preceding four years.
[5] The Sales Agreement appears to be signed by both parties. CCR absolutely denies signing the document. It believes that Hana used sample signatures it had for Carl Ricciuti, the President of CCR, to create this document. It is admitted by both parties that CCR had left Hana with blank documents bearing Mr. Ricciuti’s signature to facilitate the timely completion of contract and shipping documents required in Korea. Mr. Ricciuti travelled frequently for business and often was not available to execute the necessary documents in the short timeframe required by Hana. Mr. Ricciuti trusted Hana as his agent in Korea and trusted its president, Mr. Won, to only use the signatures for legitimate purposes. Indeed, with the exception of this document, CCR cannot point to any occasion on which it believes Hana improperly used the sample signatures.
[6] CCR produced an unsigned version of the Sales Agreement which it says accurately represents the oral agreement respecting China Roll commissions. The CCR version has it retaining 75% or 85% of the net profit with Hana being paid a 25% or 15% commission – the precise opposite of Hana’s stated commission structure. There was also an additional clause in CCR’s version of the Sales Agreement which does not appear in Hana’s version. It states that product warranties and damages claimed by customers would be paid by CCR and then deducted from the net profit prior to calculating the commission payable to Hana. This version of the Sales Agreement was presented to Hana for signature, but it failed or refused to do so. The CCR version of the Sales Agreement is not signed by either party.
[7] As witnesses, both Mr. Ricciuti on behalf of CCR and Mr. Won on behalf of Hana presented with challenges. I am unable to say which of the two is more or less credible. Some of their evidence appeared truthful; other aspects were simply not believable. This is one example. Clearly one of the witnesses was simply not telling the truth. This leaves me to examine the documents to determine which is more credible in the circumstances.
[8] Hana acts as agent for CCR in Korea. The business risk lies with CCR in that it is responsible to pay for the China Roll and it is responsible to collect payment from the end user. It would be most unusual for an agent in these circumstances to receive 75% or 85% of the net profit for facilitating the transaction. Also, it is a reasonable requirement for warranty and damage costs to be deducted prior to calculating a commission which is based on net profit.
[9] Therefore, between the two documents, I accept that the version produced by CCR accurately reflects the commission agreement between the parties. In the circumstances, I must find that the signature of Mr. Ricciuti which appears on Hana’s version of the Sales Agreement was affixed using one of the sample signatures without the knowledge or consent of Mr. Ricciuti. I do not accept the Sales Agreement is a validly enforceable document.
[10] As the business relationship between Hana and CCR has entirely broken down, there is no commercial effect to my finding in this regard. The issue primarily speaks to the credibility of the parties.
Agreement for Payment
[11] Hana presented to CCR an Agreement for Payment dated November 25, 2009 (“Payment Agreement”). It provides that both parties agree there are amounts owing to Hana for China Roll commissions. The ten invoices are referenced in the Payment Agreement, and they are attached to the document. The invoices each state the amount owing and the latest date on which it is to be paid. The Payment Agreement imposes an 8% interest rate for late payments, and a foreign exchange provision to account for currency fluctuations between USD and the Korean won if the invoices are not paid by January 15, 2010.
[12] Mr. Won drove Mr. Riccuiti to the Canadian Embassy to sign the Payment Agreement and have it witnessed by an Embassy staff member. He wanted to ensure the Payment Agreement was a legally enforceable document. There were discussions conducted in Korean between Mr. Won and the Embassy official. Mr. Riccuiti spoke with the individual in English. Mr. Riccuiti’s evidence is that he understood by signing the Payment Agreement, he was simply acknowledging having received the document; he was not accepting the financial terms of the Payment Agreement.
[13] Both parties made handwritten changes to the Payment Agreement, initialled those changes, and then signed in the presence of each other and the Embassy official. Each of the attached invoices was signed by the parties.
[14] Mr. Riccuiti is an experienced businessman. The Payment Agreement is written in English, as are each of the attached invoices. Mr. Riccuiti clarified paragraph 1 of the Payment Agreement adding “per invoice” to the payment terms and in paragraph 2 he inserted “per year” to reflect the interest rate of 8% was an annual accrual. The Payment Agreement required certain invoices be paid before the end of 2009. These payments were in fact made by CCR on or before January 4, 2010. Promises were given for further payments in 2010, but no payments were made.
[15] Attending at the Embassy was unexpected and unusual. Although he may have felt somewhat anxious, Mr. Riccuiti was not under any threat from Mr. Won nor was he under any duress. Mr. Riccuiti’s evidence that he merely signed the Payment Agreement to acknowledge receipt of the document as opposed to accepting its terms is simply not credible. I accept Hana’s evidence that the Payment Agreement was prepared and signed to formally document the outstanding commissions owed by CCR. The partial satisfaction of the payment terms confirms that CCR accepted and understood its obligations. Email correspondence from December 30, 2009 from CCR to Hana confirms “All efforts are being made to provide you with payment of owed amounts as soon as possible” and then added that a payment schedule would be provided once all financing details are in place.
[16] Mr. Riccuiti testified that CCR tried to meet its obligations of making payments but when Hana expressed a negative reaction to the withdrawal of authority, CCR decided to stop making payments. I do not accept the evidence of Mr. Riccuiti that the payments made which referenced specific invoices were intended to be payments on account subject to further adjustment, as opposed to payments for the actual invoices as rendered. To suggest the reference to a specific invoice on the wire transfer documents was done solely for the convenience of CCR’s accounting department is not credible.
[17] There is no documentary evidence to support that the Payment Agreement or the invoices attached thereto were acknowledged only as having been received by CCR but not accepted as being an accurate account of the commissions owed to Hana.
[18] The Payment Agreement is a binding contract documenting the debt owed by CCR to Hana as at November 25, 2009. The fact that it is witnessed by the Embassy official, as opposed to being notarized, does not make it less enforceable as a legal contract. CCR is in breach of the contract.
[19] It is no answer to now say the invoices failed to set out how the commissions were calculated or that the invoices did not provide for interest to accrue. CCR had the opportunity to verify the commission calculations and the amounts owing prior to signing the invoices. There is nothing noted on the Payment Agreement nor on any of the invoices to support CCR’s allegation that they were being accepted subject to further verification or reconciliation. CCR accepted the payment terms, acted upon them, regretted agreeing to them, and then breached them.
[20] There was much evidence as to whether the commissions were subject to set off for warranty issues and if they were only payable on delivery of a Final Acceptance Certificate. None of this evidence is relevant once the parties entered into the Payment Agreement. It summarized the commissions owing and I am satisfied that at the time the Payment Agreement was signed, CCR accepted the amounts as having been properly calculated.
[21] Although not pleaded in its Statement of Defence, CCR raises in its closing submissions a Limitations Act, 2002[^1] defence, arguing that the Payment Agreement relates to invoices generated from products shipped more than two years prior to the commencement of this proceeding. Having found that the Payment Agreement is a validly enforceable acknowledgment of the indebtedness owing, the limitation period is two years from the breach of that agreement which occurred after January 4, 2010. This action was commenced on December 5, 2011. There is no viable defence pursuant to the Limitations Act, 2002.
[22] Hana is therefore entitled to judgment in the amount of USD $232,330.44 for breach of contract. Hana is also entitled to interest at the agreed upon rate of 8.0% per annum. I do not accept that CCR ought to be required to pay interest at this rate from January 2010 to date. It has taken Hana more than twelve years to pursue this debt, and more than ten years to bring the matter to trial. This delay is entirely unreasonable. As plaintiff, Hana had the primary obligation to expeditiously move this matter forward. It absolutely failed to do so.
[23] Pursuant to s. 130(1) of the Courts of Justice Act[^2], I have the discretion to limit the amount of pre-judgment interest to a period of time as is appropriate having regard to the factors raised in s. 130(2). Hana should not benefit financially from the delay in advancing this claim. Therefore, pre-judgment interest shall accrue at 8.0% per annum limited to a period of three years.
Counterclaim by the Defendant
[24] CCR alleges Hana breached the established (but unwritten) agency agreement, its fiduciary duties and the duty of care owed to CCR through the negligent performance of its duties as agent for CCR.
[25] No documentary evidence of damages was offered to support its counterclaim. Mr. Riccuiti testified that the volume of sales for CCR spare part products in Korea noticeably declined by late 2009. He also stated that the steel industry was slowing down at that time. The spare part products supplied by CCR to Korea were specifically for the steel industry.
[26] There was no confidentiality agreement signed between the parties. CCR presented a confidentiality agreement in November 2009 to Hana after the relationship had started to fracture, but it was never signed. Both parties admit that Hana acted as an agent for CCR in Korea and that there was a significant level of trust between the parties.
[27] There was an admission by Mr. Won that Hana was selling competing products for another company in Korea while representing CCR. That does constitute a breach of fiduciary duty, a breach of the implied duty of utmost loyalty and a breach of confidence.[^3] It is however of no consequence as CCR has not established it suffered any damages due to Hana’s wrongful conduct.
[28] No evidence of damages was offered to support the counterclaim or the claim for set-off beyond the testimony of Mr. Riccuiti. There were no documents, no reports nor any financial statements presented to support Mr. Riccuiti’s belief that CCR suffered a loss of $75,000 to $90,000 due to the breaches of fiduciary duties by Hana. In the absence of any corroborating documentary evidence, I do not find the bald statements of Mr. Riccuiti as to the quantum of the alleged damages suffered by CCR to be persuasive.
[29] The counterclaim is therefore dismissed.
Costs
[30] Having been successful in the action, Hana is presumptively entitled to its costs of the litigation. Both parties submitted Offers to Settle which were exchanged after the conclusion of the trial. CCR made three offers prior to the trial, none of which are as good or better than the result of this judgment. Hana submitted nothing to suggest any offers were advanced by it prior to the trial. Hana’s first Offer to Settle is dated April 24, 2022, the day prior to the due date for the delivery of its written closing submissions. Hana obtained a result better than provided in the Offer to Settle and is therefore entitled to costs on a partial indemnity basis to April 24, 2022, and on a substantial indemnity basis thereafter.
[31] When considering an appropriate quantum for costs, I am to examine the factors listed in Rule 57.01(1) of the Rules of Civil Procedure. They include the complexity and importance of the matter, the conduct of a party including a party’s denial or refusal to admit anything, any offers to settle and the principle of proportionality. In this regard, the amount of time spent, and the hourly rates charged are to be considered together with the amount that a losing party would reasonably expect to pay.
[32] Hana submitted a Bill of Costs which provides for 237 hours of time. There is only a very generic description of the work done, without any itemization of time spent on each stage of the proceeding. It states the plaintiff prepared for trial four times, but it is unknown whether that was due to the unavailability of the plaintiff, the defendant, or the Court. Again, I do note that it has taken Hana more than eleven years to bring this matter to trial since filing the Statement of Claim.
[33] Hana seeks to recover fees of $71,100 calculated on a partial indemnity basis at 75% of the actual rate charged. The absolute maximum permissible for partial indemnity costs is 66% of the fee charged to the client.[^4] Counsel’s usual rate is $400 per hour so the partial indemnity rate is $264 per hour. The proper calculation for partial indemnity fees based on 237 hours is therefore $62,568.
[34] Hana also seeks recovery of disbursements in the amount of $7,788.15. This amount includes the usual litigation disbursements but also seeks to recover $3,608.95 for interpreters and $1,120 in Uber charges. Mr. Won’s native language is Korean, but he conducted his business dealings with CCR in English and he admitted to drafting all the Hana documents himself, in English. While he may have felt more comfortable having a Korean interpreter to assist, it was evident during the trial that Mr. Won was more than capable of communicating in English. This is not an expense that was necessary, nor can it be justified. It also unnecessarily and significantly extended the length of the trial. The Uber charges appear excessive and have not been justified as being necessary for the purposes of this litigation.
[35] Hana takes issue with having to attend in person for the trial and points to CCR’s refusal to conduct the trial by Zoom as being unreasonable. Mr. Won was required to fly to Canada from Korea to attend the trial. Hana submits that CCR’s insistence on having the trial proceed in person was improper, vexatious or unnecessary due to the risks of travelling during the Covid-19 pandemic. I reject this submission. Hana chose to initiate legal proceedings in this jurisdiction. It is Hana’s obligation to attend before the Ontario Superior of Justice when called upon to do so. Once the Court recommenced hearing trials in person, CCR had the right to insist on the trial being conducted in person.
[36] Hana brought a motion for a fixed trial date. That motion was not successful, and the matter was placed on the list for the Spring 2022 trial sittings. When the trial was called, Mr. Won was in Korea and required a one week adjournment to travel to Canada. There are cost consequences to be suffered for flagrantly disregarding the Order of RSJ Ricchetti and for causing a delay in the commencement of the trial. Hana’s conduct was improper and unreasonable.
[37] Hana submits that CCR conducted itself unreasonably in this litigation for refusing to admit it owed the amounts claimed in the Statement of Claim and for failing to settle on reasonable terms. As noted above, Hana filed no evidence of an Offer to Settle having been advanced prior to the conclusion of the trial. Failing to admit the amounts claimed in a Statement of Claim does not amount to unreasonable conduct.
[38] CCR filed a Bill of Costs indicating it incurred fees of $74,185 with counsel docketing just over 150 hours on the matter. There was very limited work done by two law clerks and by one articling student. The costs sought by Hana are therefore within the reasonable contemplation of CCR.
[39] Mr. Won was entitled to have a Korean interpreter at the trial. I have however concluded that he fully understood the proceedings and was able to fluently communicate in English. The trial was unnecessarily lengthened with the requirement for interpretation. There is a cost consequence for unreasonably and unnecessarily insisting the proceeding with an interpreter which also resulted in CCR incurring unnecessary legal expense.
[40] Having considered the factors outlined in Rule 57 and the unreasonable conduct of Hana, I find that the reasonable and proportionate fees for this matter amount to $37,500 inclusive of HST and disbursements.
[41] Therefore, Hana shall have judgment in the amount of the Canadian dollar equivalent of USD$232,330.44 plus interest at 8% per annum for three years from December 5, 2011, and costs of $37,500. The judgment shall bear interest at the rate of 2% per annum in accordance with the post judgment interest provisions of the Courts of Justice Act.
J. E. Mills J.
Released: June 24, 2022
COURT FILE NO.: CV-11-6827
DATE: 2022-06-24
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HANA TRADING COMPANY
Plaintiff
– and –
CCR TECHNOLOGIES INCORPORATED
Defendant
REASONS FOR JUDGMENT
J.E. Mills J.
Released: June 24, 2022
[^1]: S.O. 2002, c.24, Sched. B [^2]: R.S.O. 1990, c. C43 [^3]: Free Trade Medical Network Inc. v. RBC Travel Insurance Co., [2005] O.J. No. 3696 (ONSC) at paras. 81-82, aff’d 2015 OAC 230 (ONCA) leave to appeal ref’d [2006[ SCCA No. 434 (SCC); Watson v. Holyoake, [1986] O.J. No. 541 at para. 40 (HCJ). [^4]: Moosa v. Hill Property Management Group Inc., [2010] O.J. No. 624 (Ont. S.C.J.)