Balatchev v. TTK North America, 2022 ONSC 4711

COURT FILE NO.: 17-74523

DATE: 2022-08-16

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Stefan Balatchev, Plaintiff

AND

TTK North America Inc. and TTK S.A.S., Defendants

AND

TTK North America Inc. and TTK S.A.S., Plaintiffs by Counterclaim

AND

Stefan Balatchev and Evteam Corp., Defendants by Counterclaim

BEFORE: The Honourable Mr. Justice Marc Smith

COUNSEL: Gib van Ert and Neil Abraham, Counsel for the Defendants and Plaintiffs by Counterclaim

John Paul Zubec, Counsel for the Plaintiff and Defendants by Counterclaim

HEARD: July 12, 2022, by video conferencing

REASONS FOR DECISION

M. Smith J

1TTK North America Inc. and TTK S.A.S. ("TTK") bring a motion seeking an order that the admission made by them at paragraph 17 of the Statement of Defence, be withdrawn. Stephan Balatchev ("Stephan") and Evteam Corp. (collectively "Balatchev") oppose the motion, on the basis that the moving parties have not met the test for obtaining leave.

2Balatchev brings a cross-motion to strike paragraphs and exhibits from TTK's motion record. The parties reached an agreement regarding the cross-motion, save and except the costs. Balatchev seeks an award of costs for bringing a cross-motion.

3For reasons that follow, TTK's motion and Balatchev's request for costs are granted.

Background

4From 1996 to 2012, Stephan worked for TTK, located in France. Between 2012 and 2014, Stephan provided services to TTK as an independent contractor. In 2014, TTK expanded to North America and Stephan was hired as an employee, in the position of Engineering Manager. For this new position, Stephan entered into an employment contract with TTK. During the summer of 2017, Stephan was dismissed with 13 days notice. At the time of his dismissal, Stephan had been employed by TTK and/or provided services to TTK in France and in Canada, for approximately 21 years. Stephan commenced a wrongful dismissal claim on November 8, 2017.

5For the purposes of this motion, the relevant paragraphs of the Statement of Claim are paragraphs 27 and 28. They read as follows:

27. Balatchev employment with TTK North America was governed by a written employment contract, which contained the following provision regarding the termination of his employment:

All the terms of the termination of employment will be regulated as stated I the relevant chapters of the Ontario Employment Standards Act, 2000.

28. Balatchev states that such a provision is not determinative of his entitlements upon termination. It was therefore an implied terms of his contract that he was owed common law reasonable notice of the termination of his employment or a payment in lieu thereof.

6Between August 2017 and January 2018, through their respective counsel, the parties attempted to negotiate a resolution, without success. The issue of the enforceability of the termination provision in Stephan's employment contract was thoroughly canvassed during the negotiations.

7On August 18, 2018, TTK filed its Statement of Defence and Counterclaim. Paragraph 17 reads as follows: "The Defendants admit paragraphs 27 to 29 of the Claim."

8Balatchev filed a Reply and Defence to Counterclaim on November 6, 2018.

9In or around November 2019, new counsel, Gib van Ert, was appointed by TTK. In early February 2020, counsel van Ert advised that TTK was seeking to withdraw the admission in paragraph 17 of its Statement of Defence and Counterclaim.

10On December 4, 2020, counsel for Balatchev asked counsel for TTK to "provide a reasonable explanation as to why the admission was made and the reason for the withdrawal…"

11On December 8, 2020, counsel for TTK, wrote to counsel for Balatchev and said: "You have asked why we seek to withdraw the admission of para. 28 of the plaintiff's statement of claim. I was not counsel at the pleadings stage. The file came to me after the pleadings were closed. Having reviewed the matter, my view is that this termination clause may be effective to exclude common law notice consistently with such authorities as Nemeth v. Hatch Ltd. 2018 ONCA 7. It is early enough in the proceeding that I can see no real prejudice to your client in withdrawing this admission."

12The foregoing response from counsel for TTK was insufficient for Balatchev. Consent to withdraw the admission was refused.

13Examinations for Discovery took place on January 12, 13, 19, 22, 26, and 27, 2021. It was agreed amongst counsel that, on a without prejudice basis, discoveries would proceed on the assumption that the admission had been withdrawn.

14TTK's motion was filed on April 4, 2021.

15By consent, on July 30, 2021, Balatchev filed an Amended Statement of Claim. Paragraph 28 was amended as follows:

28. Balatchev states that such a provision is not determinative of his entitlements upon termination. It was therefore an implied terms of his contract that he was owed common law reasonable notice of the termination of his employment or a payment in lieu thereof, and said reasonable notice ought to be based on his approximately twenty-one (21) years of service with both TTK S.A.S. and TTK North America.

16The Amended Statement of Claim also increased the amount of damages. Paragraph 1(a) amended the general damages for breach of contract and wrongful dismissal from $316,000 to $580,000. Paragraph 1(c) increased the damages for the children's tuition from $23,000 to $46,000.

17On June 17, 2022, Balatchev brought a cross-motion to strike paragraphs and exhibits of TTK's Motion Record. This cross-motion was resolved, save and except the costs associated with bringing the cross-motion.

18The motion was heard on July 12, 2022.

Issues

19The issues to be determined are:

a. Should leave be granted to TTK to withdraw an admission?

b. Is Balatchev entitled to its costs for bringing the cross-motion?

Issue #1: Should leave be granted to TTK to withdraw an admission?

Legal principles

20Rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 ("Rules") provides that, on a motion at any stage of an action, the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

21Rule 51.05 of the Rules provides that an admission made in response to a request to admit, a deemed admission under r. 51.03 or an admission in a pleading may be withdrawn on consent or with leave of the court.

22While the language in r. 26.01 of the Rules is mandatory, r. 51.05 is not. The granting of leave is an entirely discretionary remedy: Phillips v. Disney, 2018 ONSC 1021, at paras. 8 to 12.

23The test for leave to withdraw an admission was articulated many years ago in Antipas et al. v. Coroneous et al., (1988), 1988 10348 (ON SC), 26 C.P.C. (2nd) 63 (Ont. H.C.), and recently cited, with approval, by the Ontario Court of Appeal in Champoux v. Jefremova, 2021 ONCA 92, at para. 28. The test is summarized as follows:

a. The court must first consider whether the admission is one purely of fact, law, or mixed fact and law. Then, the court must apply a three-part conjunctive test regarding when an admission could be withdrawn, namely:

i. Does the proposed amendment raise a triable issue in respect to the truth of the admission?

ii. Is there a reasonable explanation for the withdrawal, such as inadvertence or wrong instructions?

iii. Has the party wishing to withdraw the admission established that the withdrawal will not result in any prejudice that cannot be compensated for in costs?

Analysis

24It is undisputed that the enforceability of the termination provision in Stephan's employment contract is at the heart of the litigation. Such enforceability of the termination provision is a matter of contractual interpretation.

25The parties agree that a contractual interpretation is a question of mixed fact and law.

26Although questions of law can be more easily withdrawn than questions of fact alone, I am satisfied that even if the admission deals with a question of mixed fact and law, TTK has met the three-part conjunctive test to withdraw the admission.

Step #1 – Is there a triable issue regarding the admission?

27The core issue in this litigation is whether Stephan's contract of employment ousts the common law. If it does not, then the issue is whether TTK owes Stephan any additional compensation.

28Balatchev argues that there is no triable issue in respect to the truth of the admission because the termination provision in Stephan's employment contract is not enforceable. As such, it is submitted that it will only serve to complicate and prolong the proceedings.

29In my view, a prima facie triable issue exists.

30As stated by the Ontario Court of Appeal in Nemeth v. Hatch, the presumption that an employee is entitled to common law notice can be rebutted if the contract of employment clearly specifies some other period of notice, whether expressed or implied, provided that it meets the minimum entitlements prescribed under the Employment Standards Act, 2000, S.O. 2000, c. 41 ("ESA"). The intention of the parties to displace an employee's common law notice entitlement must be clearly and unambiguously expressed in the employment contract.

31It will be up to the trial judge to determine, on a full record, whether there is ambiguity in Stephan's employment contract and whether the parties agreed to displace Stephan's common law notice entitlement, by paying 13 days of notice pursuant to the ESA. These are issues that are best resolved by the trial judge rather than the motion's judge.

32In addition, the Statement of Claim has been amended, almost doubling the damages being sought by Balatchev. Although this amendment was done on consent and post-admission, it is nonetheless a significant triable issue to be determined, namely the appropriateness of considering Stephan's work in France with TTK, as well as his independent contracting years, for the purposes of calculating the quantum of damages.

Step #2 – Is there a reasonable explanation for the withdrawal?

33TTK argues that the admission was an error.

34Balatchev takes the position that TTK has not provided any evidence of a reasonable explanation of such withdrawal. More particularly, it is submitted that there is no evidence in the record that the admission was an error. Balatchev also suggests that TTK's admission was deliberate and unambiguous.

35I disagree.

36Before the issuance of the Statement of Claim, previous counsel for TTK set out the employer's position in a letter dated September 15, 2017, which reads in part, as follows:

"We are of the view that Mr. Balatchev, having willingly terminated his employment with TTK is not entitled to any notice of termination whatsoever. If it is found that Mr. Balatchev was terminated by our client, which we deny, it is our position that the written employment agreement signed by Mr. Balatchev on May 13, 2014 would be determinative of Mr. Balatchev's entitlement to notice of termination. As you point out in your letter, under the heading "Notice Provisions", the terms of Mr. Balatchev's termination of employment with TTK are to be regulated as stated in the relevant chapters of the ESA. On this basis, pursuant to Section 57 of the ESA, Mr. Balatchev would be entitled to at least two (2) weeks' notice, as he had been employed with TTK for between one (1) and three (3) years at the time of termination. In the alternative, in the event that a court of law were to determine that Mr. Balatchev is entitled to reasonable notice over and above his minimum statutory allotment, it is our position that a reasonable notice entitlement of twelve (12) months, as proposed in your letter, is an astronomical and unjustifiable amount for an employee in Mr. Balatchev's circumstances."

37In September 2017, TTK's position was very clear. TTK was arguing that Stephan's employment contract was enforceable and the termination provision was applicable. There is no evidence to suggest that TTK changed its position.

38In TTK's Statement of Defence and Counterclaim, they deny Stephan's entitlement to reasonable notice. Paragraph 18 partially reads as follows: "The Defendants further specifically deny that in light of the Plaintiff's circumstances and personal characteristics, a reasonable notice period would have been 12 months, as alleged in paragraph 31 of the Claim, as the Defendants shall demonstrate at trial."

39TTK's admission is inconsistent with their stated position in September 2017 and later in its August 2018 Statement of Defence and Counterclaim.

40Then, in December 2020, new counsel for TTK, Mr. van Ert, assessed and reviewed the applicable law. He clearly indicated to counsel for Balatchev that in his opinion, the admission was at odds with the governing law.

41In my view, there is sufficient evidence in the record to conclude that the only reasonable explanation is TTK's admission was made in error.

Step #3 – Will the withdrawal result in any prejudice that cannot be compensated by costs?

42TTK submits that the withdrawal of the admission will not cause prejudice but if it does, Balatchev can be compensated in costs by the trial judge.

43Balatchev argues that TTK has failed to establish that they will not be prejudiced by the withdrawal of the admission.

44I disagree.

45Although these proceedings were initiated in November 2017, TTK's admissions were made in August 2018, and the motion was only heard in July 2022, the proceedings have nonetheless been moving forward:

a. The parties attempted to negotiate a settlement after the issuance of the Statement of Claim.

b. Counsel van Ert became involved with this matter in late 2019. In early February 2020, he alerted counsel for Balatchev that he was seeking to withdraw the admission.

c. The pandemic was declared in March 2020, causing some inevitable delays in the proceedings.

d. TTK served its affidavit of documents on September 2, 2020. Balatchev served its affidavit of documents in December 2020. Several thousand pages of documents were exchanged between the parties. The documentary discovery included emails, letter correspondence, receipts, invoices, quotes, agreements, technical documents, reports, patents, employment and income records, and mitigation efforts.

e. Despite the outstanding dispute regarding the withdrawal of the admission, the parties proceeded to comprehensive Examinations for Discovery on January 12, 13, 19, 22, 26, and 27, 2021. It was agreed that TTK would examine Stephan on the assumption that the motion to withdraw the admission was successful.

f. TTK filed its motion in April 2021.

g. The parties are continuing to cooperate with one another. In April 2022, the parties consented to a variety of items, including amendments to each other's pleadings, further productions, and discoveries.

h. Balatchev has filed a motion for a Protective Order. This motion is scheduled to be heard on November 8, 2022.

46This matter has not been sitting idle for five years. TTK alerted Balatchev of its intention to withdraw the admission within a reasonable time after the appointment of their new counsel. Then, the matter proceeded in a fairly normal course, despite the pandemic and this motion. I do not find that Balatchev has been prejudiced by any of the delays in these proceedings.

47In the event that the motion is granted, TTK is prepared to reproduce a representative of TTK for further questioning. Balatchev submits that further amendments to the pleadings may also be required. Any costs associated with theses additional steps, if any or if required, could easily be compensated by costs, in the final determination of this matter. I find that there is no prejudice to Balatchev if there's withdrawal of admission.

48TTK's motion to resile from its admission at paragraph 28 of Balatchev's claim and to amend its Statement of Defence and Counterclaim is granted.

Issue #2: Is Balatchev entitled to its costs for bringing the cross-motion?

49Balatchev submits that TTK's motion record was not prepared in compliance with the Rules. It is argued that several paragraphs and exhibits of TTK's affiant were frivolous, scandalous, or vexatious. The cross-motion to strike paragraphs was necessary and important, to ensure that Balatchev not be prejudiced by the improper inclusion of evidence in TTK's motion record.

50Balatchev also says that TTK's consent to redact several paragraphs of the affidavit and exhibits is an admission that it was improper and as such, TTK should pay its costs.

51Conversely, TTK argues that they only became aware of Balatchev's objection to certain portions of their motion materials when they were served with the cross-motion. Upon review of Balatchev's cross-motion materials, they agreed to the redactions. TTK states that had counsel for Balatchev contacted their counsel before drafting the cross-motion materials, they would have consented. It was therefore unnecessary to draft cross-motion materials.

52If the drafting of the cross-motion materials could have been avoided with a simple telephone call by counsel, then Balatchev should not be compensated for its unneeded efforts. However, I am not satisfied that TTK would have consented so easily to Balatchev's request to strike. There is insufficient evidence before me to conclude that Balatchev's efforts in drafting the cross-motion materials could have been avoided.

53Balatchev is therefore entitled to their costs for the cross-motion.

Quantum of costs for the motion and cross-motion

54Costs are at the discretion of the court: s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

55Rule 57.01(1) of the Rules sets out the factors that a court may consider when deciding on a costs award.

56The overriding principals of fairness and reasonableness must be applied to each individual case: Boucher v. Public Accountants Council (Ontario), (2004) 2004 14579 (ON CA), 71 O.R. (3d) 291.

57Each party achieved success in their own motions.

58TTK's motion has been granted and presumptively, they are entitled to its costs.

59Balatchev was successful in obtaining their costs for the cross-motion.

60TTK's motion was more complex, requiring more time for drafting and preparation. Two lawyers for TTK spent a total of 42.5 hours of time, representing approximately $11,000 in legal costs, on a partial indemnity basis, all-inclusive. The hourly rates of the two lawyers are respectively $300 and $425.

61Balatchev's legal team of two lawyers and a law clerk spent 66.4 hours of time in response to TTK's motion, representing approximately the same amount of costs of approximately $11,000, on a partial indemnity basis, all-inclusive. The hourly rates of the two lawyers and law clerk are $390, $190, and $130, respectively.

62Regarding Balatchev's cross-motion, their legal team spent 25.7 hours of time at the same hourly rates as indicated above. The partial indemnity costs amount to $4,886.33, all-inclusive.

63The legal costs incurred by both parties, for both motions, are appropriate.

64I find that a reasonable and proportionate net result for these motions is that each party bear their own costs. While TTK's motion was more expensive, I would reduce its entitlement of costs in their motion to the amount of costs incurred by Balatchev in the cross-motion. TTK's motion was necessary because of their error and as such, they partially bear the responsibility for the costs incurred. Furthermore, although Balatchev should not have resisted TTK's motion, they will likely be incurring additional fees for more productions and discoveries, as well as possible amendments to the pleadings. The difference between the costs of both motions will serve as compensation to Balatchev for the anticipated additional work incurred resulting from the withdrawal of the admission.

Conclusion

65TTK's motion to resile from its admission of paragraph 28 of Balatchev's Statement of Claim is granted. TTK's Statement of Defence and Counterclaim to be amended accordingly.

66Each party shall bear their own costs.

M. Smith J