



COURT OF APPEAL FOR ONTARIO

CITATION:
Advanced Farm Technologies-JA v. Yung Soon Farm Inc., 2021
    ONCA 569

DATE: 20210817

DOCKET: C68506

Feldman, Paciocco and Coroza
    JJ.A.

BETWEEN

Advanced Farm Technologies-JA, Limited, carrying on business as
    Advanced Farm Technologies, JA. Ltd., and Advanced Farm Technologies, Jamaica Ltd.

Plaintiff

(Respondent)

and

Yung Soon Farm Inc.
, Michael Chung, Walter Chung, and Stephen Chung

Defendants

(
Appellant
)

James Chow, for the appellant

Mahdi M. Hussein, for the respondent

Heard: March 9, 2021 by videoconference

On
    appeal from the order of Justice Janet Leiper of the Superior Court of Justice,
    dated June 19, 2020, with reasons at 2020 ONSC 3831.

Feldman J.A.:

[1]

The appellant was sued under the simplified procedure
    for failing to pay the agreed price of US$48,238.49 for papayas ordered and
    delivered. After having default judgment set aside, the appellant defended the
    action and instituted a counterclaim for $5,000,000 in damages for breach of
    contract and $1,000,000 in punitive damages, taking the action out of the simplified
    procedure. After that, the appellant effectively absented itself from the
    litigation, with the result that its defence and counterclaim were eventually struck
    out by the motion judge without leave to amend. The appellant appeals that
    decision.

[2]

The motion judges decision is well-supported by
    the record and the law. I would dismiss the appeal.

A.

History of the Action

[3]

The statement of claim was served on all parties
    in December 2017, no statement of defence was filed, and default judgment was obtained
    in January 2018. In August 2018, the defendants had the default judgment set
    aside on the condition that they pay costs and deliver a defence within 30 days.
    After the plaintiff discontinued its action against the individual directors, the
    appellant delivered its statement of defence along with a counterclaim for $5
    million for breach of contract and $1 million punitive damages, which had the
    effect of converting the action from the simplified procedure to the ordinary
    stream. After the plaintiff moved to strike portions of the appellants
    pleading, the appellant delivered an amended statement of defence and
    counterclaim in January 2019.

[4]

The plaintiff delivered its affidavit of
    documents on June 7, 2019, then made numerous attempts thereafter to move the
    litigation forward, with no response from appellants counsel except to cancel
    the scheduled examinations for discovery and to consent to the timetable
    imposed by Master Short. I am setting out the details, as did the motion judge,
    because understanding the full extent of the appellants conduct of the
    litigation is necessary to understand and review the decision of the motion
    judge to strike the defence and counterclaim. The following are the details:

a.

July 11, 2019:
Plaintiffs
    counsel's office wrote to appellants counsel in an attempt to schedule
    examinations for discovery. Counsel to the plaintiff advised appellant's
    counsel that, "We have tried contacting your office numerous times, and
    only reach your voicemail. You have not returned any of our recent
    voicemails."

b.

July 24, 2019:
Plaintiffs counsels office set dates for examination for discovery, as he had
    not heard from appellant's counsel nor had he received the appellants
    affidavit of documents.

c.

August 12, 2019:
Four days before the scheduled examinations for discovery, appellant's counsel
    advised that his client was unable to attend and asked the plaintiff to provide
    further dates. Appellants counsel did not advise when his client would provide
    its affidavit of documents.

d.

August 27, 2019:
Plaintiff's
    counsel made a further request for the appellant's affidavit of documents and
    provided available dates for examinations between September and October 2019.
    Plaintiff's counsel advised that if appellant's counsel did not respond, he
    would schedule a motion to compel the appellant's affidavit of documents and
    would issue a further notice of examination. Appellant's counsel did not
    respond to this correspondence.

e.

September 13, 2019:
Plaintiff's counsel unilaterally set an examination for discovery
    of the appellant for October 17, 2019 and sent correspondence to the appellant's
    counsel advising of this date. Appellant's counsel did not respond to this
    correspondence.

f.

September 23, 2019:
Plaintiff's counsel served a motion record on the appellant's
    counsel with a return date of October 2, 2019, seeking the appellant's
    affidavit of documents and an order for the appellant to attend the scheduled
    examination for discovery. The appellant filed no responding materials for this
    motion. Appellant's counsel did not respond to this correspondence.

g.

October 2, 2019:
The court imposed a timetable on consent,

and ordered costs of $1500
    payable to the plaintiff in 60 days. The order required the appellant to
    deliver its unsworn affidavit of documents by November 1, 2019. The appellant
    did not comply with the timetable. The appellant did not pay the costs ordered
    within 60 days.

h.

November 4, 2019:
Plaintiff's counsel sought to formalize the October 2, 2019 endorsement. In
    that letter, plaintiffs counsel sought the status of the appellant's affidavit
    of documents. Plaintiff's counsel also put appellants counsel on notice that he
    would move to strike the defence. Appellant's counsel did not respond to this
    correspondence.

i.

March 6, 2020:
Plaintiff's
    counsel enclosed a notice of examination in aid of execution seeking payment
    for the outstanding costs award from the October 2, 2019 motion. Plaintiff's
    counsel also sought dates for a motion to strike the appellant's defence for
    failing to abide by the terms of the October 2, 2019 endorsement. This letter
    asserted that, "It is clear that your client has no interest in litigating
    the action." Appellant's counsel did not respond to this correspondence.

j.

March 16, 2020:
Plaintiff's
    counsel wrote to inform appellant's counsel that due to the COVID-19 pandemic
    the court would not schedule its motion. Plaintiff's counsel sought a virtual
    mediation in accordance with Rule 24 of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194
. Appellant's
    counsel did not respond to this correspondence.

k.

May 12, 2020:
Plaintiffs
    counsel informed appellant's counsel via email of the chambers appointment
    returnable on May 15, 2020. Appellant's counsel did not respond to this
    correspondence.

l.

May 13, 2020:
Plaintiffs counsel provided appellant's counsel with a proposed schedule for
    the litigation ahead of the chambers appointment. Appellant's counsel did not
    respond to this correspondence.

m.

May 15, 2020:
Myers
    J. convened a chambers appointment. Appellant's counsel did not attend. The
    motion to strike the defence was scheduled on that date and timelines were set
    for delivery of motion materials.

[5]

The order under appeal was made on a motion in
    writing dated June 15-19, 2020, which was scheduled by Myers J. at the May 15,
    2020 chambers appointment that appellants counsel did not attend. After the
    plaintiff had served its motion record and factum, on June 11, 2020, the
    appellant sent a cheque for the outstanding costs due to the plaintiff with a
    letter apologizing for the delay. Finally, on June 12, 2020, the appellant
    delivered its affidavit of documents with a letter that apologized for the
    delay, proposed mediation, and asked for the plaintiffs position on posting
    security for costs. An affidavit of an officer of the appellant stated that he
    believed the appellant had a strong case, and that the appellant intended to
    proceed expeditiously and would participate in mediation, but provided no
    explanation for any of the delays or for its failure to abide by the order of
    Master Short.

B.

The Motion Judges Analysis

[6]

The motion judge referred to Rule 60.12 of the
Rules
    of Civil Procedure
, which allows the court to sanction a party for failure
    to comply with an interlocutory court order, including by staying the
    proceeding, dismissing the proceeding, striking out a defence, or making such
    other order as is just.

[7]

The motion judge referred to the 2009 decision in
Dew Point Insulation Systems Incorporated v. JV Mechanical Limited
,
259 O.A.C. 179, where Bellamy J. summarized
    the purpose and approach to Rule 60.12 motions: to sanction repeated procedural
    breaches while bearing in mind that striking the defence is a last resort
    remedy to be used when there has been utter disregard for court orders or where
    there is prejudice to the other party. Applying those principles, the motion
    judge concluded that the appropriate remedy was to strike the defence and
    counterclaim, based on five aspects of the record.

1.       The
    appellant took no step to move the litigation forward without a court order.

2.       The
    appellant breached the consent order of Master Short by failing to deliver the
    affidavit of documents or the costs on time.

3.       The
    appellant did not remedy the breaches until after the plaintiff had scheduled a
    compliance motion, and delivered a motion record and factum.

4.       The
    appellant displayed a months long pattern of failing to respond to correspondence.

5.       The
    appellant asserted that the action was vexatious, yet it took no steps to deal
    with the action as such, and instead responded with a $6 million counterclaim
    that belied the suggestion that the claim was vexatious.

[8]

The motion judge acknowledged that the plaintiff
    was seeking an extreme remedy but concluded that it was warranted in all the
    circumstances. By ignoring Master Shorts order, the appellant showed an utter
    disregard for court orders in the overall context of this litigation, as outlined
    above.

C.

Issues

[9]

The appellants position on appeal is that the
    motion judge erred by: 1) failing to give the appellant a last chance to comply
    with court orders; 2) failing to acknowledge that by the return of the motion the
    appellant was no longer in breach of Master Shorts order; 3) failing to
    consider the merits of its defence; 4) failing to consider that the action was at
    the early stages and should have been decided on its merits; and 5) failing to
    consider that there was no evidence of prejudice to the plaintiff.

D.

Analysis

[10]

This court has recently had the opportunity to
    address the issue of when it is appropriate to strike a pleading under Rule
    30.08(2) of the
Rules of Civil Procedure
for non-compliance with document
    disclosure obligations in
Falcon Lumber Limited v. 2480375 Ontario Inc. (GN
    Mouldings and Doors)
, 2020 ONCA 310. In that case, the court summarized
    the applicable principles, at para. 57, as follows:

To summarize, several principles guide the
    exercise of a courts discretion to strike out a partys claim or defence under
    r. 30.08(2) for non-compliance with documentary disclosure and production
    obligations:

·

The remedy is not restricted to last resort
    situations, in the sense that it must be preceded by a party breaching a series
    of earlier orders that compelled better disclosure or production. However,
    courts usually want to ensure that a party has a reasonable opportunity to cure
    its non-compliance before striking out its pleading;

·

A court should consider a number of common sense
    factors including: (i) whether the partys failure is deliberate or
    inadvertent; (ii) whether the failure is clear and unequivocal; (iii) whether
    the defaulting party can provide a reasonable explanation for its default,
    coupled with a credible commitment to cure the default quickly; (iv) whether
    the substance of the default is material or minimal; (v) the extent to which
    the party remains in default at the time of the request to strike out its
    pleading; and (vi) the impact of the default on the ability of the court to do
    justice in the particular case;

·

The merits of a partys claim or defence may
    play only a limited role where breaches of disclosure and production
    obligations are alleged as one would reasonably expect a party with a strong
    claim or defence to comply promptly with its disclosure and production
    obligations;

·

In considering whether an order to strike out a
    pleading would constitute a proportional remedy in the circumstances, a court
    should consider:

o

the extent to which the defaulting partys
    conduct has increased the non-defaulting partys costs of litigating the
    action, including the proportionality of those increased costs to the amount
    actually in dispute in the proceeding; and

o

to what extent the defaulting partys failure to
    comply with its obligation to make automatic disclosure and production of
    documents has delayed the final adjudication of the case on its merits, taking
    into account the simplicity (or complexity) of the claim and the amount of
    money in dispute.

[11]

Because the default in this case involved the
    appellants failure to produce an affidavit of documents, the principles
    articulated by the court in
Falcon
are clearly relevant and should apply
    accordingly. In this case, the appellant also breached a court order, which
    adds significantly to the impugned conduct. In addition, counsel, on behalf of
    the appellant, failed to respond to normal communications from opposing counsel
    with no explanation.

[12]

With respect to the last resort issue raised
    by the appellant, there are a number of responses. First, as Brown J.A.
    explains in
Falcon
, a court may strike out a pleading if that is the
    remedy warranted by all the circumstances, as long as the party has had a
    reasonable opportunity to cure any non-compliance. Second, as the plaintiff points
    out, had the appellant attended the chambers appointment with Myers J., it
    would have had its last chance to comply with Master Shorts order before going
    to the motion where the pleading was struck. Third, in this case, the appellant
    shunned the many overtures made by plaintiffs counsel to comply and move
    forward with the litigation. Instead, the appellant ignored every overture
    after the consent order of Master Short.

[13]

With respect to taking into account the
    potential merit of the appellants defence, Brown J.A. points out that it plays
    only a limited role in the courts analysis because if a party has a strong
    position on the merits, one would expect them to produce their documents to
    demonstrate that strength.

[14]

In applying the common sense factors set out by
    Brown J.A.,

·

the appellants failure to comply with Master
    Shorts court order appears to have been deliberate as so many chances were
    given to comply and there has been no explanation for its inaction;

·

the appellants failure to comply is clear;

·

although there has now been very late compliance
    with Master Shorts order and a statement in its officers affidavit that the
    appellant intends to proceed expeditiously with the litigation, without an
    explanation for its prior inaction, there is no basis on which to accept its
    assurance;

·

the substance of the default was significant;

·

the appellant complied with Master Shorts order
    mere days before the motion to strike, meaning that the appellant was in
    default when the motion was commenced and even after the chambers appointment
    before Myers J.; and

·

the impact of the default was that the litigation
    could not proceed.

[15]

Further, there was clearly prejudice to the
    plaintiff, through the ongoing cost of chasing the appellant to fulfill its
    procedural obligations and to participate in the litigation, as required by the
Rules of Civil Procedure
.

[16]

Ultimately the motion judge concluded that the
    extreme remedy of striking the appellants pleadings was warranted, noting that
    she did not grant it lightly. She considered the appellants compliance with
    the order of Master Short, but noted that it was done on the last possible
    day. She also considered the steps taken by the plaintiff and the responses of
    the appellant in the overall context and concluded that the remedy requested
    by the plaintiff was the appropriate one.

[17]

The motion judge was entitled to conclude that
    notwithstanding the appellants eventual, months late delivery of the costs and
    affidavit of documents ordered by Master Short, its history of an overall
    failure to participate in the litigation process in accordance with the Rules
    called for the extreme remedy of striking the appellants statement of defence
    and counterclaim.  I see no error in the motion judges approach. I would not
    interfere with her decision.

E.

Conclusion

[18]

I would therefore dismiss the appeal with costs,
    fixed in the agreed amount of $10,000 inclusive of disbursements and HST.

Released: August 17, 2021 K.F.

K. Feldman J.A.

I agree. David M. Paciocco J.A.

I agree. S. Coroza J.A.


