Federal Court Decisions

     Court File No. T-1436-92

BETWEEN:

     OLYMPIA INTERIORS LTD. AND MARY DAVID

     Plaintiffs

     - and -

     HER MAJESTY THE QUEEN

     Defendant

AND

     Court File No. GST-41-92

     In the matter of an assessment by the Minister of

     National Revenue under the Excise Tax Act against

     OLYMPIA INTERIORS LTD.,

     c/o Mary David

     11 Albion Hills Drive

     Palgrave, Ontario

     L0N 1P0

AND

     Court File No. ITA-8447-92

IN THE MATTER OF THE Income Tax Act

AND IN THE MATTER OF an assessment or assessments by the Minister of National Revenue under one or more of the Income Tax Act, Canada Pension Plan, Unemployment Insurance Act

against      OLYMPIA INTERIORS LTD.

11 Albion Hills Drive

of Palgrave

in the Province of Ontario

     REASONS FOR VARIOUS ORDERS

     AND REASONS FOR COSTS

MacKAY J.:     

         These Reasons are concerned with summary explanations for a number of Orders disposing of a series of applications dealt with by the Court after hearing from the plaintiffs in the action in T-1436-92, Olympia Interiors Ltd. and Mary David, represented by Mrs. David on her own behalf and for the corporate plaintiff, and from counsel for the defendant in that action, Her Majesty the Queen. Two full days of hearings, on October 23, 1996 and November 19, 1996, were concerned with these matters.

         At the conclusion of the second day of hearings, counsel for Her Majesty the Queen moved orally for costs, considering the bases for the applications dealt with and the relative success of the parties. Included in these proceedings were two applications by the plaintiffs for show cause orders directed respectively to counsel of record for Her Majesty the Queen and to instructing counsel from the Department of Justice on behalf of Her Majesty the Queen, dealt with in separate Reasons which include directions as to costs in relation to submissions made at the hearing of those motions on October 23, 1996. Aside from those motions, counsel for Her Majesty submitted that, in relation to other matters dealt with on October 23 and November 19, 1996, costs be awarded to Her Majesty, in view of the defendant's relative success, and that costs be deemed to be on a solicitor and client basis, in an amount of $10,000.00. Further, it was urged that costs in that amount be made payable forthwith, or in the alternative that costs be awarded in the amount of $10,000.00 with $2,500.00 to be paid forthwith, and if costs not be paid by a specified date then the defendant be at liberty to move that the plaintiffs' action be dismissed.

         Having finally disposed of all matters raised during those two days of hearings, including the two applications for show cause orders and the award of costs in relation to those applications, I now direct that costs be awarded to Her Majesty in relation to all other matters considered on October 23 and November 19, 1996, in a fixed sum $2,500.00, payable by the plaintiff Mary David in any event of the cause. In the circumstances, I am not persuaded it is appropriate to consider costs on a solicitor and client basis or to direct that costs in any amount be payable forthwith.

         It will assist in explanation of my Order for costs if the background is briefly described and if the various motions considered on October 23 and November 19 are reviewed with summary reasons for their disposition.

         The three Court files involved in these motions originated in regard to claims by the Minister of National Revenue for taxes assessed as due and unpaid in the early 1980's. A certificate was filed in relation to income taxes claimed as unpaid by the corporate plaintiff (Court file ITA-8447-92), and another certificate in relation to excise taxes claimed as unpaid (Court file GST-41-92). Both were apparently filed pursuant to statutory provisions for collection of unpaid taxes. Thereafter the plaintiffs commenced action against Her Majesty the Queen for relief in relation to the claims for taxes unpaid (Court file T-1436-92).

     In these proceedings, Mary David has represented herself and by Order of Simpson J. she is permitted to represent the plaintiff corporation. She is not a solicitor. She is a principal or sole shareholder and was an officer of the plaintiff corporation, which is now bankrupt.

         In preparation for trial, Associate Chief Justice Jerome sought to assist the parties through pre-trial conferences. In that process a number of initiatives were taken primarily by Mary David, on behalf of the plaintiffs, not all of which had been dealt with before the case management of the proceedings became my responsibility. The hearings on October 23 and November 19, 1996 were arranged to deal with motions outstanding and other matters raised by the parties after August, 1996.

         The following is a summary of matters dealt with and reasons for the determinations in each case.

1.      Plaintiffs' motions for judgment which were dismissed.

(i)      By Notice of Motion dated August 16, 1996, received by the Court on August 7, 1996 and ordered filed at the hearing on October 23, 1996, the plaintiffs sought summary judgment and asked for directions (Court files T-14392 and GST-41-92).

(ii)      By Notice of Motion dated August 12, 1996, received by the Court on August 18, 1996 and ordered filed at the hearing on October 23, 1996, the plaintiffs sought summary judgment and asked for directions (Court files T-1436-92 and ITA-8447-92).

(iii)      By Notice of Motion dated September ll, 1996, the plaintiffs sought, in part, judgment under Rules 432.3 and 341(a)(b), (Court files T-1436-92 and GST-41-92).

     Reasons: All three motions were dismissed at the hearing on October 23, as confirmed by two Orders issued on October 31, 1996 the first concerning motions (i) and (iii) above and the second concerning motion (ii) above. As indicated in recitals of both Orders, these motions were dismissed following agreement of Mrs. Mary David, in the course of presenting submissions on behalf of both plaintiffs, that there was nothing new in evidence or argument to be submitted beyond submissions made earlier when Mr. Justice Rothstein dismissed an application for summary judgment made by the plaintiffs in action T-1436-92 (see Order of Rothstein J. dated November 22, 1995), or later when he dismissed a motion by plaintiffs for reconsideration of that Order (see Order of Rothstein J. dated December, 15, 1996).

2.      Plaintiffs' motions for show cause Orders which have been dismissed:

(i)      directed against Bryan McPhadden, counsel of record for Her Majesty the Queen originally with reference to file ITA-8447-92, received by the Court on August 12, 1996, subsequently supported by a Memorandum received October 18, 1996, bearing all three Court file numbers, both of which documents were ordered filed at the hearing on October 23, 1996; and

(ii)      directed against Ms. Bonnie Boucher, instructing counsel for the Department of Justice in relation to Mr. McPhadden, originally by Notice of Motion bearing Court file number T-1436-92 and GST-41-92, dated September 18, 1996 and ordered to be filed at the hearing on October 23, 1996.

     Comment: Both of these applications, upon which decision was reserved at the hearing, have now been dismissed by Order dated January 29, 1997 with costs awarded to the Crown in any event of the cause, as set out in a separate Order. Separate Reasons for the decisions and for costs as awarded, based on arguments presented have now been filed. These Reasons and the accompanying Order, concerning various orders and costs in relation to certain applications heard October 23 and November 19, 1996, do not relate further to the motions for show cause orders or to costs awarded in disposition of these motions.

3.      Plaintiffs' motion for alternative relief if an order for judgment is not granted:

     By their Notice of Motion dated September ll, 1996 the plaintiffs applied for alternative relief, in the event their application for judgment was not granted. The motion insofar as it related to alternative relief was dealt with at the hearing in Toronto on November 19, 1996.

         The alternative relief sought, and my disposition of the application in relation to each type of relief requested was dealt with by an Order dated November 20, 1996. Matters disposed of were:

     (i) An application to strike a number of designated paragraphs of the Statement of Defence filed herein was dismissed, without prejudice to the plaintiffs' opportunity to introduce at trial of the action evidence to contest or contradict the allegations of fact included in the designated paragraphs in the Statement of Defence.

     Reason: Allegations of fact in a Statement of Defence, as in a Statement of Claim, are not accepted as true for purposes of the trial unless they are agreed upon by the parties or are established on the basis of evidence adduced by the parties at trial. A motion to strike paragraphs from the pleaded Defence is not an appropriate way to contest the facts alleged in those paragraphs unless it is clear before trial that the defendant cannot prove the facts alleged. That is not clear at this stage in this action.

     (ii) An application to sever trial of the issues of liability and damages pursuant to Rule 480, was dismissed without prejudice to either party (or the Court) seeking a similar order or direction when discoveries are completed.

     Reason: The appropriate time to consider severance of issues of liability and damages in this case now will be when discoveries are completed and the parties, together with the Court, can consider in a pre-trial conference a schedule and arrangements appropriate for the trial, including this proposal.

     (iii) An application, pursuant to Rule 1715, for joinder of an additional plaintiff to be the subject of a reference after trial, was dismissed.

     Reason: Insofar as the plaintiffs' motion concerns the addition of a corporation known as Window Elegance as a plaintiff in the action in T-l436-92, on the basis that payments made to that company's shareholders by Mary David arose from actions on behalf of the defendant and which constitute a claim for the plaintiffs' loss, dismissal of the plaintiffs' motion is without prejudice to a further application, with leave, to amend the Statement of Claim if that be necessary and to add a party as a further plaintiff. At this stage, it is not clear that adding another plaintiff is appropriate.

4.      Defendant's motion (File T-l436-92) for an Order to strike the plaintiffs Statement of Claim, with costs on a solicitor and client basis for scheduled examinations for discovery which the plaintiffs failed to attend, payable forthwith, or in the alternative an Order that plaintiffs attend discoveries within a fixed period failing which the defendant would be entitled to judgment.

The application to strike the Statement of Claim was dismissed and plaintiffs were directed to attend continuing examinations for discovery, arranged at mutual convenience of the parties, to be completed by January 31, 1997.

     Reason: Arrangements for continuing discoveries, and examination under previous orders of Jerome A.C.J., were made to take place in premises of the Court in Toronto in January. Those arrangements seemed proper to the Court, and the motion to strike the Statement of Claim was not appropriate in these circumstances.

5.      Defendant's two similar motions for an Order that the plaintiffs not bring any further motions in these proceedings except with prior leave of the Court, both dated September 5, 1996, (one in relation to file T-1436-92 and one in relation to files GST-41-92 and ITA 8447-92).

     Both motions were allowed by a single Order, filed on each of the three related Court files in these proceedings.

     Reason: the basis for the defendant's motions was a perceived abuse of the Court's process by the plaintiffs, with a multiplicity of procedural initiatives. When the motions were heard on November 19, 1995, Mary David, appearing for herself and for Olympic Interiors did not object in principle to the Order sought, conceding that she was not qualified as a lawyer and the Court's processes, under the Rules, were confusing to her. The Order orally rendered at the hearing was confirmed by Order dated and filed December 16, 1996 after opportunity for the parties to comment on terms proposed for the written Order. In the process of that consultation, Mary David submitted in writing, after the hearing, that any Order requiring leave to file should be applicable to both parties, a possibility to which counsel for the defendant objected. The Court declined in the circumstances to accept Mrs. David's submission, and the Order requires only the plaintiffs to seek leave to file further motions or applications, and outlines a process for applying for, and for the Court granting, leave to file.

         This is an unusual order not specifically provided for by any of the Court's Rules. Counsel for the defendant supported the motions to require the plaintiffs to seek leave by analogy with section 40 of the Federal Court Act, R.S.C. 1988, c.F-7 as amended. That section authorizes the Court, on application, with consent of the Attorney General of Canada, where the Court is satisfied that a person has persistently instituted vexatious proceedings or has conducted a proceeding in a vexatious manner, to order that no further proceedings be instituted or that a proceeding not continue. Rule 5(b) of the Federal Court Rules, the so-called "Gap Rule", permits the Court to deal with any matter arising, that is not otherwise provided for, by reference to the practice and procedure in force in similar proceedings in the courts of the Province to which the matter of the proceeding most closely relates. Counsel argued that the Court should adopt an order by analogy to one that might be made under Rule 37.16 of the Ontario Rules of Civil Procedure. That rule permits the Ontario Court of Justice to make an order prohibiting a party from making further motions, without leave, in a proceeding where the Court is satisfied that the party is attempting to delay or to add to costs of the proceeding or otherwise abuse the process of the Court by a multiplicity of frivolous or vexatious motions.

         I make no finding that the plaintiffs intended to abuse the process of the Court. There have been, however, a multiplicity of motions, applications, inquiries or other initiatives, many not in the usual form, some without supporting affidavits or with affidavits that do not set out the factual basis for the application. I have noted that Mary David is not a solicitor. I assume her initiatives, so far as I have seen them, are intended to properly serve her interests or those of Olympic Interior, but they result in a multiplicity of papers (the Ottawa file in T-l436-92 is already in 5 volumes) requiring the defendant, and often the Registry or the Court to review and to respond, without contributing to progress in advancing the action initiated by Mary David for the plaintiffs in Court file T-1436-92.

         In these circumstances, it seemed appropriate that an Order be issued to require leave to file motions, applications or other initiatives. It will permit the Court to maintain all correspondence or documents from the plaintiffs in a case management file, and when leave is granted to file any motion or application, to then file that on the Court's regular file for these proceedings. Once on the regular file it will be part of the Court's regular process for formal response by the defendant and/or for determination by the Court.

     The Order requiring leave is issued in tandem with arrangements for a Judge, and for a Registry Officer, to be responsible for case management of these proceedings in preparation for trial. Like any other Order of the Court providing for procedures in preparation for trial or a hearing, that Order, issued on December 16, 1996, is subject to reconsideration on application by one of the parties or on the Court's own initiative.

The Matter of Costs

         The motions outlined in these Reasons were heard over two full days. Overall, the position of the defendant, Her Majesty the Queen, has been upheld with respect to motions brought on Her behalf or by the plaintiffs.

         Costs in relation to the two show cause motions of the plaintiffs have been dealt with separately by the Order dismissing those two motions.

        

     The defendant is entitled to costs. They are asked for in the amount of $10,000.00, for those matters other than the show cause motions, payable fully or in part, forthwith. I appreciate that preparation for presentation of the Crown's motions and for responding to the plaintiffs' motions took considerable time, and when the various motions came on for hearing that was evident, and helpful to the Court. Nevertheless, I note that the three motions of the plaintiffs for judgment were dealt with together and fairly expeditiously, as was the plaintiff's motion for alternate relief in lieu of judgment at this stage The defendant's motions for an Order to require the plaintiffs to have leave of the Court to file further motions were exceptional, if not particularly difficult to prepare, in my opinion, and the plaintiffs' position at the hearing was not to object; so that at the hearing these motions were dealt with expeditiously.

         I should note that the defendant asked for costs in relation to each of the Crown's two motions for an Order requiring leave for the plaintiffs to file further motions, in a fixed amount of $750.00, each payable forthwith. In regard to its motion to strike the Statement of Claim or for alternative relief the Crown asked for costs, on a solicitor and client basis for that application and costs for the aborted examinations for discovery, also payable forthwith. The substantially increased figure proposed at the end of the second day of hearings, in an amount of $10,000.00 was proposed orally, without advance notice, with reference to the several motions by both parties, excluding the show cause motions.

         In light of that overview and remembering the defendants request for costs relating to discoveries scheduled but aborted on short notice by the plaintiffs, it is my opinion that costs in an amount of $2,500.00, plus reasonable disbursements, in relation to all motions except those for show cause orders, is the appropriate amount for fixed costs to be awarded to the defendant, payable, in any event of the cause, but not payable forthwith. Those costs are payable by the plaintiff Mary David, in light of the circumstances, as I understand them, of Olympic Interior Ltd. as a bankrupt corporation.

         I decline to order the payment of costs forthwith. That would be appropriate in this case if the Court had not allowed the motions to require leave for the plaintiffs to file further motions. The leave requirement now ordered permits the Court in case management to introduce some discipline to the initiatives to be commenced henceforth. The objective of ordering payment forthwith, introducing that discipline, is thus met and no order for such payment is required.

         An Order directing fixed costs in the amount noted above is filed, the original on Court file T-1436-92, and a copy on each of files GST-41-92 and ITA-8447-92, together with a copy of these Reasons on each of those three files.

     _____________________________

     JUDGE

OTTAWA, Ontario

January 31, 1997.