Volkswagen Canada Inc. v. Access International Automotive Ltd., 2004 FC 508

Date: 20040402

Docket: T-319-98

Citation:2004 FC 508

BETWEEN:

                                             VOLKSWAGEN CANADA INC.

                                                                                                                                     Plaintiff

                                                                                                    Defendant by Counterclaim

                                                                    - and -

                             ACCESS INTERNATIONAL AUTOMOTIVE LTD.

                                                                                                                                Defendant

                                                                                                        Plaintiff by Counterclaim

                                                                    - and -

                                           VOLKSWAGEN AG and AUDI AG

                                                                                                                            Third Parties

                                                   REASONS FOR ORDER

                                      (Delivered from the Bench in Calgary, Alberta

                                                           on April 1^st, 2004)

HUGESSEN J.

[1]                Today, I have before me the continuation of the hearing on a motion which is brought by the defendant and originally heard on February 5^th last, as well as a further motion by the defendant filed on March 4^th of this year. Both motions seek substantially the same relief, namely the dismissal of the principle action, contempt against the plaintiff for failure to produce documents in compliance with Court orders and costs.

[2]                On February 5^th, I also heard and dismissed two other motions brought by the plaintiff, one being to set aside an earlier consent order regarding the production of documents and the other seeking leave to file a further affidavit. In dismissing those motions, I reserved the question of costs until today.

[3]                At the February 5^th hearing, it was made abundantly clear that the plaintiff had failed to comply with an earlier consent order which obliged it to produce a further affidavit and further documents. At that time, I gave to plaintiff a further chance to bring itself into compliance and, fixing dates for interim steps, set the matter over to today for final disposition. It was not contested on February 5^th that plaintiff had failed to comply with the consent order of April 2003 and it is not contested today that it has further failed to take advantage of the grace period which was extended to it by the order of February 5^th.

[4]                Plaintiff's counsel properly concedes that these facts justify the Court in ordering the dismissal of the action which I shall do. He also suggests that I should strike out the defence to the counter-claim and indeed the counter-claim itself. With respect to the latter, there is no proper motion before me, but with respect to the defence to the counter-claim, defendant's counsel has asked, for reasons which I think it best for me not to comment upon at this time, that I not accede to that demand.

[5]                Since the counter-claim is the defendant's own action and is independent of the principle action, the maintaining of the statement of defence to it is a matter upon which I would not act against the defendant, plaintiff by counter-claim's wishes. I shall limit myself with respect to the counter-claim to making a scheduling order after hearing from the parties.

[6]                This brings me to the question of whether or not I should issue a show cause order against the plaintiff for contempt in non-compliance with the orders of April 2003 and February 5^th of this year. There is no doubt that the evidence before me would justify such an order. There is prima facie evidence of contempt and defendant's counsel has cited to me cases to the effect that in such circumstances, the Court had no discretion under the former Federal Court Rules. With respect, I think that is no longer the law. First, the Federal Court Rules, 1998 have drastically changed and recodified rules regarding contempt. Rule 467 which is the modern rule, by the use of the permissive "may" makes it quite clear to me that now the Court always retains discretion to issue or not to issue a contempt citation.

[7]                Second, as a matter of policy, it seems to me that the Court should exercise caution and indeed prudence in exercising its coercive powers, especially in regard to what are essentially procedural failures. Here, as it seems to me, the plaintiff's undoubted misconduct will be more than adequately sanctionned by the dismissal of its action and by the costs award which I am about to make.

[8]                This brings me to the question of costs. The plaintiff's failure to respect its obligations regarding documentary production has a long history and is very serious. Even the bringing of the motion which eventually resulted in the consent order of April 2003 should not have been necessary since the documents ordered to be produced had been known to be in existence and to be relevant since some of the earliest stages of the action. Even before the consent order was formally entered, but after it had given its consent thereto, the plaintiff started seeking to avoid the consequences thereof. It was only after the defendant had brought one of the two motions before me in August 2003 that the plaintiff, in one of the motion which I dismissed on February 5^th, 2004, moved to set aside the consent order. And prior to that, in a move which can only be characterized as abusive, the plaintiff had insisted upon conducting an entirely unnecessary cross-examination of the deponent of the defendant's affidavit. Following the making of the February 5^th orders, within a very few days, the plaintiff was advised by its German parent company that it should not comply with either the April 2003 or the February 5^th, 2004 orders. But notwithstanding that, it continued to engage in obstructive and delaying tactics. In my view, an order for costs approximating full indemnization on a solicitor and client basis is justified in respect of all the motions disposed of by the April 2003 consent order and the orders issued on February 5^th, 2004 and the order issued today. On the basis of the affidavit evidence before me, I feel confortable in fixing that sum at $70,000 which sum shall include all disbursements.

[9]                As to the costs of the principle action which is to be dismissed, I take into account the fact that it appears that plaintiff has turned down some four offers to settle, all of which offer turns at least as favourable to the plaintiff if not considerably more so than what it will get out of today's proceedings. I also take account of the difficulty and novelty of some of the issues raised and of the fact that the plaintiff's conduct of the action has been particulary burdensome to the defendant which is a much smaller entity and more vulnerable. I do not however, because I cannot, dispose of the costs associated with the counter-claim which at defendant-plaintiff by counter-claim's own request remains pending. I shall fix the costs on a party and party basis including all disbursements but excluding costs related to an unsuccessful mediation and to proceedings before the Court of Appeal at $40,000.

[10]            An order will accordingly go dismissing the principle action with prejudice and with costs to the defendant in a global amount of $110,000. I shall hear counsel as to a scheduling order in relation to the counter-claim and any other outstanding matters.            

                                                                                                                                         Judge                        

Ottawa, Ontario

April 2^nd, 2004

                                                        FEDERAL COURT

                       NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                               T-319-98

STYLE OF CAUSE: Volkswagon Canada Inc v. Access International          Automotive Ltd.

PLACE OF HEARING:         Calgary, Alberta

DATE OF HEARING:           April 1^st , 2004

REASONS FOR ORDER OF THE HONOURABLE MR. JUSTICE HUGESSEN

DATED:          April 2, 2004

APPEARANCES:

Mr. L.E. Trent Horne                            FOR PLAINTIFF

Mr. Michael J. Donaldson                      FOR DEFENDANT

SOLICITORS OF RECORD:

Sim, Hughes, Ashton & McKay LLP    

Toronto, Ontario                                   FOR PLAINTIFF

Burnet, Duckworth & Palmer LLP

Calgary, Alberta                                    FOR DEFENDANT