IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Dura-Ramp Inc. v. 557317 B.C. Ltd., |
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2017 BCSC 1869 |
Date: 20171020
Docket: S162311
Registry: Vancouver
Between:
Dura-Ramp Inc.
Plaintiff
And
557317 B.C. Ltd. doing business as T-Lane Transportation & Logistics,
Brent Wiebe and Scott Green
Defendants
Before: The Honourable Mr. Justice Brundrett
Reasons for Judgment
In Chambers
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Counsel for the Plaintiff: |
J. Hutchinson |
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Counsel for the Defendants: |
B. Robinson |
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Place and Date of Hearing: |
Vancouver, B.C. July 26, 2017 |
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Place and Date of Judgment: |
Vancouver, B.C. October 20, 2017 |
[1] This is an application for special costs pursuant to Rules 9-8(4) and 14-1(1)(b)(i) of the B.C. Supreme Court Civil Rules, B.C. Reg. 168/2009, which apply where, as here, a claim has been discontinued by a plaintiff.
[2] The defendants (the applicants herein) 557317 B.C. Ltd. carrying on business as T-Lane Transportation & Logistics (“T-Lane”), Brent Wiebe (“Mr. Wiebe”), and Scott Green (“Mr. Green”) seek special costs on the basis that the plaintiff, Dura-Ramp Inc. (“Dura-Ramp”), brought serious allegations of dishonesty and wrongdoing against them without a proper evidentiary foundation. The defendants say Dura-Ramp failed to make reasonable inquiries into the allegations and did not have sufficient evidence of that wrongdoing prior to bringing the action. Since Dura-Ramp acted with reckless indifference and in a reprehensible manner, and the defendants spent considerable time and cost to defend an action which should not have been brought, Dura-Ramp’s conduct should be rebuked through the assessment of special costs.
[3] Dura-Ramp argues that while the discontinuance entitled the defendants to ordinary costs, the claim for special costs is entirely meritless. It says special costs awards are rare and to be made in only exceptional circumstances to rebuke reprehensible conduct.
[4] For the reasons that follow, I decline to order special costs.
[5] This case arose primarily as a result of Dura-Ramp’s concerns over two of its employees leaving to work for T-Lane.
[6] Dura-Ramp is a family business located in Chilliwack with approximately 15 employees. Since 1995, it has been involved exclusively in the manufacture, source, marketing, selling, and distribution of forklift ramps, portable loading docks, and other ramp products. Forklift ramps are used in the logistics industry for moving cargo; for instance, to enter and unload semi-trailer trucks. Dura-Ramp’s customers are found across North America.
[7] Dura-Ramp has more recently maintained its forklift ramp schematics and drawings in electronic form. These electronic drawings are critical to its business and are disclosed only in limited circumstances. Similarly, Dura-Ramp maintains customers lists in electronic form and guards the list in strict confidence.
[8] T-Lane is a much larger transportation logistics company that, among other things, provides trucking services to its customers. Dura-Ramp had used T-Lane in the past to deliver its forklift ramps to other parts of North America.
[9] The defendant Mr. Wiebe worked for Dura-Ramp between April 2009 and May 2015 as a sales manager. In that position, he was responsible for identifying, establishing, and maintaining relationships with customers and vendors. As sales manager, he had extensive access to Dura-Ramp’s company property including its customer list and drawings. Mr. Wiebe had family ties to the general manager, Brandon Edwards (“Mr. Edwards”), at Dura-Ramp. Mr. Edwards and his wife were quite hurt when Mr. Wiebe left Dura-Ramp.
[10] In the fall of 2014, Mr. Wiebe informed Mr. Edwards that Dura-Ramp’s physical schematics and drawings were inadequate, and that customers were now requesting digital versions of Dura-Ramp’s schematics and drawings several times a week (a later search of company records showed very few requests for electronic drawings). He persuaded Mr. Edwards that electronic drawings were necessary for Dura-Ramp’s customer relations and commercial operations.
[11] To deal with the reported increase in requests, Mr. Wiebe suggested that Dura-Ramp hire his friend, Mr. Green, to electronically transcribe all of Dura-Ramp’s Forklift Ramp schematics and drawings to create a comprehensive set of electronic drawings.
[12] Dura-Ramp hired Mr. Green as a draftsperson in November 2014 for the purpose of creating electronic drawings for all of Dura-Ramp’s forklift ramp models. Mr. Green was given responsibility for transcribing the design, operation, and manufacture of Dura-Ramp’s forklift ramps into electronic form. He also aided in the improvement of those products and the creation of new ones. Dura-Ramp paid thousands of dollars to train Mr. Green in Dura-Ramp processes so that he would be able to carry out these responsibilities. There was no written agreement regarding Mr. Green’s employment with Dura-Ramp.
[13] Over the next several months, Mr. Green created the electronic drawings by digitally transcribing Dura-Ramp’s schematics and drawings. He also improved Dura-Ramp’s designs and created new ones on an ongoing basis.
[14] In mid-April 2015, Mr. Green abruptly resigned from Dura-Ramp. He did so by going on vacation, then calling to inform Mr. Edwards that he would not be returning to work. He provided no explanation. Before Mr. Green left, all of Dura-Ramp’s electronic drawings for existing schematics and drawings had been prepared.
[15] At about the same time, Mr. Wiebe also resigned from Dura-Ramp. Mr. Wiebe had expressed his desire for some time to manage the forklift ramp business himself. However, at the time he left, Mr. Wiebe indicated that he was returning to the logistics industry. He remained with Dura-Ramp until May 8, 2015.
[16] After Messrs. Wiebe and Green resigned from Dura-Ramp, they almost immediately began working for T-Lane. Mr. Wiebe became a special project manager for T-Lane.
[17] Before Messrs. Wiebe and Green left Dura-Ramp, T-Lane did not have a ramp division.
[18] Shortly after Messrs. Wiebe and Green joined T-Lane, T-Lane established its own forklift ramp division. Dura-Ramp first learned about T-Lane’s ramp division in August 2015, when Dura-Ramp’s book-keeper discovered that one of Dura-Ramp’s existing clients (First Class Waste Services Inc.) had allegedly been solicited by T-Lane to purchase a ramp. This was within the six-month non-solicitation period in Mr. Wiebe’s employment contract with Dura-Ramp. The bookkeeper was told by a shareholder of First Class Waste that Mr. Wiebe had solicited First Class Waste to purchase a forklift ramp from T-Lane. The defendants are critical of Dura-Ramp for not doing more to confirm the report.
[19] By August 2015, T-Lane’s new ramp division was competing with Dura-Ramp and marketing itself as a provider of forklift ramps. Their new products served the same purpose as Dura-Ramp’s.
[20] After Mr. Edward’s reviewed T-Lane’s website in February 2016, he became concerned that T-Lane was marketing a range of forklift ramps that were similar in design to the forklift ramps produced by Dura-Ramp. Dura-Ramp was worried that its company property was being misused because (1) shortly after Messrs. Wiebe and Green left Dura-Ramp to join T-Lane, T-Lane started its own forklift division, (2) T-Lane’s designs for its forklift ramps appeared to be similar to Dura-Ramp’s, and (3) Dura-Ramp believed that one of its previous customers was solicited by T-Lane.
[21] In addition, Dura-Ramp was concerned because in May 2015, shortly before Mr. Wiebe left Dura-Ramp, Dura-Ramp came to believe that he had caused a ramp to be delivered to T-Lane without invoicing or documenting it (Mr. Wiebe later denied the allegation). Dura-Ramp later found out about the supposedly undocumented ramp when Richie Bros. Auctioneers Inc. (“Richie Bros.”) contacted Dura-Ramp by telephone to discuss repairs to the ramp.
[22] Shortly after the call from the auctioneer, Mr. Edwards received an email from Mr. Wiebe mentioning the undocumented ramp. When asked about it, Mr. Wiebe claimed he had completed a purchase order for the sale of the ramp to T-Lane. This record could not be found in Mr. Wiebe’s Dura-Ramp email account, in his documents left at Dura-Ramp, or on Dura-Ramp’s computer system. Mr. Wiebe also claimed that T-Lane had rented out the undocumented ramp to Richie Bros. on Dura-Ramp’s behalf. Dura-Ramp maintains this would have been an unusual transaction and was not something they typically would have authorized.
[23] After T-Lane launched the website for its ramp business, it sent an email to at least one of Dura-Ramp’s customers soliciting business in March 2016. The email was forwarded by the customer to Dura-Ramp.
[24] Dura-Ramp commenced its action against T-Lane on March 11, 2016. The allegations included the following:
(a) possession of Dura-Ramp’s company property, confidential and proprietary information;
(b) breach of employment contract;
(c) breach of confidence;
(d) breach of fiduciary duty;
(e) fraud and deceit; and
(f) conspiracy, including violations of the Criminal Code, R.S.C. 1985, c.
C-46; and
(g) conversion.
[25] The allegations included specific details of theft and fraud such as:
· taking electronic or paper copies of customers lists, pricing, financial QuickBooks, and product drawings;
· producing products based on designs created by Dura-Ramp;
· soliciting business from customers of Dura-Ramp by using Dura-Ramp’s own customer lists;
· T-Lane agreeing to employ Messrs. Wiebe and Green on the basis that they would use the confidential and proprietary information taken from Dura-Ramp for T-Lane’s benefit;
· violating ss. 341, 361, 374, and 380 of Criminal Code.
[26] The Notice of Civil Claim further alleged that the defendants embarked on a high-handed, malicious and reckless course of conduct, in a reckless or wanton disregard of their contractual, common law and equitable duties which were calculated or which would reasonably be expected to cause injury and damage to Dura-Ramp. Dura-Ramp sought general and specific damages, as well as special, aggravated and punitive damages against the defendants.
[27] In their Response to Civil Claim filed on April 15, 2016, the defendants denied all of Dura-Ramp’s allegations of wrongdoing.
[28] Dura-Ramp examined the defendants on June 20 and 21, 2016. At the discoveries, Dura-Ramp made a number of requests and document demands. During examinations, T-Lane advised Dura-Ramp that it did not have any sales of forklift ramps.
[29] Between June 2016 and January 2017, Dura-Ramp sent at least six letters to the defendants demanding responses. The letters noted the outstanding requests for information.
[30] On January 3, 2017, the defendants provided a partial response to the outstanding requests for information and documents.
[31] On January 4, 2017, the defendants conducted an examination for discovery of Dura-Ramp. Dura-Ramp produced Mr. Edwards as its representative. Mr. Edwards repeatedly replied “We’re looking into it” when asked about the basis for Dura-Ramp’s allegations.
[32] On January 11, 2017, counsel for the defendants wrote to counsel for Dura-Ramp with requests the defendants had left on record at Dura-Ramp’s examination for discovery, including information concerning particulars and evidence of Dura-Ramp’s allegations.
[33] Between February 15 and 23, 2017, counsel for Dura-Ramp sent counsel for the defendants seven Notices to Admit containing a total of 330 requested admissions. Counsel for the defendants responded to the Notices to Admit between March 1 and 7, 2017. While Dura-Ramp asked for many admissions that were unlikely to be provided (admissions of theft, misappropriation, etc.), the defendants also refused to make several basic admissions.
[34] Also in February, 2017, Dura-Ramp brought an application to compel document production and answers from the defendants. The defendants opposed all of the relief sought. The application was set down for March 22, 2017. Beginning on March 17, 2017, the defendants proceeded to answer the outstanding requests in numerous letters and emails.
[35] As noted, on March 1, 2017, counsel for Dura-Ramp wrote to counsel for the defendants with partial responses to requests made at Dura-Ramp’s January 4, 2017 examination for discovery. Further partial responses were made on March 6, 2017.
[36] On March 10, 2017, the defendants brought an application to strike Dura-Ramp’s pleadings for failure to produce outstanding examination for discovery requests or, alternatively, seeking answers and documents pursuant to those outstanding requests.
[37] By the morning of the application on March 22, 2017, the defendants had finally answered the outstanding discovery requests and document demands. The application was nevertheless heard and an order was made that Dura-Ramp produce the outstanding answers, documents, and information by April 3, 2017.
[38] According to Dura-Ramp, once the defendants had complied with the outstanding requests for information, two pieces of information caused Dura-Ramp to discontinue its action: first, in early March of 2017 it learned that Dura-Ramp and T-Lane only had two customers in common; second, on March 17, 2017, T-Lane disclosed financial information from its forklift ramp business demonstrating that it had lost a significant amount of money. Dura-Ramp says that this information caused it to believe that it was unlikely to receive substantial damages, even if it was successful in its suit.
[39] An eight-day trial was set to begin on April 18, 2017. However, on March 28, 2017, Dura-Ramp communicated its intention to discontinue its action. The defendants consented on condition that they were at liberty to apply for an order of special costs. On March 31, 2017, Dura-Ramp filed the Notice of Discontinuance in relation to all of the defendants.
[40] Costs generally follow the event and are assessed on a party and party basis. The Court has authority under Rule 14-1(1)(b) of the Supreme Court Civil Rules to order special costs.
[41] Special costs require “reprehensible” conduct: Garcia v. Crestrbrook Forest Industries Ltd. (1994), 9 B.C.L.R. (3d) 242 (C.A.). Lambert J.A., writing for the Court in Garcia, explained the test as follows:
17 … it is my opinion that the single standard for the awarding of special costs is that the conduct in question properly be categorized as "reprehensible". As Chief Justice Esson said in Leung v. Leung, the word reprehensible is a word of wide meaning. It encompasses scandalous or outrageous conduct but it also encompasses milder forms of misconduct deserving of reproof or rebuke. Accordingly, the standard represented by the word reprehensible, taken in that sense, must represent a general and all encompassing expression of the applicable standard for the award of special costs.
[42] In Mayer v. Osborne Contracting Ltd., 2011 BCSC 914, at para. 8, Mr. Justice Walker noted that the purpose of a special costs award is to chastise a litigant. Special costs are punitive in nature and encompass an element of deterrence. The Court provided the following helpful summary of the circumstances under which special costs may be awarded:
[11] Special costs may be ordered in the following circumstances:
(a) where a party pursues a meritless claim and is reckless with regard to the truth;
(b) where a party makes improper allegations of fraud, conspiracy, fraudulent misrepresentation, or breach of fiduciary duty;
(c) where a party has displayed "reckless indifference" by not recognizing early on that its claim was manifestly deficient;
(d) where a party made the resolution of an issue far more difficult than it should have been;
(e) where a party who is in a financially superior position to the other brings proceedings, not with the reasonable expectation of a favourable outcome, but in the absence of merit in order to impose a financial burden on the opposing party;
(f) where a party presents a case so weak that it is bound to fail, and continues to pursue its meritless claim after it is drawn to its attention that the claim is without merit;
(g) where a party brings a proceeding for an improper motive;
(h) where a party maintains unfounded allegations of fraud or dishonesty; and
(i) where a party pursues claims frivolously or without foundation.
[Emphasis added]
[43] Of these scenarios, the defendants rely particularly on paragraphs (b) and (h).
[44] Where there is evidence of an improper motive in bringing a claim, “reprehensibility will likely be found”: Westsea Construction Ltd. v. 0759553 B.C. Ltd., 2013 BCSC 1352 at para. 73(d).
[45] A party who alleges criminal conduct against another in a civil law suit ought to be prepared to prove such allegations or reap the consequences in the form of an order for special costs. Whether such a consequence will result, in the event the allegations go unproven, will be left to the discretion of the trial judge: Kurtakis v. Canadian Northern Shield Insurance Co. (1995), 17 B.C.L.R. (3d) 197 (C.A.), at para. 9.
[46] The defendants ground their allegations of reprehensible conduct by Dura-Ramp in several points. They say:
1. Dura-Ramp made serious allegations of wrongdoing without reasonable inquiry or evidence, including,
(a) Dura-Ramp claimed that T-Lane had solicited Dura-Ramp’s customers;
(b) Dura-Ramp alleged that Wiebe caused one of Dura-Ramp’s forklift ramps to be delivered to T-Lane without documentation;
(c) Dura-Ramp claimed that the forklift ramp designs of Dura-Ramp and T-Lane appeared similar if not identical; and
(d) Dura-Ramp claimed searches of Wiebe’s Dura-Ramp email account revealed few requests for electronic drawings by customers.
2. Dura-Ramp was unprepared to prove the criminal allegations in its statement of claim;
3. Dura-Ramp continued with its allegations despite a lack of evidence;
4. Dura-Ramp’s action was incorrectly predicated on the position that its drawings were confidential. As such, its action was bound to fail;
5. Dura-Ramp failed to provide required answers, information and documentation pursuant to requests made at an examination for discovery; and
6. The proceedings were brought for an improper motive; namely, animosity and hostility toward the individual defendants.
[47] The defendants argue that Dura-Ramp acted with reckless indifference and in a reprehensible manner by bringing a multitude of serious accusations of wrongdoing against the defendants. They say the claim was brought on nothing more than suspicion, without a proper evidentiary basis and without reasonable inquiries having first been made.
[48] The defendants submit Dura-Ramp continued to pursue its claim despite being unable to produce supporting evidence, and that it failed to provide required information to the defendants. As a result, the defendants were forced to put considerable time and costs into defending an action which should never have been brought or pursued. They say Dura-Ramp’s conduct is deserving of rebuke.
[49] Dura-Ramp submits the high standard for awarding special costs is not met. It argues: (a) Dura-Ramp’s claims were not obviously unfounded, reckless, or made out of malice; (b) the defendants’ conduct delayed the discontinuance of its action; and (c) the other grounds relied upon by the defendants are meritless. It submits that awards for special costs are rarely made, and this is not a case of reprehensible conduct warranting a rebuke from the Court.
[50] As mentioned earlier, this case involves two employees -- one of them a key sales manager -- leaving a smaller, family-run forklift ramp company to go to a much larger company that opened a new forklift ramp division a short time after the employees arrived.
[51] The context and timing of events could be seen as suspicious. In particular:
· Before they left, Mr. Wiebe had persuaded Dura-Ramp to hire Mr. Green on his representation that he was receiving requests for electronic drawings several times a week. Dura-Ramp received very few such requests after Mr. Wiebe left, and a subsequent review of Mr. Wiebe’s email account revealed few requests for electronic drawings;
· Messrs. Wiebe and Green left Dura-Ramp to join T-Lane shortly after Dura-Ramp’s schematics and drawings were digitized; and
· Within weeks of Messrs. Wiebe and Green joining T-Lane, that company entered the forklift ramp business for the first time.
[52] Dura-Ramp says it also discovered that Mr. Wiebe had sent a ramp to T-Lane without properly documenting the transaction. While T-Lane submits the ramps it started to produce were not similar to Dura-Ramp’s, the two ramps do bear some loose similarity to each other such that there could be cause for apprehension on Dura-Ramp’s part. There was also some indication of T-Lane possibly soliciting Dura-Ramp’s pre-existing customers.
[53] In general, I find the context was such that there was a reasonable basis for Dura-Ramp to be suspicious, and perhaps even alarmed, by the events surrounding the inauspicious movement of Messrs. Wiebe and Green to T-Lane. I turn to the specific aspects of the defendants’ claim for special damages.
[54] I cannot find that Dura-Ramp’s decision to commence its action, even with its serious allegations of misconduct, was reckless, high-handed or made out of malice. Nor can I find that the claims were obviously unfounded or brought on the basis of speculation. While Dura-Ramp did make accusations of criminal wrongdoing against the defendants, I cannot find that it improperly made the allegations or made them for an improper motive. Certainly, Dura-Ramp’s actions were not as blatant as those of the insurer in Kurtakis. That case, relied upon by the defendants, involved the insurer maintaining allegations of criminal conduct it knew to be untrue. Here, by contrast, I cannot make such a characterization. I note the comments of the Court in Doyle Construction Co. v. Carling O’Keefe Breweries of Canada Ltd. (1988), 27 B.C.L.R. (2d) 81 (C.A.), at para. 19 which I find apposite here:
[19] When there is reasonable evidence on which to found a plea of fraud (as in this case), I do not think the court should second guess the judgment of the lawyer drawing the pleadings. In a difficult case some lawyers might decide to leave the plea in; others might withdraw it. Out of a sense of duty to their client, I would think that a good number would choose to retain it on the assumption that as there was some sound base which at the minute fell short of complete proof, other suspected evidence at the trial or successful cross-examination might complete the picture and enable the plea to succeed.
[55] While the defendants say Dura-Ramp should have made better inquiry into the allegations, the limited information it possessed and inquiries it made supported the allegations to a sufficient degree. The particulars of the allegations were largely within the knowledge of Messrs. Wiebe and Green. While the defendants point out that Dura-Ramp could have done more, it was reasonable to wait until the key facts came out in the discovery process and Dura-Ramp had a chance to further investigate the claims with the benefit of whatever it learned in discovery. I cannot say the allegations were obviously unfounded, brought for an improper motive, or in retrospect should have been further substantiated to a degree attracting classification of Dura-Ramp’s conduct as “reprehensible”. There was some evidence upon which counsel could reasonably found their pleas.
[56] I would not exercise my discretion to award special costs on this basis.
[57] Having instituted its claim, can Dura-Ramp be faulted to a degree attracting special costs for continuing its action between June 2016 (when discoveries of Wiebe and Greene took place) and March 2017 when the action was discontinued?
[58] To be sure, both Messrs. Wiebe and Greene denied Dura-Ramp’s allegations during their examinations for discovery in June 2016. Nevertheless, Dura-Ramp made a large number of document demands and information requests at the discoveries including requests for communications between the defendants, documents relating to the design of T-Lane’s ramps, and documents relating to its solicitation of customers. Despite repeated requests, the defendants did not reply to the requests for almost 200 days. The defendants concede that there was a delay in document production. When the defendants did respond, they provided partial responses beginning January 23, 2017. The defendants only provided complete responses after Dura-Ramp set down an application on March 22, 2017 for an order to compel disclosure.
[59] The defendants also say that Dura-Ramp should have made better investigation into whether its claims could be substantiated in the latter half of 2016 and early 2017. They are particularly critical of Mr. Edwards’ inability to provide evidence of Dura-Ramp’s claims at his January 4, 2017 discovery beyond repeatedly saying “we’re looking into it” and Dura-Ramp’s attempt, in essence, to prove its claims of wrongdoing by seeking admissions that would clearly not be provided.
[60] While Dura-Ramp could probably have done more to attempt to verify its allegations in the fall of 2016 and early 2017, I am not persuaded that it failed to a degree meriting special costs. I agree with counsel for Dura-Ramp that it was not required to take the defendants’ denials of Dura-Ramp’s accusations at face value and was entitled to investigate further. Dura-Ramp was also entitled to await the receipt of more information arising from requests made in the discovery process. The defendants’ delay in responding to those requests undermines its position that Dura-Ramp delayed in substantiating its allegations. Dura-Ramp could not have concluded that its claims were bound to fail when its numerous disclosure requests were still outstanding.
[61] After six letters from Dura-Ramp requesting satisfaction of their requests and a delay until January 2017, Dura-Ramp’s requests were partially fulfilled. They were only completely fulfilled on March 22, 2017 (the hearing of Dura-Ramp’s application to compel disclosure in relation to Dura-Ramp’s document demands and information requests). The defendants made no attempt to summarily dispose of Dura-Ramp’s claim during this time.
[62] When the action was ultimately discontinued, the discontinuance occurred after Dura-Ramp discovered (1) in early March 2017 that Dura-Ramp and T-Lane only had two customers in common, and (2) on March 17, 2017 that T-Lane had lost a significant amount of money from its forklift ramp business. The defendants had previously objected to providing the latter information. In my view, combined with the history of demands and information requests, these are reasonable explanations for Dura-Ramp not discontinuing its action sooner.
[63] The defendants also argue that Dura-Ramp’s action was incorrectly predicated on the position that its drawings were confidential and that Mr. Edwards failed to provide required answers, information and documentation pursuant to requests made at an examination for discovery. While perhaps not completely private, the drawings were clearly protected company property that held value to Dura-Ramp. Mr. Edwards’ delay in complying with disclosure requests was not substantial. I am not satisfied that these arguments have sufficient strength that they would justify an award of special costs on all the facts before me.
Conclusion
[64] I cannot conclude that the nature and history of Dura-Ramp’s action falls into one of those exceptional circumstances where reprehensible conduct occurred. The application for special costs is dismissed. Dura-Ramp is entitled to the costs of this application.
“The Honourable Mr. Justice Brundrett”