Brine Lake Products Ltd. v. Schenker of Canada
Ltd. Et al 2004 CanLII 14463 (ON S.C.D.C.)
(counsel for the defendant, Schenker, was Demetrios Yiokaris of
Fernandes Hearn LLP; a full copy of the decision is at http://www.canlii.org/on/cas/onscdc/2004/2004onscdc10301.html)
In this decision, the plaintiff is a company involved
in the harvesting of Brine Shrimp (a.k.a. sea monkeys - those loveable
microscopic creatures often sold to unsuspecting little children
who believe that they are real pets). In a commercial context sea
monkeys are harvested in certain areas of the world, notably Iran
and Utah, and are used as food for shrimp. The plaintiff retained
the defendant, Schenker to arrange for the movement of fishing equipment
from Toronto to Iran for the purpose of harvesting the sea monkeys
in Iran. Schenker arranged the air carriage with British Airways.
Allegedly, the fishing equipment arrived late resulting in over US $4.5 million worth of damage.
As in many lawsuits there was a battle over compelling
answers to Undertakings. This was a particularly fierce battle lasting
two days. The plaintiff failed to or refused to answer dozens of
undertakings/refusals at its representative's Examination for Discovery.
The plaintiff refused/failed to answer some of these questions on
the basis that if the answers are provided, individuals could potentially
face criminal sanctions in Iran or the U.S. Despite this, Schenker
was successful on every ground and was awarded answers to all of
its questions, including $10,500 in legal costs for the motion.
The plaintiff appealed the undertakings/refusals decision;
however it made the appeal approximately 30 days after the initial
decision by the court. Under the Ontario Rules of Civil Procedure appeals from final orders must be made within 30 days; however
appeals on interlocutory orders must be made within 7 days. Schenker
immediately moved to quash the appeal on a technicality, regardless
of the merits of the appeal. Schenker argued that the order appealed
from was not a final order, rather an interlocutory one. Though
there is no direct case on point, the judge applied several recent
texts and cases on similar issues and the seminal Court of Appeal
decision regarding whether an order is final or interlocutory:
"In Hendrickson v. Kallio,  O.R. 675
(Ont. C.A.), Middleton J.A. (for the Court) said:
I am clearly of opinion that the order in question
is not an interlocutory order within the meaning of this statutory
provision. The interlocutory order from which there is no appeal
is an order which does not determine the real matter in dispute
between the parties - the very subject matter of the litigation,
but only some matter collateral. It may be final in the sense
that it determines the very question raised by the applications,
but it is interlocutory if the merits of the case remain to be
The court found that the Hendrikson test really means
is that to be final an order must deal with the substantive merits
as opposed to mere procedural rights, no matter how important the
procedural rights may be. The test focuses on whether the order
under appeal finally disposes of the rights of the parties, in the
sense of substantive rights to relief (in the case of a plaintiff)
or a substantive defence (in the case of a defendant).
As such, the court ruled that this was an interlocutory
order and that the plaintiff is out of time with its appeal. The
court also awarded Schenker another $4,500 in costs for the appeal.
a) there was a significant amount of money at stake in the lawsuit
(US $4.5 million);
b) the error was likely made by the lawyers and not the plaintiff
c) the defendants did not suffer any real prejudice;
d) the appeal was made only a few weeks after the deadline; and
e) that the plaintiff argued individuals could potentially suffer
criminal sanctions in Iran and the US
the court still upheld the technicality.
Show Me the Money
Brine Lake Products Ltd. v. Schenker of Canada
Ltd.  O.J. No. 1365
(counsel for the defendant, Schenker, was Demetrios
Yiokaris of Fernandes Hearn LLP; a full copy of the decision can
be found via Quicklaw access)
A year after the above decision, Schenker brought
a motion against the plaintiff for security for costs. The plaintiff
is a foreign corporation, with no apparent assets in Canada. In
Ontario, if a plaintiff is a foreign corporation and there is good
reason to believe that it does not have assets in Ontario, then
in most cases defendants are entitled to have the plaintiff post
security for costs. Security for costs is an amount of money posted
by a party to be held in trust in case it loses the law suit. If
a costs award is made against a party at the end of trial, then
the party it is awarded too may collect the costs award from that
security. The reason behind this rule is so that the winning party
at the trial does not have to chase down the foreign company in
a foreign jurisdiction where it may or may not have assets.
The plaintiff conceded that Schenker and the co-defendant,
British Airways were entitled to security for costs, but argued
as to the quantum. The court believed that the trial would take
approximately 2 weeks. It ordered that the plaintiff must post not
a token or minimal amount in security but over $130,000 in
security for costs for each defendant. Security for costs
is always a powerful weapon for a defendant being sued in Ontario
by a foreign plaintiff. Conversely, it is always something that
a foreign plaintiff should be mindful of when proceeding with a
lawsuit in Ontario.
In Ontario costs are typically awarded on a partial
indemnity or substantial indemnity scale. Partial indemnity is a
fraction of the actual legal fees up to a maximum hourly rate figure.
The maximum hourly rate is determined by the lawyer's years of experience.
Further, it is not awarded on all the work a lawyer may do for a
client, but only those "assessable" categories under the
Tariffs appended to the Ontario Rules of Civil Procedure.
Often times, courts award partial indemnity costs at 35%-65% of
the hourly rate of the lawyer. Substantial indemnity costs are awarded
on a similar fashion as partial indemnity costs but are at 100%
of the lawyer's hourly rate and only in rare types of cases (i.e.
a fraud cases or where an offer to settle is beat at trial).
In this case, the parties agreed and the court ordered
security for costs on a partial indemnity scale; however the court
awarded a rather high percentage of the lawyer's hourly rate under
the partial indemnity scale- approximately %85. The court did this
to acknowledge that consideration must be made for the low hourly
rate charged by Fernandes Hearn LLP to its client (as compared to
the going rate of other downtown Toronto firms) and the firm's industry
expertise in the area of shipping and air carriage. The court implicitly
reasoned that the defendant should benefit in a costs assessment
since it chose a specialist lawfirm. The assumption is that a specialist
lawfirm would charge less than a general commercial litigation firm
to the client. This case provides valuable precedent for all lawfirms
with industry expertise and also for most lawyers who bill at a
lower rate to its client when arguing for legal costs.
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