Court of Appeal Upholds Partial Summary Judgment and Awards Full Indemnity Costs
In NDrive, Navigation Systems S.A. v. Zhou[1] the Court of Appeal for Ontario heard an appeal from a decision granting partial summary judgment with respect to the claims against some of the defendants, and dismissing the counterclaim of the same defendants.
The appellants, collectively referred to as the “Zhou parties,” operated a consultant company which was contracted by the respondent, NDrive, to manage a business relationship between NDrive and LG Electronics. The business relationship between NDrive and LG experienced difficulties which eventually lead to arbitration. The Zhou parties represented NDrive during the arbitration, and the subsequent appeal, which was ultimately lost by NDrive. During the arbitration, Hakemi & Ridgedale LLP (“H&R”), represented NDrive at the direction of the Zhou parties.
NDrive commenced the underlying action alleging that the Zhou parties hid the outcome of the appeal, beyond the deadline for a further appeal, and inappropriately directed payment of the arbitral award to their own bank account. The claim also named H&R as defendants. The Zhou parties counterclaimed in breach of contract.
In the course of the litigation, NDrive was successful in seeking a Mareva Injunction, freezing the Zhou parties’ assets, on the basis that fraud was present.
NDrive was also successful on a motion for partial summary judgment against the Zhou parties, and for the dismissal of their counterclaim.
The motion judge in the underlying motion, Healey J., considered the factors relevant to whether partial summary judgment is appropriate, as set out in Malik v. Attia, and determined that partial summary judgment was appropriate. Healey J. also relied on a previous decision of the case management judge, who had considered the appropriateness of the matter for partial summary judgment when the motion was scheduled.
Healey J. granted partial summary judgment against the Zhou parties, and dismissed their counterclaim. She held that the Zhou parties were liable in fraud, and had attempted to deliberately mislead the Court. NDrive was awarded almost $900,000 USD in damages, punitive damages of $200,000, and costs on a full indemnity basis in the amount of $230,000.
The Zhou parties appealed the summary judgment motion. On appeal, the appellants argued that the motion judge erred in finding that the matter was appropriate for partial summary judgment based on the fact that the decision of the case management judge, upon which Healey J. relied, was rendered prior to the release of Malik. They further argued that because the Zhou parties would remain in the action even if partial summary judgment was granted, summary judgment would not result in significant efficiencies, as required by Malik.
The appellants further argued that the judge erred in awarding punitive damages as well full indemnity costs on the basis that the awards were duplicative.
On the issue of the appropriateness of partial summary judgment the Court of Appeal held that Healey J. appropriately considered the relevant factors as outlined in the decision in Malik:
- demonstrating that dividing the determination of the case into several parts will prove less expensive for the parties;
- showing how partial summary judgment will get the parties’ case in and out of the court system faster; and,
- establishing how partial summary judgment will not result in inconsistent findings by the multiple judges who will touch the divided case.
Further, the Court of Appeal agreed with Healey J. ’s reliance on the decision of the case management judge in her analysis, despite the fact that the decision was rendered prior to Malik.
The Court further agreed with Healey J. that the decision in Malik did not alter the key concerns that inform the determination of whether a partial summary judgment should go forward. These concerns are: the risk of duplicative or inconsistent findings, whether the issues in a partial summary judgment can be readily bifurcated from the main action, and, in the context of the litigation as a whole, whether granting partial summary judgment will result in disposing of issues in a proportionate, expeditious, and cost-effective manner.
The Court of Appeal further held that the fact that the Zhou parties would remain in the action was not determinative of whether summary judgment would result in efficiencies and that Healey J. did not err in concluding that the interests of justice favoured granting summary judgment.
On the issue of the award of punitive damages and full indemnity costs, the Court of Appeal held that the purposes behind these awards differ and they are therefore not duplicative.
The appeal was dismissed, and the respondents awarded costs of $40,230.
The key takeaway from this decision is that partial summary judgment, though rare, is granted in some cases. The Court further highlighted that, ultimately, the concerns to be considered when partial summary judgment is sought are:
- the risk of duplicative or inconsistent findings,
- whether the issues in a partial summary judgment can be readily bifurcated from the main action, and,
- in the context of the litigation as a whole, whether granting partial summary judgment will result in disposing of issues in a proportionate, expeditious, and cost-effective manner.
The consideration as to whether partial summary judgment is appropriate, does not hinge on one factor alone. Further, the decision demonstrates that although full indemnity cost awards are similarly rare, they do occur. Moreover, full indemnity cost awards will not preclude an award for punitive damages, or vice versa.
[1] 2022 ONCA 602.