Court File and Parties

CITATION: The Estate of Jason Nash v. The Estate of Derek Schell, 2013 ONSC 4813 DIVISIONAL COURT FILE NO.: 162/13 DATE: 2013/07/19

SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT

RE: The Estate of Jason Nash, Dale Nash, William Nash and Isabel Nash, Plaintiffs (Appellants) AND: The Estate of Derek Schell, Financialinx Corporation/Corporation Credilinx, Laker’s Restaurant Beach Bar & Fun Centre, Lakers Tap Grill & Games, and Suman Sethi operating as 1339048 Ontario Inc., Defendants (Respondents)

BEFORE: Herman J.

COUNSEL: William S. Zener, for the Plaintiffs (Appellants) Grant Bodnaryk, for The Estate of Derek Schell and Financialinx, Defendants (Respondents) Richard Parker, for Laker’s Restaurant Beach Bar & Fun Centre, Laker’s Tap Grill and Suman Sethi operating as 1339048 Ontario Inc., Defendants (Respondents)

HEARD: June 27, 2013

Endorsement

[1] The appellants appeal from the order of Master Abrams, dated January 21, 2013, which dismissed the plaintiffs’ motion to extend the time for service of the Statement of Claim.

[2] The appellants submit that the Master erred in two ways:

(i) the Master erred in finding that prejudice would result on the basis that the Schell Estate’s right to cross claim had been lost and their right to assert a third party claim was not certain; and

(ii) the Master erred in basing her decision on the plaintiff’s failure to persuade her that there was no prejudice.

Background

[3] This action arises from a tragic car accident, in which Jason Nash, a passenger in the car, and Derek Schell, the driver of the car, were killed.

[4] The accident occurred on August 18, 2007. The plaintiffs’ former lawyer issued a Notice of Action on August 17, 2009 against all the defendants, one day before the expiry of the two-year limitation period. The Statement of Claim was issued on September 11, 2009.

[5] Neither the Notice of Action nor the Statement of Claim was served on any of the defendants. The plaintiffs do not claim that there was any justification for the delay.

[6] Notwithstanding the lack of service, some of the defendants received notice that the Nash family intended to pursue claims. Within two weeks of the accident, notice of the plaintiffs’ claim was provided to Echelon General Insurance Company, insurer of the vehicle driven by Derek Schell and owned by the defendant Financialinx/Credilinx. By letter dated September 5, 2007, Echelon indicated it was investigating liability for the accident.

[7] The Laker’s defendants received a letter, dated September 11, 2009, advising them that a claim would be advanced.

[8] The plaintiffs retained new lawyers in June 2011. They brought a motion to seek leave to serve the statement of claim on the defendants.

[9] The Master dismissed the motion. She was persuaded that had the notice of action and claim “… been served the day after [they] had been issued...the defence [would] be in a better position than it is now”, citing the test articulated in Desjardins v. Mooney, [2001] O.J. No. 697 (S.C.J.) at para. 22.

[10] The Master stated, in summary, that the plaintiffs had not persuaded her that extending the time for service would not prejudice the defendants, there being a paucity of information as to the availability of documents and the availability of and recollection of witnesses. On the other hand, the defendants had satisfied her that prejudice would be suffered if the time were extended, in that the Schell Estate’s right to crossclaim would be lost and their right to assert a third party claim was not certain, in the event the other defendants were successful in advancing a limitation defence.

Standard of review

[11] The applicable standard of review on an appeal from a master is the same as that which applies to appeals of decisions of judges (Zeitoun v. The Economical Insurance Group, 2008 20996 (ON SCDC), [2008] O.J. No. 1771 (D.C.), aff’d 2009 ONCA 415, [2009] O.J. No. 2003 (C.A.)).

[12] The standard was articulated in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235: on questions of pure law, the standard is correctness; and on findings of fact, the standard is whether the master made a palpable and overriding error. Questions of mixed fact and law lie along a spectrum. Where the error is attributable to the application of an incorrect legal test or error in principle, it is treated as an error of law. However, if the issue involves the judge’s interpretation of the evidence, it is subject to the standard of palpable and overriding error.

General principles

[13] In Chiarelli v. Wiens, (2000) 2000 3904 (ON CA), 46 O.R. (3d) 780, [2000] O.J. No. 296 (C.A.), the Court of Appeal considered the exercise of the discretion to extend the time for service of a statement of claim. Laskin J.A. articulated the following principles, at paras. 14-16:

(i) The onus is on the plaintiffs to show that the defendant will not be prejudiced by an extension of time. However, the plaintiffs cannot be expected to speculate. The defence has at least an evidentiary obligation to provide some details.

(ii) The defence cannot create prejudice by its failure to do something that it reasonably could have done.

(iii) The prejudice that will defeat an extension of time for service must be caused by the delay.

(iv) The extension of the time for service should not be denied “simply because the delay is longer than the applicable limitation period”.

(v) Each case should be decided on its facts, focusing on whether the defence is prejudiced by the delay.

[14] In considering the issue of prejudice, Zalev J. in Desjardins v. Mooney, [2001] O.J. No. 697 (S.C.J.) at para. 22, proposed the following question: “If it [the Statement of Claim] had been served the day after it was issued, would the defence be in any better position than it is now?”

Issues

[15] The decision not to grant the extension of time turns on the issue of prejudice to the defendants. The Master found two bases for finding prejudice: the Laker’s defendants and Financialinx/Credilinx had good limitation defences, as a result of which the Schell Estate would be unable to make a claim for contribution and indemnity against the other defendants; and the plaintiffs had not persuaded her that the defendants would not be prejudiced, due to the lack of information as to the availability of evidence.

(i) Did the Master err in finding that prejudice would result on the basis that the Schell Estate’s right to cross claim had been lost and their right to assert a third party claim was not certain?

[16] The finding of prejudice to the Schell Estate rested on the Master’s conclusion that the other defendants had a good limitation defence. In her opinion, the Schell Estate would be precluded from making a cross-claim and their right to assert a third party claim was uncertain.

[17] The claim against the defendants was commenced prior to the second anniversary of the accident. The Statement of Claim was filed within the 30 days required by Rule 14.03(3). The defendants were not, however, served within the six months required by Rule 14.08.

[18] The insurer of the car received notice of the claim two weeks after the accident. The Laker’s defendants were advised that a claim would be advanced shortly after the expiry of the two-year limitation period.

[19] The court may grant an extension of time for service of a claim even after the expiry of a limitation period. The determination of whether there is prejudice or unfairness to the parties turns on the facts of the case (Chiarelli at para 16; Eadie v. Crompton Co., [2008] O.J. No. 129 (S.C.J.)).

[20] In the case of Waterloo Region District School Board v. CRD Construction Ltd., 2010 ONCA 838, [2010] O.J. No. 5358 (C.A.), the Court of Appeal considered whether a cross-claim for contribution and indemnity could be made when the person from whom the contribution was sought was no longer liable to the plaintiff because the claim against that person was statute-barred.

[21] Feldman J.A. concluded that the only limitation period in the Limitations Act, 2002 that applies to a claim for contribution and indemnity is the two-year limitation period in s. 18(1). Section 18(1) provides that, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, “the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place”. Thus, the limitation period is presumed to run from the date when the person who seeks contribution and indemnity is served with the plaintiff’s claim, and a contribution claim may be brought notwithstanding the passage of a limitation period that would apply to a claim by the plaintiff. The Schell Estate has not yet been served with the plaintiffs’ claim.

[22] In my opinion, the Master erred when she concluded that the Schell Estate was prejudiced by virtue of a possible limitation defence available to the other defendants. The expiry of the limitation period does not preclude an extension of time being granted for the service of a statement of claim. Furthermore, the availability of a limitation defence to one defendant in a claim by a plaintiff does not preclude another defendant from making a claim for contribution and indemnity against that defendant.

(ii) Did the Master err in basing her decision on the plaintiff’s failure to persuade her that there was no prejudice?

[23] In reaching her conclusion, the Master noted that the plaintiffs had failed to persuade her that an extension of time for service would not prejudice the defendants, there being a paucity of information as to the availability of documents and the availability of and recollection of witnesses. The Master weighed this against the prejudice that had been established, that is, the Schell Estate’s loss of a right to cross claim or assert a third party claim.

[24] The onus is on the plaintiffs to show that the defendants will not be prejudiced by an extension. However, that is not the end of the matter. The following points arise from the cases:

(i) More than a general allegation of prejudice is required. The defence has an evidentiary obligation to provide some details. The plaintiffs cannot be expected to speculate on what evidence might be relevant to the defence, whether the evidence is available and, if it is not available, whether the defence would be prejudiced.

(ii) The defence cannot create prejudice by its failure to do something it reasonably could have or ought to have done.

(iii) The claimed prejudiced must be caused by the delay. There is a distinction between the prejudice caused by the passage of time since the events giving rise to the claim and prejudice arising from the failure to serve the statement of claim within the required time period.

(iv) A finding of actual prejudice based on untested hearsay evidence is not enough to justify depriving a plaintiff of the opportunity to prove his or her case on the merits.

(see Chiarelli, at paras. 14-16; Armstrong v. McCall, 2006 17248 (ON CA), [2006] O.J. No. 2055 (C.A.) at para. 34; McGroarty v. CIBC Mellon Trust, 2012 ONCA 241, [2012] O.J. No. 1692 (C.A.) at para. 11)

[25] In reaching her conclusion, the Master pointed out that no one had commented on whether the whereabouts of witnesses were known (such as the investigating officer, the pathologist or the coroner), whether their evidence had been taken or notes and records safeguarded, whether blood and urine samples remained available and whether the vehicle had been preserved or examined.

[26] The Master was also concerned that there was no evidence that people who were at the Laker’s pub on the night in question had been located or interviewed. The only evidence before her on this point was the affidavit of Tina Collins, dated October 16, 2012. Ms. Collins is an assistant in the law firm representing the Laker’s defendants. In her affidavit she stated that she was advised that the plaintiff kept on drinking after he left Laker’s and the accident happened an hour and a half later. She further stated: “We are unable to locate those witnesses now and I believe if we do locate them, that their memory will have faded with time.”

[27] The Master acknowledged in her reasons that the evidence adduced on behalf of the Laker’s defendants was weak. The statements in the affidavit are hearsay. They are also vague and general. Ms. Collins indicated that Laker’s was unable to locate witnesses at the time she swore her affidavit, that is, in October 2012, but she did not indicate whether any attempts had been made to locate witnesses at the time when Laker’s received notification of the claim, that is, in September 2009.

[28] While the onus is on the plaintiffs to establish that the defendants will not be prejudiced, the defendants have an evidentiary obligation. In my opinion, the defendants did not meet that obligation.

[29] The plaintiffs cannot be expected to speculate. The allegations with respect to the lack of evidence were vague and general. Echelon had notice of the claim a couple of weeks after the accident occurred and undertook an investigation. Laker’s had notice in September 2009. The defendants did not address what evidence might be relevant to their defence, whether that evidence was available and, if it was not available, whether they would be prejudiced, with the exception of one hearsay statement in Ms. Collins’ affidavit that Laker’s could not locate witnesses in October 2012 and a letter from Echelon’s counsel in May 2008 indicating that he could not obtain a copy of the police report due to the Freedom of Information Act.

[30] In my opinion, the Master erred in law when she based her decision on the plaintiff’s failure to persuade her there would be no prejudice to the defendants, without taking into account the defendants’ evidentiary obligation and without addressing whether the claimed prejudice arose as a result of the plaintiffs’ failure to serve the statement of claim in time.

Conclusion

[31] I conclude that the Master erred in law with respect to her conclusion that the Schell Estate would be prejudiced because of the possible limitations defence available to the Laker’s defendants. It was also an error of law not to consider the defendants’ evidentiary obligation and not to address whether the claimed prejudice arose from the failure of the plaintiffs to serve the statement of claim in time.

[32] The appeal is allowed and the Order of the Master is set aside. The plaintiffs have leave to serve the Statement of Claim on the defendants within 30 days of the release of this decision.

[33] Leave is also granted to have litigation guardians appointed for the two Estates and for the title of proceedings and the Statement of Claim to be amended to reflect their appointment.

[34] The plaintiffs do not seek costs. No costs are ordered.

Herman J.

Date: July 19, 2013