Court File and Parties

CITATION: 2026125 Ontario Limited v. Ashland Paving Ltd., 2014 ONSC 5173 DIVISIONAL COURT FILE NO.: 73/14 DATE: 2014-09-09

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

RE: 2026125 Ontario Limited o/a Southview Asphalt & Aggregates, Plaintiff/Appellant

AND:

Ashland Paving Ltd., Harper Truck Centres Inc., and Mercedes-Benz Financial Services Canada Corp., Defendants/Respondents

BEFORE: D. M. Brown J.

COUNSEL: K. Sherkin, for the Appellant

M. Spence, for the Respondent, Ashland Paving Ltd.

K. Mitchell, for the Respondent, Harper Truck Centres Inc.

E. Gray, for the Respondent, Daimler Truck Financial, a business unit of Mercedes-Benz Financial Services Canada Corporation

HEARD: September 8, 2014

REASONS FOR DECISION

I. Appeal from Master’s order dismissing an action at a status hearing

[1] The plaintiff, 2026125 Ontario Limited o/a Southview Asphalt & Aggregates, appeals from the January 9, 2014 order of Master Graham which dismissed its action at a status hearing. As well, the plaintiff appeals from the August 6, 2014 order of the Master Graham awarding a total of $26,640, plus HST, in costs in favour of the three defendants.

[2] For the reasons set out below, I dismiss the appeal.

II. Applicable standard of review

[3] As stated by the Court of Appeal in 1196158 Ontario Inc. v. 6274013 Canada Limited,[^1] a decision to dismiss an action for delay at a status hearing is discretionary and entitled to deference on appeal. The decision may be set aside if made on an erroneous legal principle or if infected by a palpable and overriding error of fact.

III. Nature of the Action

[4] The plaintiff commenced its action by statement of claim issued February 14, 2011. The plaintiff sought damages against Ashland Paving Ltd. and Harper Truck Centres Inc. for breach of contract, and damages against Mercedes-Benz Financial Services Canada Corp. for inducing breach of contract. The plaintiff contended that Harper had breached two 2010 contracts to sell it 14 trucks for slightly more than $2 million through a leaseback arrangement and that Ashland had breached a snow removal contract entered into with the plaintiff. The plaintiff alleged that Mercedes-Benz had induced Harper to breach its contract by arranging to finance the purchase of the same vehicles on behalf of Ashland.

IV. Grounds of appeal

[5] In its Notice of Appeal the appellant set out the following grounds for appeal:

(i) the Master erred in determining that there was not a reasonable explanation for delay;

(ii) in the alternative, the Master erred in requiring that the appellant prove that there was a reasonable explanation for the delay, applying the applicable Rule 48.14(13) test too rigidly; and,

(iii) the Master failed to consider all of the circumstances of the particular case, failed to balance the respective interests of the parties and failed to consider whether it would be fair to dismiss the action in the context of the particular case. At the hearing Appellant’s counsel stressed the failure of the Master to take into account evidence that the plaintiff had intended to pursue the action.

V. Analysis

A. The applicable legal principles

[6] In his January 9, 2014 oral reasons for judgment, Master Graham referred to the jurisprudence emanating from the Court of Appeal dealing with the dismissal of an action at a status hearing under Rule 48.14(13): Khan v. Sun Life Assurance Co. of Canada;[^2] 1196158 Ontario Inc. v. 6274013 Canada Limited;[^3] and Faris v. Eftimovski.[^4] Those decisions identified the following policy principles which inform the application of Rule 48.14(13):

(i) The goal of the civil justice system is to ensure the just, most expeditious and least expensive determination of every civil proceeding on its merits;

(ii) Civil procedure recognizes the need to deal with unexplained delay and provides for an active judicial role to promote the timely resolution of disputes and to discourage delay through rules such as Rule 48.14(13). The Rule enables the court to control the pace of litigation and ensure that disputes are resolved in a time-effective manner;

(iii) Failure to enforce rules and orders undermines public confidence in the capacity of the justice system to process disputes fairly and efficiently;

(iv) Where a party fails to prosecute an action in a timely fashion, the court is entitled to exercise the powers conferred by the Rules to dismiss actions absent an adequate explanation for the delay; and,

(v) The focus of the inquiry on a Rule 48.14 status hearing is on the conduct of the plaintiff.

[7] In those cases the Court of Appeal described the analysis which a court should perform under Rule 48.14(13) at a contested status hearing:

(i) The responsibility to move an action along lies chiefly with the plaintiff. Therefore the plaintiff bears the burden of demonstrating that (i) there was an acceptable explanation for the involved litigation delay and (ii) if the action was allowed to proceed, the defendant would suffer no non-compensable prejudice;

(ii) That test is conjunctive, not disjunctive. Even if the plaintiff can provide a satisfactory explanation for the delay, the action will be dismissed if there would be prejudice to the defendant. As well, if the plaintiff is not able to provide a satisfactory explanation for the delay, it is still open to the judge to dismiss the action, even if there is no proof of actual prejudice to the defendant;

(iii) In considering the issue, courts must allow some latitude for unexpected and unusual contingencies that make it difficult or impossible for a party to comply with deadlines. Courts should strive to avoid a purely formalistic and mechanical application of timelines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits; and,

(iv) The conduct of a defendant may be relevant to an inquiry under Rule 48.14(13) where a plaintiff who tries to move an action along is faced with some resistance from the defendant or tactics not consistent with a willingness to see a relatively straight-forward case proceed expeditiously.

[8] Master Graham accepted that if this action proceeded, there would be no prejudice to the defendants, so the issue therefore was whether the plaintiff had satisfied the Court that there was a reasonable explanation for the delay.

[9] The appellant submitted that the Master made two errors of law. First, the appellant contended that the “key consideration” which a court must take into account under Rule 48.14(13) is the presence or absence of prejudice to the defendant should the action proceed. I disagree. The conjunctive test articulated by the Court of Appeal identifies that as a factor, but not the determinative or key factor.[^5]

[10] Second, the appellant argued that the test requires the court to give great weight to evidence of the plaintiff’s intention to move its action along. While such evidence may well factor into the court’s analysis, the two-pronged approach enunciated by the Court of Appeal does not treat such evidence in the way suggested by the appellant.[^6]

[11] I find that Master Graham correctly stated the applicable principles of law governing the exercise of his discretion and made no error in that regard.

B. Adequacy of the explanation for the delay

[12] Master Graham found that there was a delay of at least 26 months - between March 21, 2011 and May 28, 2013 - in which the plaintiff did nothing to move the action along. Ample evidence supported that finding of fact by the Master. Mercedes-Benz had filed a statement of defence on March 16, 2011, after which the plaintiff did nothing. Ashland Paving had served the plaintiff with a demand for particulars dated March 16, 2011; the plaintiff did not respond to it until June, 2013, months after receiving the Status Notice, and Ashland Paving filed its defence on August 16, 2013. Harper Truck served a notice of intent to defend and a February 23, 2011 Demand for Particulars; the plaintiff did not respond to the Demand until June 24, 2013. Harper Truck served its defence on August 7, 2013.

[13] Master Graham found that the plaintiff had offered no explanation whatsoever for that delay. On this point Master Graham went on to state:

There is simply a statement in paragraph 17 and 18 of the affidavit of Jeremy Sacks [one of the plaintiff’s counsel] in support of the defendant’s position on the status hearing that subsequent to the receipt of the notice of intent to defend from the Defendant Ashland, assignment of the file was given to another associate who had left the firm in mid-2013 and Mr. Sacks was unable to explain why the remaining defendants were not noted in default. There is reference to counsel receiving Ashland’s request to inspect and demand for particulars, but once again there is no explanation whatsoever for the complete lack of activity on the file on the part of plaintiff’s counsel between March 21, 2011 and May 28, 2013.

While I accept that not every unexplained period of delay is sufficient to result in a dismissal of an action at a status hearing, a delay of over two years at the very least requires an explanation on the part of the plaintiff, and in this case no explanation is forthcoming.

[14] Those findings of fact made by the Master were amply supported by the evidence. The Master made no error of fact in so finding. This is a case where the plaintiff took no steps for over two years to move its action along and offered no explanation to the Master presiding at the status hearing for that delay. Whether that delay resulted from the negligence of counsel, the inadvertence of counsel, the instructions of the client, or the inability of the plaintiff to fund further steps in the preceding, one cannot say because no explanation for the 26 month delay was provided. The absence of an explanation by the plaintiff or plaintiff’s counsel for the delay contrasted starkly with the situation which faced this Court in Kerr v. CIBC World Markets Inc.,[^7] where the plaintiff filed extensive evidence which demonstrated her intention to move the action along and the failure of her counsel to obey her instructions to do so. That evidence led Newbould J. to conclude that the plaintiff had provided an acceptable explanation for the delay in her case. No evidence of that kind was put forward by the plaintiff in this case, and Master Graham quite properly distinguished the facts in Kerr from those in the present case.

[15] The appellant suggested that some fault for the delay rested with the defendants, in particular Ashland Paving and Harper Truck which did not plead over in early 2011. I do not accept that submission. The record contained no evidence that the defendants had resisted any effort by the plaintiff to move the action along. There was nothing to resist; the plaintiff simply did nothing.

[16] In the case of Mercedes-Benz, that defendant filed its Defence in March, 2011, but the plaintiff took no further steps against it. As put by counsel for Mercedes-Benz, there was “complete radio silence”. Turning to Ashland Paving and Harper Trucks, the appellant argued that the Master failed to consider the fact that their statements of defence were only filed in August, 2013 in breach of the Rules of Civil Procedure and that the appellant could not proceed with the matter until all the defences were filed. Ashland Paving and Harper Truck were not in breach of the Rules by waiting until they had received a response to their Demands for Particulars before pleading over; the plaintiff was under an obligation to respond promptly to the Demands, following which those two defendants would be required to plead-over.

[17] Finally, the Master gave the plaintiff fair opportunity to explain its delay. At the initial status hearing on August 20, 2013, Master Graham wrote in his endorsement that the defendants were seeking to dismiss the action and he continued:

This delay requires an explanation such that the action is vulnerable to dismissal (See Bolohan v. Hull (C.A.)) and a hearing on a full evidentiary record is required. The status hearing is adjourned to January 9, 2014 for this purpose.

The Master then set down a timetable for the filing of affidavits by the parties. The Master afforded the plaintiff the opportunity to file clear, cogent evidence explaining its delay, yet the plaintiff fell far short of putting its “best foot forward” to explain the delay.

[18] I therefore do not accept the appellant’s submission that the Master erred in determining that there was not a reasonable explanation for the delay. The Master was quite correct in so finding. That being the case, the appellant failed to satisfy the first part of the two-part conjunctive test under Rule 48.14(13).

C. Other factors

[19] The appellant also argued that the Master failed to consider whether it would be fair to dismiss the action in the context of the particular case, especially in light of the post-Status Notice evidence that the plaintiff intended to proceed with its action. As the Court of Appeal has pointed out, courts must allow some latitude for unexpected and unusual contingencies that make it difficult or impossible for a party to comply with timelines. As well, courts should strive to avoid a purely formalistic and mechanical application of timelines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits.

[20] It is clear from the reasons of Master Graham that he reviewed the evidence of the post-Status Notice dealings amongst counsel because he made specific reference to correspondence which took place in May and June, 2013. As well the Master referred to the timetable negotiations amongst the parties which followed:

I should also refer to the fact that the plaintiff argued that the defendants did attempt to negotiate a timetable with respect to the action after the status hearing was scheduled. However, the fact that the defendants attempted to do so does not constitute a waiver of their rights with respect to a status hearing.

[21] The court sent out the Status Notice on February 28, 2013. That notice provided a 90-day window of opportunity for the plaintiff to set the action down for trial. For three months plaintiff’s counsel did nothing: no response was made to the outstanding demands for particulars; no efforts were made to schedule discoveries; nothing was done. On May 28, 2013 plaintiff’s counsel wrote to defendant’s counsel advising that the plaintiff was requesting a status hearing and “a draft timetable will follow shortly”. The May 30, 2013 Notice of Status Hearing fixed August 20, 2013 as the hearing date. The plaintiff thereby was afforded half a year from the date of the Status Notice to ready this rather straight-forward contractual dispute for trial, but it did not do so.

[22] Instead of recognizing that it had failed to discharge its obligation to move the action along with due dispatch, the plaintiff began to engage in unnecessary litigation tactics. For example, the June 24, 2013 letter from its counsel stated that before the plaintiff would agree to a timetable, it required a response from Mercedes-Benz to the plaintiff’s 2011 Request to Inspect, notwithstanding plaintiff’s counsel’s May 28 promise to circulate a draft timetable “shortly”. Counsel for Mercedes-Benz promptly replied to advise that the response to the request to inspect had been sent to the plaintiff more than two years previous.

[23] Another month and one-half passed without any action by the plaintiff. Only on August 8, 2013, on the eve of the status hearing, did plaintiff’s counsel circulate a draft timetable which anticipated the lapse of one more year before this rather simple action would be set down for trial. Ensuing negotiations amongst counsel shortened the timetable, and defendants’ counsel bent over backwards to accommodate the work calendar of plaintiff’s counsel in selecting discovery dates. Efforts to reach a sensible resolution of the matter floundered when plaintiff’s counsel refused to agree that the dates set out in the proposed timetable would be peremptory to the plaintiff. I appreciate that at the time plaintiff’s counsel expressed some concern about committing to a November, 2013 conclusion date for discoveries given the uncertainty about when his November trial would end. That said, in light of the two-year plus history of the plaintiff doing nothing in the action, quite understandably defendants’ counsel were not prepared to agree to a timetable to which plaintiff’s counsel would not give a binding commitment, and plaintiff’s counsel did not offer up a timetable which would be peremptory to his client. The contested status hearing ensued.

[24] In sum, the plaintiff did nothing to move the action along for five of the six months between the date of the Status Notice and the date of the status hearing, then unreasonably refused to bind the plaintiff in a peremptory way to timetable dates. Taken together, that evidence certainly does not demonstrate a strong desire by the plaintiff to move the matter forward to trial. I see nothing in the post-Status Notice evidence to suggest that the Master ignored cogent evidence which would make it unfair in all the circumstances to dismiss the action. In my view, the Master took into account all of the circumstances surrounding the litigation history of this action and reached a conclusion which fell within the reasonable scope of the exercise of his discretion.

VI. Conclusion

[25] For those reasons, I dismiss the appeal. I award each respondent its costs of the appeal in the amount of $3,000.00.

D. M. Brown J.

Date: September 9, 2014

[^1]: 1196158 Ontario Inc. v. 6274013 Canada Limited, 2012 ONCA 544, para. 16. [^2]: Khan v. Sun Life Assurance Co. of Canada, 2011 ONCA 650 [^3]: 1196158 Ontario Inc. v. 6274013 Canada Limited, 2012 ONCA 544. [^4]: Faris v. Eftimovski, 2013 ONCA 360. [^5]: The jurisprudence regarding motions to set aside the registrar’s dismissal of an action contains different considerations than that dealing with Rule 48.14(13): see, Finlay v. Van Paasen, 2010 ONCA 204, paras. 25 and 28. [^6]: See, also, 904778 Ontario Ltd. v. OneWorld Energy Inc., 2014 ONSC 2539, para. 8 and 15. [^7]: Kerr v. CIBC World Markets Inc., 2013 ONSC 7685.