DIVISIONAL COURT FILE NO.: 122/14
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
SIGNAL CHEMICALS LTD.
Plaintiff
(Respondent)
– and –
HARINDER SINGH, RAKESH SHARMA, KAWARJIT KALSI and RE/MAX HALLMARK REALTY LTD.
Defendants
(Appellants)
Ron J. Aisenberg, for the Plaintiff (Respondent)
M. Michael Title, for the Defendants (Appellants)
HEARD at Toronto: September 9, 2014
C. HORKINS J. (orally)
Background
1This is an appeal from a final order of Master Haberman dated February 21, 2014.
2The appellant, Harinder Singh, was examined for discovery on May 10, 2012 and gave a number of undertakings at his discovery. He did not comply with the undertakings. As a result, the respondent brought a motion for an order directing compliance with undertakings and questions refused or taken under advisement.
3The appellant complied with all of the undertakings before the motion was heard. This left the appellant’s refusals and questions taken under advisement to be dealt with. The parties resolved this on consent and Master Dash issued a consent order on December 18, 2013. This order directed that the appellant answer five questions that had been taken under advisement by January 20, 2014. The order also directed that the appellant provide certain cell phone records by February 18, 2014 and pay costs to the respondent/plaintiff of $2,000 by January 20, 2014.
4The appellant paid the costs on time but did not comply with the rest of the order of Master Dash. As a result the respondent brought a motion to strike the appellant’s statement of defence and counterclaim. This motion was heard by Master Haberman on February 21, 2014. At the time of this motion the trial was scheduled for April 14, 2014.
5The motion was confirmed as opposed.
6The appellant did not file any responding material for this motion. Counsel for the appellant appeared on the motion and did not request an adjournment.
7Master Haberman struck the appellant’s statement of defence and counterclaim and endorsed the motion record as follows: “In view of the lack of responding materials and the proximity of the trial date I have no choice but to strike the pleading”. No further reasons were provided.
STANDARD OF REVIEW
Standard of Review
8The order of the Master striking the defence and counterclaim was a final discretionary order.
9On appeal, the decision of a Master is entitled to the same level of deference with respect to findings of fact and the exercise of discretion as would be accorded to the decision of a judge.
10The standard of review of an order, whether final or interlocutory, is correctness with respect to questions of law. Where the Master exercises discretion, the Court on appeal must determine whether the correct principles were applied and whether the master misapprehended the evidence such that there is a palpable and overriding error (Zeitoun v. The Economical Insurance Group (2008), 91 O.R. (3d) 131 (Div. Ct.), aff'd 2009 ONCA 415).
THE APPEAL
Position of the Parties
The Appeal
11The appellant argues that the Master struck out the statement of defence and counterclaim without “directing herself to the legal principles applicable to the judicial exercise of discretion in a case of this kind.” The Master said “she had no choice” but to strike the statement of defence and counterclaim when in fact she had a judicial discretion. The appellant says that the Master failed to consider and apply her discretion and this was an error in law. The Master failed to follow the jurisprudence that directs that striking a pleading is an extreme remedy and should be used as a last resort. Further, the appellant argues that the Master gave inadequate reasons.
12The appellant asks this court to set aside the order on the following terms:
(1) that the appellant comply with the order of Master Dash within 5 business days of the hearing of this appeal.
(2) That any issue regarding the sufficiency of compliance be remitted to another Master rather than Master Haberman.
(3) That the above terms represent the appellant’s last chance to comply and that failure to comply shall result in his statement of defence and counterclaim being struck out.
13The respondent takes the position that the Master properly exercised her discretion in the circumstances. Specifically, the appellant filed no material to respond to the motion and did not ask for an adjournment. As a result there was no evidence before the Master explaining the default, whether the documents would be produced, and if so, when.
Analysis
Analysis
14Pursuant to Rule 60.12 of the Rules of Civil Procedure, the court has authority to dismiss an action or defence as a sanction for default of a court order.
15The decision to strike a claim or defence is one of discretion, which must be exercised on proper principles.
16In Starland Contracting Inc. v. 1581518 Ontario Ltd. [2009] O.J. No. 2480, the Divisional Court heard an appeal from a Master who struck the statement of defence and counterclaim of a defendant that had not complied with a court order directing that undertakings be answered.
17In Starland, the court reviewed the law that applies to the exercise of discretion under rule 60.12. I adopt and agree with the lengthy summary in Starland found at paras. 23-34. In summary, striking a defence is an extreme remedy and should only be ordered as a last resort. The issue on such a motion is whether to impose such a drastic remedy or grant some lesser remedy.
18The following passage from Starland at para. 25 recognizes the balancing act that is engaged when considering whether or not to strike a pleading:
25 Gray J. in Broniek-Harren v. Osborne, [2008] O.J. No. 1690 (S.C.J.), describes the competing principles of a party's right to have its case determined on its merits, and the need for the orderly procedural progress of litigation. He states at paras. 28 to 31:
The policy underlying the Rules of Civil Procedure is twofold: to ensure that cases that are not settled are tried on their merits; and to ensure that cases are processed, and heard, in an orderly way. A civilized society must ensure that a credible system of justice is in place, and the Rules of Civil Procedure, made pursuant to the Courts of Justice Act, reflect the scheme created by the Province for the orderly handling of civil cases.
The Rules reflect a balance. The litigant does not have an untrammelled right to have his or her case heard. In order to be heard, a case must be processed in accordance with the Rules. By the same token, adherence to the Rules must not be slavish in all circumstances. They are, after all, designed to ensure that cases are heard. Throughout the Rules, the principle is reflected that strict compliance may be dispensed with where the interests of justice require it: see, for example, Rules 1.04(1), 2.01, 2.03, 3.02, and 26.01. The difficult issue, in any particular case, is to determine when non-compliance reaches the point that it can no longer be excused. The Court, and society as a whole, have an interest in ensuring that the system remains viable. If the Rules can be ignored with impunity, they might as well not exist.
19The law, as stated in Starland, has been recognized in numerous cases: (Bell Express Vu Limited Partnership v. Corkery, 2009 ONCA 85 and Dew Point Insulation Systems Inc. v. J.V. Mechanical Ltd., 2009 Carswell Ont. 8064 (Div. Ct.)).
20I grant the appeal for the following reasons. The Master did not exercise her discretion according to correct legal principles. The Master struck the statement of defence and counterclaim because she concluded that she had “no choice”. This is an error in law.
21The law is clear that there is a choice to be made that involves a consideration of whether or not such an extreme remedy is required or whether a lesser remedy will suffice. As stated in Broniek-Harren v. Osborne the difficult issue “is to determine when non-compliance reaches the point that it can no longer be excused.” The answer to such question requires a “careful review of the substance of the default and its impact on the ability of the court to do justice” (see Tizard Estate v Ontario [2003] O.J. No. 3010 para 3. that was quoted with approval in Starland).
22No consideration was given to ordering compliance within a short fixed period of time, making such an order a “last chance” order and directing that the pleading would be struck if compliance did not follow. The substance of the default and its impact on the ability of the court to do justice was not considered in Master’s brief endorsement.
23The brief endorsement of the Master does not reveal any consideration of the careful review that is required on such a motion.
24Having granted the appeal, it is agreed by both parties that this Court should hear the matter de novo. The respondent takes the position that no “last chance” order should be granted because the appellant filed no evidence on the Master’s motion. While it clearly would have been prudent to file an affidavit, I disagree with the respondent’s position that this disentitles the appellant to a “last chance” order.
25There was evidence before the Master, which is summarized as follows:
(1) This is a case involving the failure to comply with one court order. There is no evidence of repeated failures to honour court orders.
(2) All undertakings were answered. What remained were five refusals that the appellant agreed to answer along with production of cell records.
(3) The trial was two months away. This is not a case where the parties were on the cusp of trial as in the Rock Precast Erectors Ltd. v. Canadian Precast Limited, et al., 2012 ONSC 594.
26This is not a case where the non-compliance has reached the point where it can no longer be excused. To strike a defence and counterclaim on the facts of this case is an extreme remedy out of proportion to the default.
27I exercise my discretion and impose a “last chance” order as requested by the appellant.
28I order as follows:
(1) The Order of Master Haberman is set aside on the following terms: The appellant has until September 17, 2014 to comply in full with the Order of Master Dash.
(2) This Order represents the appellant’s last chance to comply with the order of Master Dash. Failure to comply shall result in his statement of defence and counterclaim being struck out.
COSTS
Costs
29No order as to costs.
C. HORKINS J.
Date of Reasons for Judgment: September 9, 2014
Date of Release: September 12, 2014
CITATION: Signal Chemicals Ltd. v. Singh, 2014 ONSC 5228
DIVISIONAL COURT FILE NO.: 122/14
DATE: 20140909
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
C. HORKINS J.
BETWEEN:
SIGNAL CHEMICALS LTD.
Plaintiff
(Respondent)
– and –
HARINDER SINGH, RAKESH SHARMA, KAWARJIT KALSI and RE/MAX HALLMARK REALTY LTD.
Defendants
(Appellants)
ORAL REASONS FOR JUDGMENT
C. HORKINS J.
Date of Reasons for Judgment: September 9, 2014
Date of Release: September 12, 2014