REASONS FOR JUDGMENT

Nature of the Appeal

[1] The Appellants appeal from the decision of Master Graham dated June 30, 2015 dismissing this action for delay pursuant to Rule 24.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[2] The Respondent takes the position that the Master’s decision should not be disturbed or appealed.

Jurisdiction

[3] Appeals from a final order of a master are heard by a single judge of the Divisional Court, pursuant to s. 19(1)(c) and s. 21(2)(a) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

Standard of Review

[4] The standard of review on an appeal from the order of a master is the same as that for an appeal from an order of a judge: correctness for an error of law, palpable and overriding error for an error of fact, and correctness or palpable and overriding error for a question of mixed fact and law, depending on whether there is an extricable legal principle (see: Zeitoun v. Economical Insurance Group, 2009 ONCA 415 at para. 1; Wellwood v. Ontario (Provincial Police), 2010 ONCA 386 (at para. 28)).

History of the Action

[5] The relevant chronology is not in dispute.

[6] On February 12, 2003, the Appellants issued a Statement of Claim seeking damages arising from a franchise agreement dated October 26, 2001 for a Timothy’s World Coffee franchise at 150 York Street in the City of Toronto.

[7] In addition to allegations of breach of contract, the Appellants alleged that misrepresentations were made by representatives of the Respondent during negotiation of the franchise agreement.

[8] In March of 2004, examinations for discovery were conducted. The Appellants complied with undertakings given at their discovery by September 2004.

[9] In May 2005, the Appellants retained Michael Webster as their counsel.

[10] On January 12, 2007, after nearly two years of inactivity, Webster served a Trial Record.

[11] From 2007 to 2009, counsel for the Respondent attempted to move the matter forward by either scheduling a pre-trial and/or discussing settling the matter without success.

[12] On July 5, 2010, the action was struck from the trial list by administrative order.

[13] Between July 5, 2010 and February 6, 2012, the Appellants took no steps to restore the action to the trial list or to move it forward. On February 6, 2012, Patrick Di Monte contacted Respondent's counsel to advise that he had been retained by the Appellants to represent them.

[14] As early as March 14, 2012, counsel for the Respondent took the position that there had been significant prejudice as a result of the Appellants’ delay. It was noted that prejudice arose from the passage of almost a decade, the absence of witnesses and the changes in ownership of the Respondent since 2003.

[15] In particular, since 2003 the Respondent had been involved in several complex restructuring transactions and ownership changes, including:

(a) On January 29, 2007, Timothy's Coffees of the World Inc., Mmmuffins Canada Corporation, 1504316 Ontario Inc. and 2007165 Ontario Inc. amalgamated and continued as Timothy's Coffees of the World Inc;

(b) On October 5, 2007, Timothy's Coffees of the World Inc. assigned all of its leases to Timothy's World Coffee Inc. ("TWCI");

(c) On February 5, 2008, 2161001 Ontario Inc. ("216") purchased all of the outstanding shares of Timothy's Coffees of the World Inc. Later that year, Timothy's Coffees of the World Inc., TWCI and 216 amalgamated and continued as Timothy's Coffees of the World Inc. ("Timothy's");

(d) In 2009, Green Mountain Coffee Roasters Inc. acquired Timothy's wholesale business. Also in 2009, Bruegger's Enterprises Inc. ("Bruegger's") purchased Timothy's retail business and assigned all leases to a wholly owned subsidiary called ThreeCaf Brands Canada Inc; and

(e) In 2011, Bruegger's parent company, Bagel Acquisition Corp., entered into a merger agreement with Le Bagel Inc. and LB Acquisition Corp. (both subsidiaries of LeDuff America Inc.). The merger resulted in a change of effective voting control of ThreeCaf Brands Canada Inc.

[16] Master Graham accepted the evidence of the Respondent that human resources documents, including documents that contained the contact information for the individuals employed by the Respondent from 2001 to 2009, had been transferred to Green Mountain Coffee Roasters Inc. when it purchased Timothy's wholesale business and were no longer available.

[17] Master Graham also found that, as a result of the various changes in ownership since 2007, none of the Respondent’s employees who were involved in negotiating the franchise agreement that is the subject of the action remain employed by the Respondent.

[18] Master Graham emphasized the impact of the departures of Rebecca McKinnon, President of the Respondent during the relevant time, and David Black, Vice President, Real Estate & Franchise Development when the franchise relationship began and was developed.

[19] Black had been responsible for overseeing all franchising and leasing activities at the relevant time. He also oversaw the recruitment of franchisee candidates and the process by which Timothy's entered into contractual relationships with its franchise partners. Black also negotiated and signed the lease with Oxford Properties Canada Ltd. with respect to the 150 York Street location. Black was examined for discovery on behalf of the Respondent in early 2004.

[20] Master Graham found that there was unexplained delay for failing to advance the action from 2004 to 2007.

[21] Master Graham also found that, there was a period of inordinate and inexcusable delay of three and one-half years between the Appellants setting the action down on January 12, 2007 and the striking of the action from the trial list on July 5, 2010:

It took six months for Mr. Webster to reply to defendant's counsel's letter of January 12, 2007. The balance of the correspondence consisted of defendant's counsel trying to prompt plaintiffs’ counsel to move the action forward and the plaintiffs’ counsel either not responding at all or giving unresponsive replies like "a pre-trial would be useful". There was no contact whatsoever from plaintiff’s counsel between February 11, 2008 and April 1, 2009, a period of more than 13 months. The delay in the hearing of the security for costs motion resulted from adjournments requested by the plaintiff, the plaintiffs’ failure to attend his scheduled cross-examination and the plaintiffs’ delay in providing evidence that Mr. Poshnarji was ordinarily resident in Canada. There was then no communication from plaintiffs’ counsel between the attendance before Master Birnbaum on August 4, 2009 and the striking of the action from the trial list on July 5, 2010.

[22] Master Graham noted that, although Poshnjari swore in his affidavit of February 13, 2013 that he was not aware of the motion for security for costs and the consequences of it, the evidence before him demonstated that Poshnjari had sworn an affidavit in response to that motion.

[23] Master Graham found that, although DiMonte failed to contact the Respondent's counsel for one year and ten months (between the Respondent's counsel's letter of March 14, 2012 and DiMonte's letter of January 16, 2014), DiMonte did take some steps in the intervening period, including attempting to communicate with Webster to ask him to report the matter to LawPro. When he failed to do so, DiMonte communicated with LawPro himself.

[24] Master Graham found as follows:

Once LawPro told Mr. DiMonte that it would not be bringing the required motion, it was incumbent on him to move expeditiously to schedule the motion himself. This would have required a call to the motions office to determine the court's availability, a call to opposing counsel to find a mutually convenient date and the serving and filing of a notice of motion. This could and should have been done within weeks of receiving LawPro's correspondence of June 27, 2013 stating that they would not be bringing the motion. Mr. DiMonte failed to do so until more than three months after the defendant served its motion record for the motion to dismiss for delay on December 3, 2014.

[25] The Appellants did not serve and file any notice of cross-motion until they served their Responding Motion Record on March 18, 2015.

[26] Master Graham concluded that there was a further period of unjustified delay between LawPro's June 27, 2013 correspondence and the service of the Appellants' Motion Record on March 18, 2015.

[27] Master Graham also found that no persons with knowledge of the dispute with the Appellants remain employed by the Respondent. As a result, Master Graham accepted the assertion on behalf of the Respondent that it is unable to produce any witnesses who have relevant knowledge of the events that underlie the Appellants' claim.

[28] By order of June 30, 2015, Master Graham dismissed the action for delay.

Fresh Evidence

[29] The Appellants sought leave to tender fresh evidence on this appeal. The fresh evidence basically consists of the results of recent “LinkedIn” searches of the names of six former employees of the Respondent, including McKinnon and Black.

[30] The Respondent objects to the introduction of this evidence.

[31] Following argument, determination of this issue was reserved to permit submissions on the substance of the appeal to be heard.

[32] An articulation of the test for receiving fresh evidence is set out in Sengmueller v. Sengmueller (1994), 1994 8711 (ON CA), 17 O.R. (3d) 208 (C.A.).

[33] The Sengmueller criteria have been applied by the Court of Appeal for Ontario in Centre City Auto Sales Inc. v. Kalsatos, 2013 ONCA 373, as follows:

(a) Is the evidence credible?

(b) Could the evidence have been obtained prior to trial though exercise of reasonable diligence?

[34] There is no challenge to the authenticity of these copies of web pages.

[35] This evidence could have been obtained prior to the attendance before Master Graham with the exercise of reasonable diligence. The Respondent’s counsel’s letter of March 14, 2012 and their motion material made it clear that prejudice due to the lack of availability of critical witnesses was being alleged. The LinkedIn search could have been carried out by the Appellants before the hearing and the results placed before the Master.

[36] Even if this fresh evidence were admitted, I do not consider that it would likely be conclusive as to any issue on this appeal. The mere contact information on the pages submitted does not demonstrate that any of those individuals are where the information states them to be, have been contacted by anyone, are available to the Respondent or willing to attend trial.

[37] The position of the Respondent and its evidence, as accepted by Master Graham, was not that those witnesses had disappeared or died. The thrust of the evidence was that the relevant individuals, due to the passage of time and intervening events, were no longer employed by the Respondent and available to it to assist it in defending the action.

[38] Accordingly, leave to tender this fresh evidence on the appeal is denied.

Law and Discussion

[39] The test on a motion to dismiss for delay was articulated in Woodheath Developments Ltd. v. Goldman, 2003 46735 (ON SCDC), [2003] 66 OR (3d) 731, as follows (at para. 4):

The principle to be applied on a motion to dismiss for delay is that the action should not be dismissed unless: (1) the default is intentional and contumelious; or (2) the plaintiff or his or her lawyers are responsible for the inexcusable delay that gives rise to a substantial risk that a fair trial might not now be possible. It is presumed that memories fade over time, and an inordinate delay after the cause of action arose or after the passage of limitation period gives rise to a presumption of prejudice. Where there is a presumption of prejudice, the defendant need not lead actual evidence of prejudice and the action will be dismissed for delay unless the plaintiff rebuts the presumption. The presumption of prejudice may be rebutted by evidence that all documentary evidence has been preserved and the issues in the lawsuit do not depend on the recollection of witnesses or that all necessary witnesses are available with detailed recollection of the events. If the presumption is rebutted, then the action may still be dismissed if the defendant leads convincing evidence of actual prejudice.

[40] The Appellants concede that Master Graham properly instructed himself on the test for dismissing an action under Rule 24 and that he correctly applied the test to find that there was inordinate delay in this case.

[41] The Appellants dispute Master Graham's conclusions that:

(a) the delay was inexcusable; and

(b) the delay gave rise to a substantial risk that a fair trial of the issues would not be possible.

[42] By arriving at his findings and conclusions with respect to these aspects of the test, the Appellants submit the Master made a palpable and overriding error that should invite appellate interference.

Inexcusable Delay

[43] The Appellants submit that the delay is excusable because the Plaintiff himself co-operated in every respect with the request of counsel and the court and that the Master found that the Plaintiff himself does not appear to have been responsible for the delay. They argue that the Plaintiffs should not be deprived of their day in court and a possible remedy due to the neglect and inattention of their counsel.

[44] The test in Woodheath Developments Ltd. does not require that it be shown that a plaintiff, rather than counsel, has deliberately or neglectfully failed to move an action forward. Rather, the dismissal is triggered where the plaintiff or his lawyers are responsible for the delay.

[45] I agree with the position of the Respondent that, in most cases at least, the appropriate remedy where a solicitor's neglect has resulted in a dismissal of an action is not to reinstate the action against a defendant who is blameless for the delay. Rather, the available recourse is for the clients to bring an action against their former solicitor. It is common ground that the Appellants have commenced a claim against Webster.

[46] I also agree that recent decisions demonstrate a greater emphasis upon the need to enforce more rigorously the requirement that disputes be resolved expeditiously and in a time-efficient manner. As was observed by LaForme J. in DeMarco v. Mascitelli, [2001] O.J. No. 3582:

A lengthy, unexplained delay in a case of this nature could well be defined as an abuse of the court's process. … The delay in this matter, of over a decade, strains the empathy of the court to excuse a delay of this ‘magnitude and gravity’ and further undermines public confidence in the administration of our civil justice system. ...

[47] Citing LaForme J.’s observation with approval, the Ontario Court of Appeal in Wallace v. Crate's Marine Sales Ltd., 2014 ONCA 671 upheld a motion judge's decision to dismiss an action for delay, stating that:

There comes a time, in short, when enough is enough and the civil justice system will no longer tolerate inordinate and inexplicable delay.

[48] Accordingly, I can find no palpable and overriding error in Master Graham’s conclusion that the delay in this case was inexcusable.

Substantial Risk that a Fair Trial Might Not be Possible.

[49] Master Graham also found that it would be unjust to force a defendant to continue defending a twelve-year action where its ability to do so has been prejudiced by delay for which it is not responsible.

[50] Master Graham found that the Appellants had led no evidence to rebut the presumption of prejudice due to the passage of time, and that the Respondent had demonstrated actual prejudice in any event.

[51] Master Graham found that the Appellants' claim was not solely driven by documentation. Some of the Plaintiffs’ allegations will require viva voce evidence to defend the action, including allegations of oral misrepresentations and breach of duty to act honestly which are claimed to have induced them to enter into the franchise agreement.

[52] The Master considered and rejected the Appellants' submissions that the nature and reliability of the evidence still available, being the contracts and various other records, and the nature of the action rebutted the presumption of prejudice to the Respondent flowing from the long delay.

[53] The action will depend on the recollection of witnesses concerning representations by employees of the Respondent that are said to have occurred nearly 14 years ago. It is reasonable to presume that the ability of any witnesses to reliably recall the events and conversations that occurred in 2001-2002 has been severely compromised by the passage of time and is unlikely to be cured by reference to such documents as may remain available. The longer the delay, the stronger the presumption of such prejudice.

[54] Master Graham accepted the Respondent's evidence that there are no employees currently employed by the Respondent with knowledge of the dispute with the Appellants. This assertion was not challenged at the hearing by any contrary evidence adduced by the Appellants.

[55] The Respondent also argues that, even if it could locate the relevant witnesses, there would still be prejudice to the Respondent because the witnesses are no longer the Respondent's employees and are now third parties to the action, and the Appellants' claim will requires the viva voce testimony of these witnesses' recollections from events that occurred nearly 15 years ago.

[56] Master Graham concluded that this absence of witnesses available for trial had resulted from the delay, and that the lack of availability of these witnesses constitutes prejudice arising from the delay such that there is a substantial risk that a fair trial is no longer possible.

[57] Master Graham considered the evidence and submissions on the motion and concluded that they favoured the determination that the inexcusable delay in this case had given rise to a substantial risk that a fair trial of the issues would not be possible.

[58] In my view, in so doing Master Graham made no palpable and overriding error that would justify appellate intervention.

Conclusion

[59] For these reasons, this appeal is dismissed.

Costs

[60] The parties have agreed on costs of this appeal in a sum of $7,500.00, all-inclusive, to the successful party. The Appellants therefore shall pay that sum to the Respondent by way of costs within 30 days.

Stewart J.

Released: February 12, 2016

CITATION: Poshnjari v. Timothy’s Coffees of the World Inc., 2016 ONSC 1076

DIVISIONAL COURT FILE NO.: 385/15

court file No.: 03-CV-243823

DATE: 20160212

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

Robert poshnjari and 1505287 ontario limited

Appellants

and -

timothy’s coffees of the world inc.

Respondent

REASONS FOR JUDGMENT

Stewart J.

Released: February 12, 2016

Robert Poshnjari and 1505287 Ontario Limited v. Timothy’s Coffees of the World Inc., 2016 ONSC 1076

Case Summary

REASONS FOR JUDGMENT

Nature of the Appeal

Jurisdiction

Standard of Review

History of the Action

Fresh Evidence

Law and Discussion

Inexcusable Delay

Substantial Risk that a Fair Trial Might Not be Possible.

Conclusion

Costs

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 3

Legal Tests 2

Legislation 3