Citation: Outfront Media Canada LP v. Clarity Outdoor Media Inc., 2017 ONSC 2136

DIVISIONAL COURT FILE NO.: 489/16

DATE: 20170926

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: OUTFRONT MEDIA CANADA LP, Plaintiff (Appellant)

AND:

CLARITY OUTDOOR MEDIA INC., STEPHEN AMO and TRIBAR INDUSTRIES INC., Defendants (Respondents)

BEFORE: Mr. Justice H.J. Wilton-Siegel

COUNSEL: Gary Graham and John J. Adair, for the Plaintiff/Appellant Outfront Media Canada LP

Allan Herman, for the Defendant/Respondent Clarity Outdoor Media Inc.

HEARD at Toronto: April 12, 2017

ENDORSEMENT

[1] On this appeal, the appellant Outfront Media Canada LP (the “appellant” or “Outfront”) seeks an order setting aside the order dated September 8, 2016 of Master Haberman (the “Order”) and an order varying an order to continue dated October 8, 2015 granted by the Registrar (the “2015 Order to Continue”). The 2015 Order to Continue changed the name of the appellant in this action from “CBS Outdoor Canada, a division of CBS Canada Holdings Co.” to “Outfront Media Canada LP”. The Order set aside the 2015 Order to Continue and dismissed the appellant’s action.

Factual Background

[2] CBS Canada Holdings Co. (“CBS” or the “plaintiff”) commenced this action on May 5, 2010 claiming damages against Clarity Outdoor Media Inc. (“Clarity” or the “respondent”) arising out of a contract for the use of road-side billboard advertising space. Clarity raised a set-off defence and counterclaimed based on misrepresentation.

[3] On July 15, 2010, CBS served a summary judgment motion that was scheduled for March 16, 2011. Clarity served a cross-motion for summary judgment in August 2010 and late served responding materials to the CBS motion in November 2010.

[4] The motion and cross-motion were adjourned on March 3, 2011 under circumstances addressed below. On October 4, 2011, the motions were re-scheduled to be heard on April 23, 2012.

[5] On March 30, 2012, CBS entered into an asset and share purchase agreement with CBS Outdoor Canada LP (“LP”) (the “Purchase Agreement”). Pursuant to the Purchase Agreement, CBS sold and assigned all of its right, title and interest in and to substantially all of the assets, property and undertaking owned, used or held by CBS for use primarily in, or relating primarily to, the Outdoor Business (being the business of providing outdoor advertising services) (such assets, property and undertaking being herein referred to as the “Assets” and such division being herein referred to as the “Outdoor Division”). The transaction contemplated by the Purchase Agreement is herein referred to as the “Reorganization”. Pursuant to the Reorganization, LP also assumed and agreed to discharge or perform when due all liabilities to the extent related to the Outdoor Business and the Assets, including without limitation certain liabilities set out in the schedules to the Purchase Agreement referred to as the “Assumed Liabilities”. The Reorganization closed on or about March 31, 2012.

[6] Although the effect of the Reorganization was to transfer CBS’s claim in the action against Clarity to LP, LP did not seek an order to continue pursuant to Rule 11.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, at that time.

[7] The motion and cross-motion were heard on April 23, 2012. Perell J. released reasons on April 27, 2012 in which he dismissed the CBS summary judgment motion on the grounds that a genuine issue for trial existed with respect to Clarity’s defence and counterclaim. Perell J. granted Clarity’s cross-motion striking the claims against Stephen Amo (“Amo”) and Tribar Industries Inc. (“Tribar”). Perell J. held there was no basis for the allegations asserted against these individuals and awarded substantial indemnity costs in their favour.

[8] On July 9, 2012, the Court issued a Status Notice with respect to this action. CBS did not immediately receive a copy of the Status Notice as it was apparently sent to the wrong office of CBS’s counsel in the action. On September 11, 2012, CBS received a copy of the Status Notice from Clarity’s counsel as well as correspondence that indicated that Clarity’s counsel wished the opportunity at a show cause hearing to seek a dismissal of the action for alleged delay on the part of CBS. On September 25, 2012, CBS’s legal counsel requested a Status Hearing. The Status Hearing was originally scheduled for December 20, 2012 but was adjourned on that date to April 19, 2013. At the Status Hearing, the parties consented to a timetable for the action with the result that the show cause hearing did not proceed.

[9] On May 30, 2013, Clarity examined CBS’s representative Nick Arakgi (“Arakgi”), the current president of Outfront and, prior to the Reorganization, the Vice-President, General Manager of CBS.

[10] CBS advised Clarity of the Reorganization for the first time on or about November 14, 2013, by way of an answer to an undertaking given on the discovery of Arakgi. The answer was included in a lengthy list of responses to undertakings. The answer read as follows:

Effective March 31, CBS Canada Holdings Co. completed an internal reorganization which involved transferring the CBS Outdoor Canada business to a limited partnership, CBS Outdoor Canada LP, through its General Partner CBS Canada GP Co.

The response did not include a copy of the Purchase Agreement.

[11] On February 5, 2014, after the examination for discovery of Clarity’s representative William Moore (“Moore”), a director of Clarity, CBS served a trial record in the action. Subsequently, an unsuccessful mediation was conducted on July 26, 2014. The parties served their respective expert reports in the spring of 2015 and a pre-trial was conducted on July 13, 2015.

[12] On October 24, 2014, counsel for the parties agreed to a trial date in November 2015.

[13] On November 20, 2014, LP filed a declaration of change of name under the Limited Partnerships Act, R.S.O. 1990, c. L.16, changing its name to “Outfront Media Canada LP”. Accordingly, for clarity, in this Endorsement the terms “Outfront”, “appellant” and “LP” refer to the same entity.

[14] On September 2015, in an attendance before the Master in her capacity as a case management Master, Clarity raised the need for an order to continue under Rule 11.03. As a result, the case conference was adjourned. The issue had also previously been identified in a pre-trial conference held in July 2015.

[15] On October 8, 2015, CBS obtained the 2015 Order to Continue on an ex parte basis from the Registrar. The 2015 Order to Continue continued the action under the style of cause showing Outfront as the plaintiff.

[16] The 2015 Order to Continue was obtained on the basis of an affidavit of Arakgi sworn October 1, 2015 (the “2015 Arakgi Affidavit”). In the 2015 Arakgi Affidavit, Arakgi swore that: (1) the plaintiff changed its name to Outfront Media Canada LP on November 20, 2014; and (2) “by way of name change, the Plaintiff has assigned, sold, conveyed and transferred to [Outfront], all of its right, title and interest in and to the property that forms the subject matter of this Action and all proceeds of or from any of the assigned collateral.” On this basis, Arakgi stated Outfront wished to amend the title of proceedings to substitute its name for that of CBS. As discussed below, the statement in (2) was incorrect and did not give the Registrar the authority to issue the 2015 Order to Continue.

[17] At the present time, a second pre-trial conference is scheduled for October 20, 2017 and the trial of this action is scheduled to commence on December 4, 2017.

The Motion and the Cross-Motion

[18] Clarity brought a motion pursuant to a Notice of Motion dated December 15, 2015, which was subsequently amended on January 11, 2016 (as so amended, the “Notice of Motion”). The relief sought was: (1) an order setting aside the 2015 Order to Continue; and (2) an order dismissing or permanently staying the action. The Clarity motion pursuant to the Notice of Motion is herein referred to as the “Motion”.

[19] The Notice of Motion listed the following six grounds. First, Clarity alleged the 2015 Order to Continue was prejudicial to it. Second, Clarity stated that its counterclaim had been prejudiced by the 2015 Order to Continue. Third, it stated that the 2015 Arakgi Affidavit was “fundamentally untrue” in characterizing the subject transaction as a name change effected in 2014 when there had been a transfer of interest in 2012 in the form of the Reorganization, at which time, according to the Notice of Motion, “some” of CBS’s assets were transferred to a limited partnership. Fourth, Clarity stated that the appellant failed to give timely disclosure of the Reorganization and to take timely action to obtain an order to continue or provide any explanation for “its delays”. Fifth, Clarity alleged that the appellant was responsible for unreasonable and excessive delays of the action that have prejudiced Clarity. Sixth, Clarity suggested that CBS “procured” Clarity’s consent at the Status Hearing in 2013 to an order that allowed the appellant to avoid showing cause why the action should not be dismissed for delay, stating that, if it had been aware of the Reorganization, Clarity would have required a show cause hearing.

[20] The Motion was supported by an affidavit of Moore sworn February 10, 2016 (the “Moore Affidavit).

[21] It is noteworthy that Moore did not suggest that CBS undertook the Reorganization with the intention of insulating its assets from any counterclaim or costs award of Clarity. Moore’s statements in the Moore Affidavit on this issue are limited to an expression of the concern mentioned above that Clarity could be prejudiced “if Outfront is less able to satisfy a judgment than CBS had been prior to the subject transfer of interest” and that Outfront “may no longer have any material assets or undertaking.” Further, Clarity did not submit that CBS intentionally withheld disclosure of the Reorganization in order to implement the Reorganization.

[22] Clarity’s position in the Moore Affidavit is generally that CBS and the appellant are entirely responsible for the delay of the action. It relies on the following considerations to make this argument: (1) CBS’s alleged late delivery of materials in connection with its summary judgment motion; (2) CBS’s failure to cross-examine Clarity’s representative, Amo, in accordance with the timetable agreed to between counsel after the summary judgment motion was re-scheduled from March 16, 2011; (3) CBS’s failure to schedule discoveries in a timely fashion after the dismissal of its summary judgment motion on April 27, 2012; (4) an alleged breach of the timetable agreed at the Status Hearing on April 19, 2013 regarding the timing of the discovery of Moore, as Clarity’s representative, scheduled for July 9, 2013, which ultimately occurred on December 9, 2013; and (5) CBS’s prosecution of its summary judgment motion and its assertion of claims against Amo and Tribar, which Clarity says necessitated its cross-motion in the summary judgment proceedings, in the absence of which the trial could have occurred in 2011. It is noteworthy that these matters are not causally connected to the appellant’s failure to obtain an order to continue the action after the Reorganization.

[23] Based on the Moore Affidavit, Clarity alleged prejudice in three forms resulting from CBS’s alleged conduct in delaying this proceeding.

[24] First, Clarity argued that, if it had known that CBS’s action had been stayed after March 31, 2012, it would not have agreed to a timetable for the action and would, instead, have required CBS to show cause why the action should not have been dismissed at the Status Hearing on April 19, 2013. Second, Moore stated that Clarity was concerned that CBS may no longer have any material assets or undertaking and that, even if Outfront assumed liability in respect of the counterclaim, Clarity will be prejudiced if Outfront is less able to satisfy a judgment than CBS had been prior to the Reorganization. Third, Clarity submitted that it had suffered prejudice from the delay associated with the departure of Amo as a shareholder of Clarity in April 2014. Amo was also the former president of Clarity.

[25] On February 16, 2016, Outfront brought its cross-motion to vary the 2015 Order to Continue to correct the failure to refer to the Reorganization in the 2015 Order to Continue (the “Cross-Motion”).

[26] The Cross-Motion was supported by an affidavit sworn February 16, 2016 of Arakgi (the “2016 Arakgi Affidavit”). The 2016 Arakgi Affidavit stated: (1) that the Purchase Agreement assigned CBS’s interest in the action to LP; (2) under the Purchase Agreement, LP assumed, among other liabilities, any liability that CBS might have to Clarity in respect of Clarity’s counterclaim; and (3) LP changed its name to Outfront on November 20, 2014. The 2016 Arakgi Affidavit also purported to correct the preamble in the 2015 Order to Continue and was accompanied by a heavily redacted version of the Purchase Agreement.

[27] In response to the Cross-Motion, counsel for Clarity served a Notice to Inspect dated February 18, 2016 seeking inspection of an un-redacted copy of the Purchase Agreement. Arakgi was also cross-examined on March 22, 2016. On April 5, 2016, in response to a question put to him in that cross-examination, Arakgi delivered a substantially less redacted version of the Purchase Agreement. This copy of the Purchase Agreement was before the Master at the hearing of the Motion and the Cross-Motion.

[28] The Cross-Motion was also supported by a number of affidavits of Kristine Sebastian-Crone, a law clerk in the office of legal counsel for the appellant (“Sebastian-Crone”). In her affidavit sworn February 11, 2016, Sebastian-Crone stated, among other things, that Ronald Dunford (“Dunford”), the principal legal counsel in this action for CBS and the appellant, advised her that, subsequent to obtaining the 2015 Order to Continue, it came to Dunford’s attention that both the preamble to the 2015 Order to Continue as well as the 2015 Arakgi Affidavit contained “inadvertent errors”. This affidavit also contained copies of extensive correspondence between counsel respecting a proposed, but ultimately successful, effort to settle an amendment to the 2015 Order to Continue. In a further affidavit sworn March 10, 2016, Sebastian-Crone testified that she was advised by Dunford that “any delay in obtaining an Order to Continue pursuant to Rule 11 was inadvertent and not motivated by bad faith” and that, having been advised of Clarity’s position in the 2015 case conference before the Master, he immediately took steps to file motion materials for the 2015 Order to Continue.

The Master’s Reasons

[29] The Master provided lengthy reasons for her decision dated September 8, 2016 (the “Reasons”).

[30] The Master began her Reasons with a lengthy chronology of this action. The Master then addressed the events leading up to the hearing of CBS’s summary judgment, which was ultimately heard on April 23, 2012. In this narrative, the Master made two significant determinations.

[31] First, the Master offered her own view of the events, concluding that the adjournment of the hearing of the motion, which was originally scheduled for March 16, 2011, was due to “CBS’s unexplained failure to comply with the timetable”. She held there was no satisfactory explanation for the delay.

[32] Second, the Master concluded that the Reorganization was “a manoeuver by CBS to insulate itself from a potentially bad outcome less than a month before the eventual hearing date.” She further concluded that CBS’s failure to take any action to lift the stay resulting from the Reorganization for “a considerable period of time” strengthened the basis for the inference she had drawn, speculating that this might have been the result of a careful review of Clarity’s motion materials.

[33] In view of its significance, the following is the relevant passage of the Reasons:

It appears that CBS’s repeated unexplained delays in getting their materials together for these motions resulted in the ultimate hearing date being put over by more than a year. The timing of this reorganization and its proximity to the new hearing date set is now suspect. In the context of everything that surrounds this reorganization and what appears to have been an effort by CBS to keep it quiet, it is open to the court to infer that this reorganization was a manoeuvre by CBS to insulate itself from a potentially bad outcome less than a month before the eventual hearing date.

Nothing was said about this reorganization for a considerable period of time. Although it had the effect of staying the action, nothing was done to life the stay or to alert Clarity, or the court for that matter, to its existence until after the completion of several key litigation steps, including service of a trial record. CBS’s conduct after this reorganization strengthens the basis for the inference that I have drawn. Perhaps a good hard look at Clarity’s motion materials had a sobering effect on CBS. The timing, in my view, cannot be ignored, particularly in the context of what did-and did not-follow.

[34] The Master then turned in Part One of the Reasons to Clarity’s Motion to set aside the 2015 Order to Continue and Outfront’s Cross-Motion. I will briefly summarize the issues addressed by the Master. The Master’s observations and conclusions in respect of these matters are discussed in greater detail below.

[35] The Master began by setting out three categories of concern respecting CBS’s actions.

[36] First, she observed that CBS did not move for an order to continue the action after the Reorganization. Instead, CBS sought permission to do so only after having made its submissions and having heard Clarity’s submissions and the comments of the Master at the hearing of the Motion.

[37] The Master inferred that CBS’s strategy was to reveal as little as possible about the Reorganization and, only after it became clear that this strategy would not succeed, to proceed with a back-up strategy of asking “to start all over again”. She considered that Clarity had raised all the issues that were pertinent to the motion to continue and CBS had been given an opportunity to respond fully but chose not to do so, with the result that all the issues relevant to a motion for an order to continue had been canvassed. The Master rejected the CBS request for leave to bring a fresh motion for an order to continue based on the Reorganization saying that, in the absence of new evidence, CBS should not be given an opportunity to restart the process.

[38] Second, the Master referred to a number of factual concerns which are discussed in greater detail below. The Master began by expressing concern regarding the fact and timing of the Reorganization. The Master then expanded her concerns to include the lack of any explanation that was satisfactory to her in respect of a number of matters, including: (1) why no order to continue was sought after the Reorganization until October 2015; (2) why Clarity was not advised of the stay under Rule 11.01 before the hearing of the summary judgment motions or “before expending funds in defending an action that was stayed”; (3) why the order to continue sought on October 2015 had nothing to do with the Reorganization; and (4) why the name change was suddenly obtained in October 2015 after the issue of the stay and the need for an order to continue was raised in her court “some months earlier”.

[39] The Master’s second concern regarding factual matters was the impact of the Reorganization on Clarity. The Master considered that Clarity should “be able to assess the viability of their counterclaim before expending further funds on pursing [sic] it. They should also be able to assess if they should be bringing a motion for security for costs.” The Master considered that Clarity’s efforts to examine these issues had been “repeatedly thwarted”.

[40] The Master considered that the Reorganization did not involve a simple transfer of assets from CBS to LP pursuant to the Purchase Agreement. She stated that the Purchase Agreement did not, in her view, explain what actually happened. I discuss the Master’s misapprehension of the evidence regarding the Reorganization below. The Master also tied her concerns regarding the lack of disclosure regarding the Reorganization to Arakgi’s failure to answer certain questions on his cross-examination and the delivery of only partial answers to these questions by answers to undertaking. The Master’s concerns with Arakgi’s evidence are also addressed below.

[41] The third concern of the Master was the failure of CBS to disclose the Reorganization to Clarity “for over two years” and then, when disclosure was made, to fail to reveal the “true essence of the transaction.” The Master concluded that the failure to disclose reflected a “deliberate attempt to keep this information from Clarity for some period of time”. In this discussion, the Master referred mainly to the inconsistency between Arakgi’s answers to certain questions put to him on his discovery and his later statements in the 2016 Arakgi Affidavit.

[42] The Master then addressed the basis on which the 2015 Order to Continue was obtained and her view that the appellant had failed to provide a satisfactory explanation for the delay in seeking an order to continue after the Reorganization. The Master dismissed the explanations of Arakgi and Dunford, which were in each case “inadvertence”. Instead, the Master concluded that the explanation lay in “deception on a grand scale”. This conclusion is addressed further below.

[43] Next, in a lengthy section of the Reasons, the Master collected many of her findings, expressed previously, that addressed her understanding of, and issues with, the Reorganization and the Order to Continue.

[44] The Master then addressed the applicable law noting first that Rule 11.01 of the Rules of Civil Procedure operated to impose a stay of proceedings on a party whose interest has been transferred until an order to continue is obtained. The Master concluded correctly that Rule 11.01 had the effect of staying the action upon the Reorganization and that, because the 2015 Order to Continue did not address the event which gave rise to the stay, the action remained stayed. The Master concluded that the 2015 Order to Continue should be struck without leave to CBS to vary.

[45] The following sets out the basis for the Master’s conclusion:

As this action has been stayed since 2012 and the order obtained in 2015 in no way addressed the root cause of that stay, I am of the view that the action remains stayed. I am further of the view that that would have been the case regardless of whether or not I struck the 2015 order. As the action has been stayed since 2012, an order seeking to lift a stay for totally unrelated reasons cannot accomplish what it set out to do.

I am therefore striking the 2015 order as it was made at a time when the action was stayed for reasons quite different from what was disclosed in the supporting evidence.

I make this order without leave to CBS to vary. CBS has given no explanation for why this should be permitted, aside from hearsay evidence, baldly stated, contained in an affidavit based entirely, in this regard, on what counsel who appeared in court advised the deponent. As such, the evidence has no real weight.

[46] In Part II of the Reasons, the Master addressed whether the action should continue to be stayed or should be dismissed as requested by Clarity in its Motion.

[47] The Master began by noting that CBS had not yet moved to continue the action as a result of the Reorganization. She held that “in the absence of any explanation it is open to the court to now dismiss the action”. Accordingly, she proceeded to address Clarity’s Motion to stay or dismiss the action for delay, and CBS’s alleged bad behaviour, concluding that, as the action has been stayed since 2012, the only issue for consideration was dismissal.

[48] The Master stated that she considered herself obligated as a matter of law to apply a contextual approach to the issue of dismissal. In this regard, she considered, as significant, “the absence of anything approaching a reasonable explanation” for ten enumerated matters generally described above. The Master concluded that “[i]n the context of all of the above, the reasonable inference to draw is that all this is the result of careful planning. The result, however, is litigation strategy gone terribly wrong”. In other words, she concluded that CBS’s actions were intentional.

[49] After referring to the decision in Kamdar v. Lombard Insurance Company, 2008 10383 (S.C.J.), which the Master considered to be of assistance in terms of what circumstances amounted to unreasonable delay for the purposes of Rule 11.03, the Master dismissed the action on the basis that CBS’s delay was unreasonable not only on the basis of the length of time but also because it was directed toward insulating its assets from Clarity. In doing so, the Master rejected Arakgi’s evidence as unreliable.

[50] The following passages set out the Master’s reasoning in dismissing the action:

I adopt a similar approach in this case. All of these unexplained delays, in a context where a plaintiff who delays has an onus to explain the reason for that delay, creates an inference that CBS acted as they did for reasons that, in their view, would insulate their assets from Clarity. This would protect them from the impact of both the counterclaim and a costs order. In the absence of reasonable explanations for the factual matrix of this case, this is a reasonable inference to draw.

As Aragki’s evidence has been all over the map, I have no reason to conclude that this is counsel off on a frolic of their own. The client seems to have had a cavalier attitude in terms of how they present their evidence. As a result, it is now difficult to know which aspect of Arakgi’s testimony are [sic] in fact accurate.

While dismissal is often said to be a draconian remedy, there are times when it is the only appropriate one. On the basis of all of the above it is, in my view, fully warranted in this case.

CBS counsel made the point that this would be a harsh result here, in that everything is ready to go and a trial date has been set. It bears recalling, however, that the case has reached this point on the basis of deception on grand scale for over 4 ½ years. The failure to explain how and why this occurred was the last straw. I am required to do justice between the parties – in my view, dismissal is the only just result at this time. A different approach to these motions might have garnered a different result – but we must all play the hand we are dealt with.

Standard of Appeal

[51] The appeal is brought pursuant to section 19(1)(c) of the Courts of Justice Act, R.S.O. 1990, c. C.43. The parties do not dispute that the standard of review is set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 in paras. 6-10 and 36-37. On a pure question of law, the standard of review is correctness. The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a "palpable and overriding error". Questions of mixed fact and law are subject to the “palpable and overriding error” standard, unless it is clear that the trial judge made an error of law or principle that can be identified independently in the judge's application of the law to the facts of the case.

Applicable Statutory Provisions

[52] This appeal turns in important respects on the operation of the provisions of Rule 11 which, in its entirety, provides as follows:

11.01 Where at any stage of a proceeding the interest or liability of a party is transferred or transmitted to another person by assignment, bankruptcy, death or other means, the proceeding shall be stayed with respect to the party whose interest or liability has been transferred or transmitted until an order to continue the proceeding by or against the other person has been obtained.

11.02 (1) Where a transfer or transmission of the interest or liability of a party takes place while a proceeding is pending, any interested person may, on filing an affidavit verifying the transfer or transmission of interest or liability, obtain on requisition from the registrar an order to continue (Form 11A), without notice to any other party.

(2) An order to continue shall be served forthwith on every other party.

11.03 Where a transfer or transmission of the interest of a plaintiff takes place while an action is pending and no order to continue is obtained within a reasonable time, a defendant may move to have the action dismissed for delay, and rules 24.02 to 24.05 apply, with necessary modifications.

The Standard on a Motion Under Rule 11.03

[53] An important issue on this appeal is the appropriate test for relief under Rule 11.03.

[54] Clarity does not dispute that, given the language of Rule 11.03, which provides that the defendant may bring a motion, the onus of proof lies with a defendant to establish both that a reasonable time has expired without a notice to continue having been obtained and that a reason exists to dismiss the action.

[55] However, the parties disagree on the test to be applied on a motion for dismissal under Rule 11.03 and whether the Master erred in applying the standard that she did.

The Positions of the Parties

[56] Clarity argues, in effect, that the test for dismissal under Rule 11.03 is the well-established test for dismissal of an action for delay under Rule 24. This test was most recently addressed by the Court of Appeal in Langenecker v. Sauvé, 2011 ONCA 803. The Court of Appeal confirmed in that decision that, in order to dismiss an action for delay, a court must be satisfied that either: (1) the default has been “intentional and contumelious”; or (2) the delay is inordinate, inexcusable and such that it gives rise to a substantial risk that a fair trial of the issues in the litigation will not be possible because of the delay.

[57] Clarity therefore submits that, if the requirement of an unreasonable delay in obtaining an order to continue has been demonstrated such that a defendant has standing to bring a motion under Rule 11.03, the defendant is entitled to canvass all issues relevant to a motion for dismissal for delay under Rule 24. Clarity submits that, in this case, the appellant’s actions satisfied both types of cases described by the test for dismissal under Rule 24 in Langenecker.

[58] The appellant argues that the test for the purposes of Rule 11.03 is the test described in Langenecker as modified to reflect the fact that the behaviour and consequences to be addressed in either of the two types of cases described in Langenecker must specifically relate to a plaintiff’s failure to obtain an order to continue under Rule 11.02.

[59] Accordingly, the appellant says that, in respect of the first type of case, it is the default in obtaining an order to continue that must be demonstrated to be intentional and contumelious. Similarly, in respect of the second type of case, the appellant says that the prejudice suffered by the defendant must relate to the failure of a plaintiff to obtain an order to continue.

[60] While the appellant did not assert a ground of appeal based on the Master’s approach to the applicable test, such a ground of appeal is implicit in its submissions and was addressed by Clarity in its responding submissions.

The Test Applied by the Master

[61] The Master’s decision on this issue is set out in Part II of her Reasons. As mentioned, Part II contains a number of observations and comments on pages 14 and 15 of the Reasons followed by a general analysis of the applicable law and its application to the circumstances in this case. However, the Master did not expressly state the test that she considered applicable. Based on the following reading of the Master’s decision, I conclude that she adopted an approach which is closer to that proposed by the appellant. However, as discussed below, the Master also referred to certain matters that were not related to the appellant’s failure to obtain an order to continue after the Reorganization and, to this extent, adopted the respondent’s approach.

[62] The Master began her legal analysis by stating that, in her view, the applicable test under Rule 11.03 should be based on a “contextual approach” which, in the present case involved an assessment of whether CBS had provided a reasonable explanation for a number of matters which can be reduced to four categories: (1) the delay of the summary judgment motions; (2) the delay in advising Clarity of the Reorganization; (3) the delay in, and manner of, obtaining the 2015 Order to Continue; and (4) the inconsistent evidence of Arakgi in this proceeding, which the Master considered pertained to these delays. I note that all of these matters relate generally to conduct pertaining to the appellant’s failure to obtain an order to continue after the Reorganization with the exception of (1), the reliance on which is addressed below.

[63] As mentioned above, the Master concluded that “[i]n the context of all of the above, the reasonable inference to draw is that all this is the result of careful planning. The result, however, is litigation strategy gone terribly wrong.” As set out above, the Master then concluded that, in the absence of reasonable explanations for the “factual matrix of this case”, which I understand to be the four categories of matters described above, it was reasonable to infer that CBS acted as it did with a view to insulating its assets from Clarity and concealing this fact from Clarity in order to induce Clarity to progress the litigation when, with knowledge, Clarity would have sought a dismissal of the action in a show cause hearing at the Status Hearing or otherwise. The Master then summarized her conclusion by stating that the “deception on a grand scale for over 4 ½ years” associated with CBS’s failure to provide a reasonable explanation for its delay in seeking an order to continue in respect of the Reorganization justified an order dismissing the action.

[64] Accordingly, the Master appears to have proceeded on the basis that the Motion under Rule 11.03 should be dismissed primarily on the basis of a finding that CBS had acted in bad faith in undertaking the Reorganization, and in its subsequent concealment of the Reorganization by refraining from obtaining an order to continue. This finding appears to relate to the first ground for dismissal in Langenecker. In addition, however, the Master also found that Clarity had suffered prejudice as a result of the appellant’s delay in obtaining an order to continue, although the precise prejudice requires further discussion below. Accordingly, that finding together with her finding of an absence of a reasonable explanation for the delay – in fact, her finding of an unmeritorious explanation for the delay – also appears to relate to the second ground for dismissal in Langenecker. Clarity agrees with this description of the Master’s approach to the applicable test for the purposes of a motion under Rule 11.02 and the basis of her dismissal of the action. Clarity argues that the Master did not commit any palpable and overriding error in dismissing the action on each of these two grounds by way of application of the test contemplated in Langenecker.

Analysis and Conclusions Regarding the Applicable Test

[65] There is little jurisprudence on the test to be applied in the consideration of a motion under Rule 11.03. The Master relied on the decision in Kamdar. I do not find this decision to be helpful for the following reasons. The motion judge in that case did not address the applicable test on a motion for dismissal under Rule 11.03. In addition, the actual basis of the decision, including the time period that was held to be unreasonable, is not clear. In any event, given the factual determinations in this Endorsement, the circumstances in Kamdar were materially different from the present circumstances. Accordingly, I consider that the test to be applied is a novel issue.

[66] While it may appear convenient to consider that the general principles governing dismissal of an action for want of prosecution should apply, I do not think such an approach is correct. Such a reading renders Rule 11.03 not only irrelevant but also perverse. Given the breadth of the circumstances permitting a motion for dismissal under Rule 24, there is no need for a further rule that also permits a party to move for dismissal on the narrow circumstances of a failure to obtain an order to continue. This reality argues very strongly for a more limited test that addresses prejudice that is causally related to the failure by a party to obtain an order to continue. Moreover, on the Respondent’s approach, a party seeking to move under Rule 11.03 would be required to demonstrate unreasonable delay as a condition of entitlement to an order under Rule 11.03 notwithstanding that there is no such condition to an order under Rule 24 to the extent that the party could establish the first type of case contemplated in Langenecker for dismissal. This indicates that the test under Rule 11.03 must necessarily differ from the test in Langenecker at least insofar as it pertains to the first branch of such test.

[67] Accordingly, I do not accept Clarity’s view of the applicable test under Rule 11.03.

[68] On the other hand, I am also not inclined to accept the appellant’s proposed approach to the test under Rule 11.03 in its entirety. The test in Langenecker, as modified in the manner suggested by the appellants, is at best awkwardly applied in the context of a delay in obtaining an order to continue. In particular, with respect to the first type of case under Langenecker, given the administrative nature of an order to continue, I do not see how even an intentional failure to obtain an order to continue would, on its own, justify a dismissal of an action. Such action would only justify an order for dismissal if it resulted in real prejudice to another party to the action.

[69] Further, as this case demonstrates, delay in obtaining an order to continue is very different from delay in prosecuting an action. In the present proceeding, the case had been advanced to the point where it is ready for trial notwithstanding the delay in obtaining an order to continue. Further, as discussed below, such delay has not resulted in any prejudice to Clarity’s right to a fair trial.

[70] Accordingly, I am of the view that the test for dismissal of an action must be demonstration that the failure to obtain an order for continuance of an action has prejudiced a party to the action in some manner that is related to the fairness of a trial in the action. This more limited test is also consistent with the administrative nature of an order to continue as discussed below. Further, as this case demonstrates, a delay in obtaining an order to continue is highly unlikely to add any significant consideration of prejudice to whatever prejudice can be demonstrated to have resulted from a plaintiff’s failure to prosecute an action. Given the existence of Rule 24, the circumstances giving rise to an order for dismissal under Rule 11.03 are likely to be very narrow.

[71] However, I do not have to make a determination between the test as formulated by the appellant and as expressed by the Court. Given the findings below, there is no basis for a dismissal of the action whether the appropriate test is the test proposed by the appellant or the more limited test of prejudice suggested by the Court. The important point is that, as I have concluded above, the test for dismissal of an action for delay as set out in Langenecker and applied in respect of a motion under Rule 24 does not apply in the present case. I will return to the significance of this conclusion below in the context of the Master’s reliance on her findings regarding the behaviour of CBS and the appellant as grounds for dismissal of the action.

Procedural and Factual Matters Informing the Conclusions Herein

[72] Before addressing the appellant’s grounds of appeal, I propose to address two procedural and three factual matters that inform the conclusions herein.

The Nature of an Order to Continue Under Rule 11.02

[73] An order to continue under Rule 11.01 is fundamentally an administrative order that does not affect the substantive rights and obligations of the parties: see 1467736 Ontario Ltd. v. Galli, [2003] O.J. No. 4186 at para. 9 (S.C.J.) and Lasalle National Bank v. Mundi, [2007] O.J. No. 3671 at paras. 24-27.

[74] The nature of an order to continue is revealed by the procedure for obtaining an order pursuant to Rule 11.02. It provides that, where a transfer or transmission occurs, any interested person may, on filing an affidavit verifying the transfer or transmission of interest or liability, obtain on requisition from the Registrar an order to continue (Form 11A), without notice to any other party.

[75] Rule 11.02 therefore envisages an administrative act on the part of the registrar rather than a motion before a master or judge of the Supreme Court. It also envisages an ex parte procedure followed by service of the order to continue on the other parties to the action.

[76] Accordingly, in the circumstances of this case, Rule 11.02 would have permitted the issue of an order to continue in respect of the Reorganization upon an ex parte requisition by an interested party and the filing of an affidavit verifying the transfer or transmission of the interest of CBS in the action, and of the liability of CBS in respect of the Clarity counterclaim, to LP pursuant to the Purchase Agreement.

[77] Significantly, the provisions of Rule 11.02 do not contemplate a refusal of a requisition by the Registrar on substantive grounds. Instead, via the language of Form 11A, being the form of an order to continue, Rule 11.02 contemplates the right of any affected party to bring a motion to vary or set aside any such order.

[78] This raises the issue of the circumstances under which a defendant is entitled to an order setting aside an order to continue after service of the order to continue. This has not been addressed in the language of Form 11A or in any case law presented to the Court. However, such an order would be appropriate to the extent that relief is required to implement any necessary technical arrangements to ensure that, as a matter of law, the new plaintiff in the action stands in the same relation to the defendant as did the previous plaintiff.

[79] Accordingly, in this action, any uncertainty as to whether the effect of the Reorganization rendered the appellant liable in respect of the Clarity counterclaim could have been addressed on a motion of Clarity to vary the order to provide clarifying language to such effect.

[80] Whether a court has the authority to dismiss an action on the grounds of substantive prejudice to a defendant, as that term is used below, is unclear. I note that neither Rule 11.02 nor Form 11A contemplates a motion to dismiss an action solely by virtue of the transfer or transmission of the interest of the original plaintiff in the action. To the contrary, Form 11A contemplates an order to set aside the order to continue, not to dismiss the action as a result of the order to continue. This suggests that any such motion for dismissal must be brought pursuant to other provisions of the Rules of Civil Procedure. However, it is not necessary to decide this issue given the Court’s findings below, including its finding of an absence of demonstrable prejudice to Clarity in the present circumstances.

The Scope of the Motion Before the Master

[81] On the appeal, Clarity submitted that the Master dismissed the action pursuant to her authority under both Rule 11.03 and Rule 24. The appellant submitted that the Master confined the exercise of her authority to Rule 11.03.

[82] I accept that the Notice of Motion indicated that Clarity was relying upon Rule 24.01 and section 106 of the Courts of Justice Act in addition to Rule 11. However, it is abundantly clear from the Reasons that the Master understood the Motion to be limited to a claim for relief under Rule 11.03 and made her decision to dismiss the action solely pursuant to her authority under that provision.

[83] This is made express at page 13 of the Reasons where the Master stated:

Rule 11.03 states that the order must be obtained within a reasonable time and that a defendant may move to have the action dismissed for delay where the party who should have obtained the order fails to do so. The Rule refers to rules 24.02 and 24.05, which apply with necessary modification. This is what Clarity relies on for part two of its motion.

[84] Rules 24.02 to 24.05 are procedural provisions that are of no application to the present circumstances. Their mention in Rule 11.03 does not have the effect of importing the provisions of Rule 24.01, or the test for dismissal for delay thereunder, into a motion under Rule 11.03.

[85] In addition, as the appellant has noted, the Reasons reflect this limited basis for the dismissal of the action in two respects. First, in several places, the Master refers to the relevant delay in terms of 4½ years, being the appellant’s delay in seeking an order to continue following the Reorganization on March 31, 2012. At no point does she address the course of the entire action since its commencement on May 5, 2010. Second, the case law upon which the Master relies, being the Kamdar decision, is a decision under Rule 11.03 not under Rule 24.

[86] Lastly, it should also be noted that the Moore Affidavit sets out Clarity’s position that the appellant was responsible for a delay in the action in considerable detail. The principal events enumerated in the Moore Affidavit have been set out above. However, with the exception of the timing of the summary judgment motions, the Master makes little or no reference to these events in her decision and clearly does not rely on any of them in reaching her decision.

[87] Accordingly, on this appeal, I have proceeded on the basis that the Master’s decision to dismiss the action was granted pursuant to the exercise of her authority pursuant to Rule 11.03 and not pursuant to Rule 24.01.

The Reorganization

[88] The Master concluded that she could not understand either the purpose or the effect of the Reorganization from the Purchase Agreement or the other evidence regarding the Reorganization in evidence before her. She went on, however, to find that the purpose of the Reorganization was to isolate the Assets in the event of an award in favour of Clarity. In doing so, the Master erred in two principal respects.

[89] First, the Master erred in drawing an inference of the purpose of the Reorganization from the timing of the Reorganization relative to the hearing date of the summary judgment motions for two reasons.

[90] There is no evidence that either Arakgi or legal counsel for CBS were aware of CBS’s intention to implement the Reorganization at the time that the original hearing date for the motions was adjourned in March 2011. Nor is there any evidence that either of them was aware of such intention at the time that the hearing date was re-scheduled in October 2011 for April 2012. In short, the evidence indicates that the timing was coincidental rather than intentional.

[91] In addition, as a practical matter, the premise that the Reorganization was undertaken after CBS reviewed the merits of Clarity’s counterclaim principally to avoid exposing the assets of the Outdoor Division to a judgment in favour of Clarity is unreasonable. Given the size of Clarity’s counterclaim relative to the size of the Outdoor Division, this finding inflates the significance of Clarity’s counterclaim out of all reasonable proportion. It is unreasonable to assume, without any supporting evidence, that a corporate entity would undergo the significant cost and time associated with the creation of a limited partnership, the conveyance of legal title to a significant proportion of its owned properties to a nominee corporation, the conveyancing and other documentation pertaining to the transfer of all of its assets and the assumption of its liabilities by the limited partnership, the filing of all necessary tax elections, and the completion of all associated audit work, solely in order to avoid liability for a counterclaim in the amount being asserted at the time of the Reorganization by Clarity.

[92] Second, the Master described the Purchase Agreement as “unintelligible”. In particular, the Master noted that legal, but not beneficial, title had been assigned to a Nova Scotia corporation. She then noted that, in view of the fact that most of the schedules to the Purchase Agreement had been redacted, it was impossible to know what properties remained with the plaintiff. The Master misapprehended the facts pertaining to the Reorganization in the following four respects.

[93] First, the Master appears to have misunderstood the relationship between CBS and LP. It is clear that the original plaintiff in this action was CBS Canada Holdings Co., the vendor under the Purchase Agreement, not LP, as the Master suggests at page 6 of the Reasons. Further, the assets transferred were substantially all of the assets of the Outdoor Division, which carried on business as a division - in fact, as the only division - of CBS under the name “CBC Outdoor Canada”. The Master considered Arakgi’s explanation to this effect in the 2016 Arakgi Affidavit to be incomprehensible when it was, in fact, very clear.

[94] Second, the Master misconstrued the significance of the Nova Scotia corporation in the Reorganization. Paragraph 1(d) of the Purchase Agreement expressly states that the beneficial interest in the “Nominee Properties”, which are the properties for which legal title was transferred into the name of the Nova Scotia corporation, was sold and transferred to LP. In other words, the evidence before the Master indicated that LP received the beneficial title to substantially all of the assets of the Outdoor Division pursuant to the Reorganization, even if legal title to certain of the assets resided in a nominee corporation.

[95] Third, I do not see how the redaction of the remaining information in the schedules renders the Purchase Agreement “murky”, “unintelligible” or fails to disclose “what went where” as the Master suggests. Schedule A is merely a list of the properties for which legal title was held in the name of the Nova Scotia company. As mentioned, the beneficial interest in all these properties was transferred to LP. The enumeration of the owned real properties in Schedule 1(c) and the leased real properties in Schedule 1(e) is not necessary to understand the transaction. The relevant disclosure is the definition of “Assets”, which is “substantially all of the Vendor’s right, title and interest, in, to and under, or relating to, the assets, property and undertaking, owned or used or held by Vendor for use primarily in, or relating primarily to the Outdoor Business”. Similarly the schedules dealing with the benefit plans for employees and the collective agreements being assumed are clearly irrelevant. For the same reason, the specific amounts of the individual liabilities comprising the “Assumed Liabilities” and the purchase price allocation amounts are unnecessary for an understanding of the Reorganization.

[96] Lastly, while the definition of “Assumed Liabilities” is limited to the liabilities set out in Schedule 3(a), it is clear from the language in paragraph 3(a), as well as the language of the Purchase Agreement as a whole, that the intention of the parties to the Agreement was that LP was to assume all of the outstanding obligations of CBS pertaining to the Outdoor Division. In this regard, as well, paragraph 14 of the Purchase Agreement provided that LP would not require an exemption under applicable bulk sales legislation and agreed to indemnify CBS for any liabilities arising out of such non-compliance. In such circumstances, the assets acquired by LP remained subject to all liabilities of CBS at the date of the Reorganization to its creditors, including Clarity.

[97] Accordingly, the only possible uncertainty in respect of the Purchase Agreement might have been whether, as a procedural matter, LP assumed liability for the counterclaim given that Clarity was not a party to the Purchase Agreement. This would appear to be the very purpose of an order to continue. However, to the extent that Clarity considered that an order to continue the action in the name of Outfront did not achieve this result as a matter of law, it was open to it to bring a motion to vary the order to continue to make specific provision for such liability of Outfront. The Master therefore erred in proceeding on the basis that any uncertainty on the issue of the liability of LP in respect of Clarity’s counterclaim must be treated as a prejudice to Clarity arising from the Reorganization that justified a dismissal of the action. I note, as well, that, as a legal matter, LP received the chose in action constituted by the action subject to any equities between Clarity and CBS.

[98] The Master’s view that the effect of the Purchase Agreement was unclear also appears to have been influenced by a misunderstanding regarding CBS’s continuing obligation in respect of the Clarity counterclaim. This is a separate issue from the issue of whether LP became subject to liability in respect of the counterclaim upon the Reorganization, although the two issues appear to have run together in the Reasons.

[99] As a matter of law, the transfer of assets from CBS to LP, including the action, did not relieve CBS of its liability to Clarity in respect of the counterclaim. Further, in its correspondence, and in the proceeding before the Master, CBS made it clear that it was prepared to remain a party to the action to resolve any doubt as to its continuing liability for the counterclaim. The Master recognized this reality in commenting that, under contract law, “a party to a contract cannot transfer his liability under the contract without the consent of the other party.” However, the Master then queried whether “such a transfer of CBS’s assets was available here without Clarity’s consent in the context of Clarity’s counterclaim.” Insofar as the Master was suggesting that the entire Reorganization required Clarity’s consent, the Master was clearly in error. As discussed above, the net result of the Reorganization was that LP became subject to the Clarity counterclaim without CBS having been discharged.

[100] In summary, the Master erred in concluding that the purpose and effect of the Purchase Agreement was unclear. In short, the evidence before the Master establishes that the purpose and effect of the Purchase Agreement was to transfer substantially all of the assets comprising the Outdoor Division from CBS to the appellant with the result that the appellant became liable in respect of Clarity’s counterclaim without CBS being discharged from such liability. Accordingly, there is no basis in either the timing of the Reorganization or in the substantive effect of the Reorganization that supports the conclusion that the purpose or effect of the Reorganization was to isolate the Assets from Clarity. I have proceeded accordingly in this Endorsement.

When Did Clarity Learn of the Reorganization?

[101] At page 16 of the Reasons, the Master says that Clarity was told about the Reorganization in 2013. I think that this is the correct timing on the evidence. However, the Master otherwise proceeded on the basis that the Reorganization was withheld from Clarity for a materially longer period of time and to the prejudice of Clarity. In doing so, the Master misapprehended the facts pertaining to the appellant’s disclosure of the Reorganization.

[102] The evidence regarding the timing of Clarity’s apprehension of the Reorganization is as follows.

[103] While CBS did not provide a copy of the Purchase Agreement when it delivered its answers to undertakings on November 14, 2013, the disclosure at that time made it clear that the effect of the Reorganization was to transfer the entirety of the Outdoor Business to LP. Clarity should reasonably have assumed from this disclosure that the transfer included any litigation claims of the Outdoor Business, including the action. Counsel for Clarity acknowledges that he did not send the answers to undertakings to Clarity at the time that he received them. He also acknowledges that he did not read the answers to undertakings at that time, attributing this to the volume of material included in the answers to undertakings. For present purposes, however, there was no concealment of the location of the assets of the Outdoor Division after the time of this disclosure, whether or not Clarity’s counsel advised it of the Reorganization in 2013. Further, CBS was not obliged to provide a copy of the Purchase Agreement in connection with the answer to the undertaking. If Clarity thought that a copy of such agreement was relevant, it had the obligation to seek a copy.

[104] In any event, in its factum, Clarity acknowledges that it became aware of the “transmission” at or about the time of the mediation on June 26, 2014. As mentioned above, the only events of relevance that occurred in the period March 31, 2012 to June 2014 were: (1) the hearing of the summary judgment motions; (2) the Status Hearing; and (3) the examination for discovery of Arakgi. As discussed below, the failure to advise Clarity of the Reorganization did not result in any prejudice to Clarity in any respect relating to either the summary judgment motions or the Status Hearing. I will address the issues raised regarding Arakgi’s evidence on discovery below. For present purposes, however, the record establishes that nothing of significance occurred during the period from March 31, 2012 to November 14, 2013, or to June 2014 to the extent the latter date is even relevant.

[105] Notwithstanding the foregoing, in the chronology on page 2 and at page 9 of the Reasons, the Master states that Clarity did not become aware of the Reorganization until November 14, 2014, which was shortly before the name change of LP to Outfront on November 20, 2014. The Master considered that the name change was tied to the disclosure of the Reorganization shortly before and that this timing was part of CBS’s strategy to conceal the Reorganization as described above.

[106] The Master was clearly mistaken regarding this timing. As mentioned, at the latest, Clarity learned of the Reorganization on or about June 26, 2014. The Master therefore had no basis for tying the Reorganization and the name change of LP together in the manner that she did. The Master also had no basis for relying on this alleged timing in drawing the inference of a litigation strategy regarding the obtaining of the 2015 Order to Continue. This is addressed further below.

[107] It should also be noted that, for its part, legal counsel for the appellant should also have recognized that an order to continue was required under Rule 11.02 no later than the time that it drafted and sent CBS’s answers to undertakings in November 2013. In order words, even though CBS’s legal counsel was not transaction counsel to CBS on the Reorganization and may therefore not have known on or about March 31, 2012 of the Reorganization and the consequential need to continue the action, such counsel were in possession of the relevant facts no later than November 2013.

Matters Relating to the Appellant’s Manner and Timing of Obtaining of the 2015 Order to Continue

[108] The Master relied heavily on inferences drawn from the manner in which the appellant obtained the 2015 Order to Continue. In particular, she relied on: (1) her understanding that the name change of LP was filed two weeks after CBS notified Clarity of the Reorganization; (2) the timing of the requisition for the 2015 Order to Continue relative to the timing of the case conference before the Master in September 2015; (3) the fact that the 2015 Order to Continue was obtained on an ex parte basis; and (4) the fact that the 2015 Order to Continue was sought on the basis of the name change of LP rather than the Reorganization. The Master concluded on the basis of these four factors that “a completely different story was crafted to make the entire situation more palatable, something the registrar could deal with and for which notice was not required”. She went on to conclude that the purpose of the 2015 Order to Continue was “an effort to displace both the extensive delay in moving to lift the stay, without really disclosing anything about what occurred in 2012.”

[109] The Master’s finding regarding the purpose of the appellant’s actions with respect to the 2015 Order to Continue is based on a number of factual errors.

[110] First, the Master stated that the name change of LP to Outfront was filed two weeks after CBS notified Clarity of the Reorganization, implying that the name change was a means of concealing the Reorganization in the requisition to the Registrar for the 2015 Order to Continue. In fact, as mentioned above, the name change occurred one year after disclosure of the Reorganization in November 2013, and eleven months before the requisition to the Registrar for the order to continue in November 2015.

[111] Second, the Master misapprehended the relationship of the timing of Clarity’s reference to the need for an order to continue in the case conference in September 2015 before the Master and the requisition for the 2015 Order to Continue in early October 2015. The need for an order to continue was first raised by Clarity in the pre-trial conference conducted in July 2015. There is no inference regarding the alleged litigation tactic that can be drawn based on the further mention of the issue at the case conference before the Master in August 2015the evidence discussed below that more persuasively explains the actions of the applicant and its counsel.

[112] Third, the Master considered it significant that the 2015 Order to Continue was obtained on an ex parte basis. However, as noted, Rule 11.02 contemplates a requisition to the Registrar on an ex parte basis.

[113] Lastly, the Master misconstrued the significance of the appellant’s action in seeking an order to continue on the basis of the name change of LP rather than the Reorganization. The Master considered that the appellant had “crafted” the name change to somehow make the order to continue “more palatable” to the Registrar and to conceal the Reorganization. This ignores the fact that the basis for the requisition, as set out in the 2015 Arakgi Affidavit, rendered the 2015 Order to Continue a nullity as the Registrar had no authority under Rule 11.02 in respect of a mere name change. Far from making the requisition more “palatable” for the Registrar, the Registrar should have rejected the requisition for the reason upon which the Master did so in her Reasons. Further, as mentioned, the Master’s conclusion also ignores the fact that the Reorganization had already been disclosed almost two years earlier. I discuss the significance of the appellant’s actions below.

[114] In short, there is nothing in the four circumstances described above regarding the manner and timing of the requisition for the 2015 Order to Continue that can support the Master’s inference of a “litigation tactic”. Setting these considerations aside, the only circumstances upon which the Master could therefore have relied in drawing her inference of the appellant’s alleged litigation strategy relating to these matters was the inaccuracy of the statements in the 2015 Arakgi Affidavit. The significance of these inaccuracies is addressed later in this Endorsement.

Analysis and Conclusions Regarding the Master’s Disposition of the Motion and Dismissal of the Action

[115] The appellant has raised four grounds of appeal which are set out below. I will address each of these grounds of appeal in turn and will then address the appellant’s request for an order to vary the 2015 Order to Continue.

Grounds of Appeal

[116] The appellant’s four grounds of appeal are the following :

1. that the Master erred in concluding that Clarity suffered prejudice as a result of the appellant’s delay in obtaining an order to continue in respect of the Reorganization;

2. that the Master erred in concluding that CBS adopted a litigation strategy involving implementation of the Reorganization and subsequent non-disclosure thereof;

3. that the Master erred in failing to consider the merits of the litigation and the fact that the action was ready for trial; and

4. that the Master erred in appreciating the nature of an order to continue and the significance of a failure to obtain an order to continue, thereby bringing the administration of justice into dispute.

As mentioned, the appellant also asserts that it is entitled to an order to vary the 2015 Order to Continue or, in the alternative, to bring a fresh requisition or motion for an order to continue the action in respect of the Reorganization pursuant to Rule 11.02.

[117] I will address each of the foregoing issues in turn. For the reasons set out below, the Court agrees that the Master erred in the manner contemplated in issues #1, #2 and #4 (in part) and finds that it is not necessary to address issue #3. The significance of these findings is addressed below. The Court also concludes that the appellant is entitled to leave to bring a fresh requisition for an order to continue in respect of the Reorganization.

Prejudice to Clarity

[118] The appellant’s first ground of appeal is that the Master erred in concluding that Clarity suffered prejudice as a result of the appellant’s delay in obtaining an order to continue in respect of the Reorganization. This conclusion is required to support the Master’s dismissal of the action on the basis of the second branch of the test in Langenecker.

[119] Underlying the Master’s decision is a conclusion that the Reorganization resulted in prejudice to Clarity by virtue of the appellant’s actions in concealing the Reorganization, and the stay of proceedings under Rule 11.01 that resulted from the appellant’s failure to obtain an order to continue. The Master did not, however, make an express finding of any particular prejudice. Clarity argues that there was a basis for finding that it was prejudiced in three respects which are mentioned in the Reasons. I will address each in turn.

Alleged Prejudice to Clarity’s Ability to Pursue its Counterclaim

[120] First, in stating that Clarity should have enough information to assess the viability of its counterclaim and whether it wished to bring a motion for security for costs, the Master, in effect, raised the question of whether Clarity’s position as a litigant was negatively affected by the Reorganization. Such prejudice could take the form of either legal prejudice or substantive prejudice. I will address each in turn. I conclude that there was no basis for a finding that Clarity suffered either form of prejudice as a result of the Reorganization.

[121] Clarity has failed to demonstrate any legal prejudice to it resulting from the Reorganization, by which is meant any prejudice to Clarity’s ability to pursue its counterclaim.

[122] As discussed above, the effect of the Purchase Agreement was that the appellant assumed all the liabilities of CBS in respect of the Outdoor Division, including the Clarity counterclaim. Further, as the transferee, the appellant received the benefit of the Assets subject to any liabilities to creditors of CBS by virtue of the operation of bulk sales legislation. An order to continue would do no more than confirm the appellant’s liability in respect of the counterclaim. Moreover, nothing in the Reorganization discharged CBS from its liability in respect of the counterclaim as mentioned. To the extent there was any doubt on the matter, the proper course of action for Clarity would have been to bring a motion to vary any order to continue issued in respect of the Reorganization to clarify the liability of CBS and the appellant.

[123] Clarity has also failed to demonstrate any substantive prejudice to it resulting from the Reorganization, by which is meant any impact on the assets available to satisfy any judgment in Clarity’s favour on its counterclaim.

[124] As a preliminary matter, it is not clear to what extent an unsecured party can move under Rule 11.03 for dismissal of an action based on a transfer having occurred or arisen in a manner which results in the transferee being less capable, as a financial matter, of honouring any judgment rendered against it. An unsecured creditor cannot generally object to a counterparty dealing with its assets as it chooses. A creditor’s protection lies in the availability of remedies under fraudulent preference and similar legislation.

[125] In any event, in this case, I see no adverse impact resulting from the Reorganization on Clarity’s ability to obtain satisfaction in respect of its counterclaim. Clarity has failed to demonstrate that CBS isolated its assets pursuant to the Reorganization in a manner that prevents Clarity from accessing them in the event of a judgment in its favour on its counterclaim or by way of a costs award. It has also failed to demonstrate that the appellant is less capable financially of honouring any award in Clarity’s favour on its counterclaim or for costs, to the extent such a potential form of prejudice could ground relief under Rule 11.03. In particular, Moore does not provide any evidence of any such prejudice in the Moore Affidavit. Instead, he limits his evidence in paragraph 15 to speculation that Outfront may be less able to satisfy a judgment than CBS prior to the Reorganization. Given the onus on Clarity and the evidence to the contrary in the Purchase Agreement as discussed above, this is not sufficient to establish any substantive prejudice on the part of Clarity.

Alleged Prejudice Regarding Prevention of Status Hearing

[126] Second, the Master appears to have accepted Clarity’s position that it was also prejudiced by the delay in being advised of the Reorganization in that, had it known, Clarity would have had the opportunity to argue that the action should have been dismissed in a show cause hearing at the Status Hearing on April 19, 2013.

[127] This argument of prejudice requires that Clarity demonstrate that it would have succeeded in a show-cause hearing in April 2013 in having the action dismissed. As mentioned, the onus rests with Clarity to establish this prejudice on a balance of probabilities.

In a show cause hearing at the Status Hearing, the applicable test for a dismissal of the action would have been the test set out in Langenecker. The failure of the appellant to obtain an order to continue by April 2013 would not, however, have added anything to whatever case Clarity might have had at that time to obtain an order for dismissal for delay under Rule 24. In particular, CBS’s failure to obtain an order to continue was not “contumelious”, particularly in view of the explanation for such failure as discussed below. In addition, the failure to obtain an order to continue did not result in any prejudice to Clarity in terms of its right to a fair trial. In this regard, it is also relevant that, if the absence of an order to continue had been identified by the time of the hearing on the Status Notice in April 2013, CBS would have been entitled to rectify the deficiency by requisitioning an order to continue from the Registrar under Rule 11.02. Further, as mentioned, to the extent that it is even relevant, given the legal and substantive effect of the Reorganization, there is no basis on which Clarity would have succeeded on any motion for dismissal based on any substantive or legal prejudice to Clarity resulting from the Reorganization.

[128] In short, the failure of the appellant to obtain an order to continue prior to the show cause hearing in April 2013 would have been an irrelevant consideration if the hearing had proceeded. There is no basis for Clarity’s suggestion that such consideration would have “tipped the balance” in its favour. Clarity would have had to demonstrate that the events prior to the show cause hearing, not including the failure to obtain an order to continue, warranted a dismissal order on their own. I also note that, to the extent this is relevant, the Master did not make a finding that Clarity would have been entitled to a dismissal order on such basis.

Alleged Prejudice Resulting from the Departure of Amo

[129] The third form of prejudice referred to by the Master is possible prejudice resulting from the departure of Amo as a shareholder of Clarity in 2014 and therefore as a witness in this action. The evidence in the record does not, however, establish that Amo’s evidence is no longer available to assist Clarity. More significantly, and in any event, this is an allegation that Clarity has been prejudiced by the delay in moving this litigation forward. It has no connection to the issue of the delay in obtaining an order to continue under Rule 11.02. Indeed, CBS moved the action forward to the point of setting the action down for trial notwithstanding its failure to obtain an order to continue and the operation of a stay under Rule 11.01. For the reasons discussed above, this is not prejudice that could be taken into consideration by the Master on a motion for dismissal under Rule 11.03. If Clarity has a claim for prejudice arising from CBS’s alleged delay in pursuing the action, as opposed to its delay in obtaining an order to continue, the proper forum for such a determination is a motion to strike the action under Rule 24.

Conclusion Regarding Alleged Prejudice to Clarity

[130] Given the foregoing, Clarity has failed to demonstrate any prejudice resulting from the appellant’s failure to obtain an order to continue in respect of the Reorganization, including but not limited to any prejudice to a fair trial. Given this conclusion, and the Court’s view of the applicable test for dismissal of an action under Rule 11.03 discussed above, I am of the view that the appeal should be granted on this ground alone. I have, however, addressed the appellant’s other grounds of appeal in case I have erred in my conclusion regarding the applicable test for dismissal of an action under Rule 11.03 and in view of the significance of the findings in respect of such other grounds of appeal for the relief sought on this appeal.

The Reorganization Was a Litigation Tactic

[131] The appellant’s second ground of appeal is that the Master erred in concluding that CBS adopted a litigation strategy involving implementation of the Reorganization and subsequent non-disclosure thereof.

[132] While the Master placed great emphasis on unexplained delays on the part of CBS and the appellant, this finding on its own, even if established, is not sufficient to warrant dismissal of the action. The Master held, in effect, that the delays revealed a hidden litigation strategy whose bad faith justified a dismissal of the action. Accordingly, as I read the Reasons, the Master dismissed the action on the basis of her principal finding that CBS adopted a litigation strategy of first delaying the hearing of the summary judgment motions and then withholding disclosure to Clarity of the Reorganization and the operation of the stay of proceedings under Rule 11.02. The Master held that the delay of the summary judgment motions was designed to permit the Reorganization to occur prior to the hearing of the motions in order to insulate CBS’s assets from any judgment in favour of Clarity on its counterclaim. The Master’s finding regarding the purpose of the appellant’s non-disclosure of the Reorganization is less clear. The three possible forms of prejudice to Clarity from which it is suggested that the appellant would have benefitted have been addressed above. In any event, the Master held that the conduct of CBS and the appellants warranted a dismissal of the action and a denial of leave to bring a new requisition or motion for an order to continue.

[133] The Master’s finding of the alleged litigation strategy would support a dismissal of the action under the first branch of the modified version of the Langenecker test proposed by the appellant, being “contumelious” behaviour. However, even if an unexplained delay were established, there is no basis for a finding on the second branch of that test given the finding above of an absence of any prejudice to Clarity, including any prejudice to a fair trial of the action, flowing from the failure to obtain an order to continue. On this basis, the second branch of the test in Langenecker could not be satisfied in the present circumstances.

[134] In any event, for the reasons set out below, I find that the Master erred in finding that CBS and the appellant adopted the alleged litigation strategy. Before proceeding, however, I propose to address the Master’s rejection of Arakgi’s evidence, as this was a significant factor in her finding of the alleged litigation strategy.

The Master’s Rejection of Arakgi’s Evidence

[135] Arakgi provided testimony on three occasions in this action. I will summarize his relevant testimony and then address whether the Master could reasonably have rejected Arakgi’s evidence.

Arakgi’s Testimony

[136] On his discovery, which was held on May 30, 2013, Arakgi was asked his current position with CBS and replied that he was the vice-president, general manager. He was also asked what CBS held besides the Outdoor Business and replied that it only held the Outdoor Business. The correct answers would apparently have been that he was the vice-president, general manager of CBS until the Reorganization, that since the Reorganization he was employed by Outdoor in a similar capacity although with a different title, and that since the Reorganization CBS’s interest in the Outdoor Business took the form of its partnership interest in Outfront.

[137] Second, in the 2015 Arakgi Affidavit, Arakgi stated that he was the senior manager responsible for the operations of the plaintiff, being CBS, in Canada and has the title of Vice-President, General Manager. This was incorrect for the same reasons as were discussed above in respect of his discovery. In addition, Arakgi stated that “[b]y way of name change, the Plaintiff has assigned, sold, conveyed and transferred to [Outfront] all of its right, title and interest in and to the property that forms the subject matter of this Action and all proceeds of or from any of the assigned collateral”. This is manifestly incorrect. There was a name change of LP in November 2014. However, a name change cannot effect a transfer of a chose in action. That occurred by virtue of the Reorganization of which no mention was made in the 2015 Arakgi Affidavit.

[138] Third, in the 2016 Arakgi Affidavit, Arakgi corrected his previous statements. He stated that his current title was president of Outfront, that he had no current position with CBS, and that he had been the general manager of CBS from March 8, 2007 to March 31, 2012. He described the 2015 Arakgi Affidavit as containing inadvertent errors regarding the identity of the plaintiff in the action, the entity that changed its name to Outfront, and the Purchase Agreement. He then stated that CBS’s interest in the action was assigned by CBS to LP pursuant to the Purchase Agreement and that, under the Purchase Agreement, LP assumed and undertook the liabilities of CBS including any liability of CBS in respect of Clarity’s counterclaim in the action. Lastly, Arakgi stated correctly that LP changed its name to Outfront on November 30, 2014.

The Court’s Conclusions Regarding the Master’s Treatment of the Evidence of Arakgi

[139] The Master held that a “significant issue” is that the 2015 Arakgi Affidavit “says absolutely nothing about what occurred in 2012; about the [Purchase Agreement]; or about anything that actually took place that resulted in a stay of the action well before the name change”. In respect of the 2015 Order to Continue, she concluded that “a completely different story was crafted to make the entire situation more palatable, something the registrar could deal with and for which notice was not required”. In short, the Master concluded that the appellant intentionally concealed the Reorganization from Clarity both on Arakgi’s examination for discovery and in the 2015 Arakgi Affidavit.

[140] There is no doubt that Arakgi’s testimony was inconsistent. The Master is correct in stating that Arakgi and his legal counsel had an obligation to inform themselves of the relevant facts before Arakgi provided evidence in this action and that they appear not to have done so in respect of the 2015 Arakgi Affidavit. The Master was also correct in stating that the appellant’s statement that the errors identified above were inadvertent and not in bad faith was incomplete. In particular, there is no explanation regarding whose inadvertence created the circumstances before the Master.

[141] However, in relying entirely on the failure of Arakgi, and secondarily of Dunford, to provide such an explanation and disregarding the evidence before her on this issue, I think that the Master misapprehended the evidence before her. I reach this conclusion for the following reasons.

[142] First, in disregarding the evidence of Arakgi in the 2016 Arakgi Affidavit, notwithstanding that Arakgi acknowledged in that affidavit that his previous testimony contained a number of errors which he intended to correct by that affidavit, I think that the Master misapprehended the significance of the errors in Arakgi’s testimony in three respects.

[143] It is clear from his testimony that, while Arakgi was the senior person in Canada in respect of the Outdoor Business, he was not involved in matters of corporate structure. This was dictated by individuals in New York. Arakgi’s role was to run the marketing business of CBS in Canada, being the Outdoor Division, which was owned by CBS until March 31, 2012 and was owned thereafter by the appellant.

[144] In addition, the Master failed to appreciate that the appellant’s legal counsel in the action was not corporate counsel for either CBS or the appellant and, as such, had an imperfect knowledge of the corporate relationships involved. Accordingly, the Master misapprehended the extent to which actions on the part of the appellant’s legal counsel that are discussed below resulted in Arakgi’s incorrect testimony on discovery and in the 2015 Arakgi Affidavit.

[145] In short, while a failure of these parties to inform themselves of the correct facts is subject to criticism on other grounds, there is a very real basis for the appellant’s position that the errors were “inadvertent” in the sense of unintended.

[146] Second, as a related matter, during Arakgi’s later cross-examination on the 2016 Arakgi Affidavit, Arakgi was asked whether Gary Graham (“Graham”), legal counsel for the appellant, was familiar with the business affairs of CBS and was familiar with CBS’s corporate structure. He was also asked to undertake to ascertain whether Graham was the person who advised CBS in business law matters. These questions and undertaking were initially taken under advisement. In the answers to undertakings delivered April 5, 2014, the appellant stated that Graham does not hold the corporate records for CBS and did not have any involvement with the Reorganization. The balance of the questions was refused on grounds of “relevant/privilege/overbreadth”.

[147] The Master stated at two places in the Reasons that Graham refused to answer if he was “familiar with these transactions”, presumably meaning the Reorganization and the name change of LP. The Master inferred from this alleged refusal that the appellant’s counsel was aware of the Reorganization at the time of Arakgi’s examination for discovery in May 2013 and could, and should, have corrected Arakgi’s testimony.

[148] In drawing this inference, the Master misapprehended the evidence regarding the knowledge of appellant’s counsel of the Reorganization and the name change of LP in 2014. Graham did not refuse to ask whether he was familiar with these corporate matters. He was never asked such questions. The questions put to Arakgi were quite different. More importantly, the Master inferred that Graham knew of the Reorganization at the time of Arakgi’s discovery. There is no evidence to support this and therefore no evidence to support an inference that Graham was in a position to correct Arakgi on his discovery, much less that Graham failed to do so intentionally.

[149] Third, in two places in the Reasons, the Master questioned Arakgi’s authority to engage counsel to act on the requisition for the 2015 Order to Continue if he had no position with CBS at the time. She also questioned how Arakgi could have had any knowledge of the name change in 2014 if he had no knowledge of CBS since 2012. The Master appears to imply from these questions that Arakgi’s evidence was unreliable because he had ceased to be employed by CBS after the Reorganization. The statements suggest that the Master herself did not understand the corporate relationships at issue and Arakgi’s role after 2012.

[150] Even though Arakgi was not the vice-president, general manager of CBS at the time he swore the 2015 Arakgi Affidavit and assuming that he had no knowledge of CBS’s operations since 2012 (which I take to be correct), he still had full knowledge of the effect of the Reorganization and the 2014 name change as the president of the appellant. He also had authority to authorize the requisition for an order to continue on behalf of the appellant, which was clearly an “interested party” for the purposes of Rule 11.02. Insofar as the Master considered that an absence of authority on Arakgi’s part was further reason to disregard his evidence, or was evidence of improper activity, or the alleged litigation tactic, there was, therefore, no basis for such an inference or conclusion.

[151] Fourth, while Arakgi gave incomplete or incorrect information in his earlier testimony, he was never challenged on his statement in the 2016 Arakgi Affidavit that his errors were “inadvertent”. In particular, Arakgi was never asked if he lied and, if so, for what purpose. He was instead asked if he intended to tell the truth and stated that he did.

[152] Fifth, the Master also referred to the fact that, on his cross-examination, Arakgi refused to answer “a significant number of important questions” which the Master believed would have shed some light on the Reorganization. She stated further that instead Arakgi “answered only portions of those questions, and even then, only after the fact, when fulfilling undertakings, such that CBS’s self-serving evidence was provided by letter but the ‘meat’ of what was actually sought was still refused.” The questions to which the Master referred pertained to Clarity’s requests for particulars of the appellant’s assets and their fair market value, particulars of all security on the appellant’s assets, and a statement of the amount of its current debt and current secured debt.

[153] The Master misapprehended this evidence in two respects. As discussed above, the appellant’s disclosure of the Reorganization was sufficient to permit Clarity to understand the nature of the transaction and to assess the extent to which it suffered any prejudice therefrom. It is therefore difficult to see the relevance of these requests. In addition, as also discussed above, it is questionable whether a defendant has the right on a motion to vary an order to continue to seek a dismissal of the action based on alleged substantive prejudice. There was, therefore, a reasonable basis for counsel’s position to refuse the further disclosure sought by Clarity, which required a determination by a motion for production.

[154] Sixth, the Master’s conclusion that Arakgi misrepresented material facts is tied to her conclusion that Arakgi’s purpose in lying was to conceal the Reorganization. As discussed above, however, there is no factual basis for the Master’s findings that the appellant “crafted” a story in its requisition to the Registrar and that the purpose of the 2015 Order to Continue was “an effort to displace the extensive delay in moving to lift a stay, without really disclosing anything about what occurred in 2012.”

[155] More generally, the problem with the Master’s conclusion is that it answers the Master’s need for an explanation of both the errors in Arakgi’s evidence as well as the failure of the appellant to obtain an order to continue regarding the Reorganization on a basis that cannot be supported in the evidence for the reasons set out elsewhere in this Endorsement. In particular, the Master’s theory of an intentional litigation strategy is based on an explanation of the purpose of such strategy which is contradicted by the evidence.

[156] There is no basis in the evidence for concluding that Arakgi’s inaccurate testimony served any purpose, much less that it was part of an intentional strategy of non-disclosure. As discussed, there is no evidence that his inaccurate testimony resulted in any benefit to the appellant, or any prejudice to Clarity, in the 5 ½ month period from the date of his discovery to the date of disclosure of the Reorganization. Nor did the appellant’s course of action in failing to obtain an order to continue serve the purpose of running up the costs of the action or put any pressure on Clarity. Therefore, the Master’s conclusion rests on the alleged purpose of insulating the appellant’s assets from Clarity or avoiding a show-cause hearing. However, as described above, Clarity has failed to demonstrate any basis for a finding of either such purpose.

[157] Accordingly, shorn of any associated purpose for the inaccuracies in Arakgi’s answers on discovery and in the 2015 Arakgi Affidavit, there is no reasonable basis for disregarding his evidence, particularly given that the facts in his affidavit are consistent with the reality of the Reorganization and the 2014 name change.

[158] Lastly, and most significantly, the evidence in the record provides an explanation for the circumstances before the Master to which the appellant alludes even if the appellant and its counsel refrained from explicitly providing it. In my view, the evidence overwhelmingly establishes that, rather than any intentional plan of deception, the matters enumerated above were the product of a more banal combination of inattention, an inadequate knowledge of the Reorganization, and unfortunate judgment in the conduct of the action. This is addressed in greater detail below.

[159] In summary, taking the Master’s observations regarding Arakgi’s evidence as a whole, I think that it is more accurate to say that the Master premised her finding that Arakgi’s evidence lacked credibility on her finding of the existence of the appellant’s litigation strategy, rather than the other way round. The Master’s finding regarding the credibility of Arakgi presupposes that the appellant had adopted its alleged litigation strategy and that Arakgi’s incorrect statements on his discovery and in the 2015 Arakgi Affidavit were part of this strategy. Absent a finding of such a strategy, the Master had no basis for her finding that any of Arakgi’s incorrect evidence was intentional.

[160] Based on the foregoing, I find that the Master erred in rejecting Arakgi’s evidence that the errors in his testimony were “inadvertent”.

The Court’s Analysis Regarding the Master’s Finding of the Alleged Litigation Strategy

[161] Given the previous finding, the Master’s finding of the existence of the alleged litigation strategy is only supportable if there is evidence, apart from the inconsistencies in Arakgi’s evidence, upon which she could have relied. The errors in Arakgi’s testimony do not support the Master’s conclusions regarding the appellant’s behaviour and consequent dismissal of the action.

[162] There is, however, no direct evidence from any representative of CBS or the appellant, or in any documentation of CBS or the appellant, that supports either of the findings upon which the Master relied to find that the appellant had engaged in the alleged litigation strategy. Instead, the Master based her finding on an inference drawn from various circumstances. The principal evidence upon which the Master based her findings was what she characterized as an “unexplained delay” on the part of CBS in pursuing its summary judgment motions and on the appellant’s part in failing to take any action to obtain an order to continue the action after the Reorganization, compounded by the manner in which the appellant obtained the 2015 Order to Continue and its conduct on the Motion and the Cross-Motion. The Master concluded that she was entitled to draw an inference from these circumstances regarding the existence and purpose of the alleged litigation strategy.

[163] I propose to address the Master’s findings on this issue by dealing separately with the following elements underlying, or upon which the Master based, her finding of the alleged litigation strategy:

1. CBS’s alleged delay of the summary judgment motions prior to the Reorganization;

2. the appellant’s failure to disclose the Reorganization for a material period of time to the detriment of Clarity; and

3. the appellant’s conduct of matters pertaining to the 2015 Order to Continue and this litigation.

CBS’s Alleged Delay of the Summary Judgment Motions

[164] In support of her finding that CBS and the appellant engaged in the alleged litigation strategy, the Master relied on an inference based on what she regarded as an alleged unexplained delay on CBS’s part in furnishing its reply and responding materials for the summary judgment motions. In this regard, the Master made two principal findings respecting the delay in the hearing of the summary judgment motions: (1) that the delay in the hearing of the summary judgment motions was solely the result of CBS’s failure to furnish its reply and responding materials for such motions; and (2) that the purpose behind the appellant’s actions was to permit the implementation of the Reorganization before the hearing of the motions in order to insulate CBS’s assets from an unfavourable judgment in favour of Clarity on its counterclaim. In my view, the Master misapprehend the evidence in respect of both findings for the following reasons.

[165] With respect to the first finding, the evidence does not support the conclusion that CBS was the sole cause of the thirteen-month delay in the hearing of the summary judgment motions. There is evidence of communications between counsel concerning the possibility of a resolution, or at least a mediation, of the action during the early part of 2012 that suggests a different explanation for the appellant’s delay in delivering its reply and responding materials at that time. For its part, Clarity also did not insist on meeting the original date for hearing the summary judgment motions at that time.

[166] In any event, the facts in the record would not justify dismissal on the sole ground of the alleged failure of CBS to meet the timetable for the hearing of the summary judgment motions. The actual delay in CBS’s delivery of its responding and reply materials was limited to approximately five months. Thereafter, the delay in the hearing of the summary judgment motions cannot be solely attributed to CBS’s actions. Accordingly, the amount of the delay at issue that may clearly be attributable to CBS is not sufficient to constitute an inordinate delay in the context of the overall progress of the action. Moreover, Clarity did not raise any objection to such delay at the time. Most importantly, both the Master and Clarity rely on the alleged delay of CBS, not as a ground for dismissal of the action on its own but for the very different purpose of supporting the Master’s finding of a bad faith purpose of insulating CBS’s assets from any judgment in favour of Clarity. Given the findings below on this issue, the alleged delay, even if established, does not constitute “intentional and contumelious” behaviour that would support dismissal for delay under the first type of case contemplated by Langenecker.

[167] Accordingly, the Master erred to the extent that she relied on CBS’s actions in respect of the summary judgment motions as constituting an independent act of deception and bad faith that warranted dismissal of the action under Rule 11.03.

[168] With respect to the second finding, and more importantly, there is no support at all for the alleged purpose of CBS’s actions, which clearly underlies the Master’s finding of the alleged delay in the hearing of the summary judgment motions. As discussed above, the Reorganization did not result in either legal or substantive prejudice to Clarity. In particular, CBS did not insulate the assets of the Outdoor Division from a claim by Clarity by implementing the Reorganization. There is, therefore, no basis for the Master’s inference that CBS delayed the hearing of the summary judgment motions in order to implement the Reorganization or for the further inference of the existence of the alleged litigation strategy of the appellant.

[169] Accordingly, even if the Master considered that CBS intentionally delayed the hearing of the summary judgment motions, there was no basis for a finding that CBS did so for a reason related to the Reorganization. There is therefore no basis in the evidence for a causal connection between CBS’s alleged delay of the hearing of the summary judgment motions and the appellant’s failure to obtain an order to continue after the Reorganization. The absence of any finding of prejudice to Clarity resulting from the Reorganization therefore excludes any inference of the appellant’s alleged litigation strategy of non-disclosure of the Reorganization based on the alleged delay.

[170] In short, CBS’s actions prior to the Reorganization are irrelevant for the purposes of the Motion and the Master erred insofar as she took such actions into consideration in dismissing the action.

The Appellant’s Alleged Withholding of Disclosure of the Reorganization

[171] The Master also drew an inference that, after the Reorganization, the appellant adopted its litigation strategy of withholding disclosure of the Reorganization from Clarity to prejudice it by inducing Clarity to spend funds to move the action forward and avoiding a dismissal of the action at a show cause hearing at the Status Hearing. In other words, the Master inferred the existence of the alleged litigation strategy from an assumed purpose of the alleged non-disclosure, being a benefit to CBS and the appellant and a prejudice to Clarity.

[172] It is not sufficient to observe, as did the Master, that Clarity expended monies while the action was technically stayed. The fact that the action was stayed does not mean that Clarity expended monies that it would not otherwise have spent. Such a conclusion requires demonstration that Clarity suffered prejudice in this proceeding. However, as discussed above, no proceedings occurred in this action during the period of non-disclosure, being between March 31, 2012 and November 14, 2013, that would not otherwise have taken place if Clarity had known of the Reorganization. Further, as discussed above, the implementation of the Reorganization would not have been a reason for dismissal of the action at any show-cause hearing on the Status Hearing.

[173] Accordingly, there was no reasonable basis for an inference that the appellant acted deceptively and in bad faith after March 2012 in failing to seek an order to continue, or in failing to advise Clarity of the Reorganization, based on alleged prejudice to Clarity from non-disclosure of the Reorganization.

Misapprehension of Matters Relating to the Conduct of the Appellant in this Action

[174] Lastly, the Master also relied for her inference of the appellant’s litigation strategy upon the conduct of CBS and the appellant in this action. The relevant conduct falls into two categories: (1) conduct relating to the 2015 Order to Continue, as well as in respect of the Motion and the Cross-Motion, which the Master held to be unexplained or otherwise evidence of the appellant’s alleged litigation strategy; and (2) conduct which the Master considered to constitute oppressive or abusive actions, apart from non-disclosure of the Reorganization;. I will address each category of evidence in turn.

Actions Pertaining to the Conduct of the Action After the Reorganization

[175] Given the conclusions reached above, the principal remaining basis for the Master’s finding of the alleged litigation strategy of CBS and the appellant is the failure of the appellant to provide an adequate explanation for the manner in which it conducted the action subsequent to the Reorganization. The Master relied upon the following matters relating to the appellant’s conduct of the action upon which to draw her inference of a bad faith litigation tactic: (1) the lack of any explanation for the failure of the appellant to obtain an order to continue in respect of the Reorganization or to notify Clarity of the Reorganization until after the litigation had been advanced to the point of filing a trial record; (2) the lack of any explanation for the questions raised by the Master regarding the timing and manner of the requisition for the 2015 Order to Continue; (3) the appellant’s reluctance to provide an unredacted copy of the Purchase Agreement; and (4) the appellant’s request in the hearing before her on the Motion and the Cross-Motion for leave to bring a new motion to continue.

[176] One can sympathize with the situation in which the Master was placed. She had before her the following catalogue of events which the appellant, and its legal counsel, characterized as “inadvertent errors”:

(1) A failure to seek an order to continue for at least two years after legal counsel learned of the Reorganization;

(2) A failure to correct Arakgi’s testimony on his examination for discovery regarding the ownership of the Outdoor Division in the answers to undertakings which disclosed the Reorganization;

(3) The factual errors in the 2015 Arakgi Affidavit which confused the Reorganization in 2012 and the name change of LP in 2014;

(4) The Cross-Motion to vary the 2015 Order to Continue at a time by which it should have become clear that such Order was a nullity;

(5) The introduction of evidence of inadvertence and lack of bad faith by means of a hearsay statement from the lawyer who was acting on the Cross-Motion for the appellant; and

(6) The production of an overly redacted copy of the Purchase Agreement that prevented an understanding of the Reorganization.

[177] The Master observed with justification that the purported explanation of “inadvertent errors” should give the court pause. The Master raised the legitimate concern that this “explanation” was inadequate. It did not address the questions of whom? and how did it occur? The Master noted that the appellant’s counsel was “one of the leading firms in the country” and properly observed that the appellant’s counsel “would know about the impact of the reorganization if they were aware that it had occurred”.

[178] However, the Master concluded that the appellant’s explanation of “inadvertence” for the matters set out above was not a satisfactory explanation in the circumstances. In effect, the Master rejected this explanation by opting for a finding of intentional deception based on bad faith on the part of the appellant and its counsel. In doing so, the Master erred for the following reasons.

[179] First, for the reasons set out above, the Master erred in rejecting Arakgi’s evidence that the errors in his testimony was due to inadvertence. However, the Master not only rejected Arakgi’s evidence that the errors in his testimony were inadvertent. She went on to hold that such errors, and the failure of the plaintiff’s counsel to correct such errors, were important evidence in support of her inference that the appellant intentionally engaged in its alleged deceptive litigation strategy. Given the finding that the Master was not entitled to reject Arakgi’s evidence, the Master further erred in her reliance on the errors in Arakgi’s testimony in this manner. Even if it were assumed for this purpose that Arakgi intentionally misstated facts on his discovery and in the 2015 Arakgi Affidavit, such misstatements do not support the inference of the Master that such misstatements are evidence of CBS’s alleged litigation strategy.

[180] Second, as mentioned above, in my view the evidence establishes that the appellant’s delay in obtaining an order to continue, and the related errors in Arakgi’s testimony, as well as the appellant’s actions in this proceeding have a more banal explanation than the alleged litigation tactic. In my view, the evidence establishes that, rather than any intentional plan of deception, the matters enumerated above were the product of a combination of inattention, an inadequate knowledge of the Reorganization, and unfortunate judgment in the conduct of the action.

[181] Arakgi’s evidence on discovery was incorrect and likely a product of his inattention to the actual corporate state of affairs in 2013 compounded by counsel’s failure to correct his evidence when it delivered the Answers to Undertakings given on his discovery. In fact, counsel’s inattention to both the inaccuracy of his testimony and, more importantly, to the need for an order to continue under Rule 11.03 for 4½ years until the requirement was raised by Clarity for its own purposes, contributed materially to the circumstances before the Master.

[182] These circumstances were further compounded by a failure to ensure that the 2015 Arakgi Affidavit addressed the Reorganization. Given the absence of any benefit to the appellant resulting from the incorrect disclosure therein, it appears that the confusion of the name change of LP with the Reorganization in the 2015 Arakgi Affidavit was the product of some combination of an incomplete understanding of the Reorganization and a lack of attention to detail on the part of both Arakgi and legal counsel at the time of drafting the 2015 Arakgi Affidavit.

[183] The appellant’s refusal to provide an appropriately redacted version of the Purchase Agreement and the decision to introduce evidence regarding the cause of the foregoing circumstances by means of the affidavits of Sebastian-Crone further compounded the situation. In failing to provide upon request a redacted version of the Purchase Agreement that demonstrated the material features of the Reorganization, including the treatment of CBS’s liability for Clarity’s counterclaim, the appellant invited suspicion regarding both the effect and the intention of the Reorganization.

[184] In addition, the evidence from the lawyer representing the appellant on the Motion and the Cross-Motion was important in these motions given the position that Clarity was taking on its Motion. The Master properly observed that counsel’s evidence was presented in a manner that was hearsay and, therefore, of questionable admissibility although it was not formally excluded from the evidence before the Master. While the reason for this action may be understandable, in view of Clarity’s positions on these motions, the appellant should have adopted a different course of action to ensure that its counsel’s evidence was before the Master in an affidavit from him. I note that the conclusions in this Endorsement do not, however, require consideration of Dunford’s evidence.

[185] The foregoing history of the action also explains the appellant’s leave request before the Master to bring a fresh motion for an order to continue with additional evidence. The Master also misapprehended this action as further evidence of the appellant’s litigation strategy. The Master concluded that this request was only made after the appellant’s litigation strategy described above had been revealed in the hearing and after the appellant had realized from Clarity’s submissions, and the Master’s comments, that it was going to lose the Motion and the Cross-Motion. It appears that the appellant and its counsel did not properly appreciate until a very late stage that not only Clarity, but also the Master, considered that the foregoing actions gave rise to a valid basis for dismissal of the action by Clarity, notwithstanding that they related solely to a failure to take an administrative step in the action that did not prejudice Clarity.

[186] Based upon the foregoing view of the correct explanation for the matters that troubled the Master, I conclude that the Master erred in finding that the actions of the appellant in the conduct of the action following the Reorganization supported her inference of the appellant’s alleged litigation tactic.

Alleged Oppressive or Abusive Actions of CBS and the Appellant Apart from the Non-Disclosure of the Reorganization

[187] In addition to her finding of “deception on a grand scale” in respect of the alleged non-disclosure of the Reorganization and the operation of the stay as a result thereof, the Master made the following additional finding regarding CBS’s behaviour in this action at page 15 of the Reasons:

From the outset, the plaintiff has been playing hard ball. From the nature of its pleading at the outset, to its fast-off-the-mark summary judgment motion which stalled long enough to give them time to reorganize, the plaintiff has been operating in a manner that applies the utmost pressure while driving up costs. They have done this for the last 4 ½ years despite the fact that the action was stayed.

[188] This issue engages the test for a dismissal order under Rule 11.03. To the extent that the Master relied upon this finding to support her dismissal of the action under Rule 11.02, the Master erred as a matter of law. For the reasons discussed above, whether or not true, this consideration has no causal connection with the appellant’s failure to obtain an order for continuance after the Reorganization, apart from the matters addressed and rejected in connection with Clarity’s allegations of prejudice. Therefore, it cannot ground an order for dismissal of an action under Rule 11.03 based on an unreasonable delay in obtaining an order for continuance. If Clarity wishes to rely on such allegation in order to obtain a dismissal of the action, it must do so in another motion under Rule 24 or otherwise.

Conclusion Regarding the Master’s Finding of a Litigation Strategy

[189] Based on the foregoing, I conclude that the Master misapprehended the evidence before her in drawing the inference that the appellant adopted a litigation strategy of intentionally withholding disclosure of the Reorganization and failing to obtain an order to continue. I see no basis for such an inference in the evidence before the Master. This conclusion requires that the Order be set aside insofar as the Master relied on her inference as a basis for a determination that the first branch of the test in Langenecker, or the modified version of such test proposed by the appellants, applies in the circumstances of this case.

The Appellant’s Argument of Fairness

[190] As an alternative argument related to the issue of the alleged litigation strategy, the appellant also says that the Master erred in principle or in law in deciding the motion on the basis of a factual allegation that had not been advanced by Clarity. It relies on the following statement of Doherty J.A. in N-R Power and Energy Corp. v. Ontario Electrical Financial Corp., [2016] O.J. No. 2018 (C.A.) at para. 62:

62 A judgment based on a claim not made or a theory not advanced and argued cannot stand. The fairness and reliability of the adversarial process demand that each side have notice of the other’s claims and a full opportunity to respond to those claims: see Labatt Brewing Company Limited v. NHL Enterprises Canada, L.P. (2011), 2011 ONCA 511, 106 O.R. (3d) 677 (C.A.), at para. 6; Rodaro v. Royal Bank of Canada (2002), 2002 41834 (ON CA), 59 O.R. (3d) 74 (C.A.), at paras. 58-62.

[191] The appellant says that Clarity’s notice of motion did not raise the issue of whether the Reorganization was motivated by a desire to insulate CBS’s assets from Clarity’s counterclaim or any costs award. Furthermore, because Clarity’s notice of motion was silent on this issue and Clarity’s counsel did not put this case to Arakgi on his cross-examination, CBS was unaware that this was an issue that it had to address. In this regard, the appellant also notes that, on his cross-examination, Moore was asked whether he considered the decision not to obtain an order to continue was deliberate and he responded that he did not know.

[192] Given the Court’s conclusions above on the substantive issue regarding the Master’s inference of a bad faith litigation strategy, it is not necessary to address this procedural issue and, accordingly, I decline to do so.

Merits and Status of the Litigation

[193] The appellant’s third ground of appeal is that the Master failed to consider the merits of the appellant’s case as well as the status of the action.

[194] With respect to the former, Perell J. found that there was no genuine issue requiring a trial of CBS’s contractual claim against Clarity but that there was a genuine issue requiring a trial respecting the equitable grounds upon which Clarity asserted its counterclaim. Perell J. stated that, but for Clarity’s defence of equitable set-off, CBS would have been entitled to summary judgment for the amounts claimed. The action has now been set down for trial, which is scheduled to commence on December 4, 2017.

[195] Given the foregoing conclusions, it is also not necessary to address this issue and I decline to do so. However, I agree with the Master’s observation that a party cannot rely on the fact that an action has been progressed if such progress involved non-disclosure of matters which has prejudiced the other party or parties to the action. Accordingly, this ground of appeal depends to a large extent on the issue of whether Clarity was prejudiced by the appellant’s failure to obtain an order to continue or to disclose the Reorganization. As such, this ground of appeal is secondary to the other grounds of appeal.

The Nature of a Motion Under Rule 11.02

[196] The appellant’s final ground of appeal is that the Master misconstrued the nature of an order to continue, which it says is essentially administrative in nature. The appellant argues that the Master’s decision to dismiss the action and, in particular, to deny leave to bring a further requisition or motion for a new order to continue, brings the administration of justice into disrepute by providing for a dismissal of an action for failure to take an administrative step. This ground of appeal also has relevance for the relief requested by the appellant.

[197] The appellant says that the two decisions relied upon by Clarity support the appellant’s position insofar as each contemplated that the plaintiff would have the right to bring a further motion notwithstanding that, in each case, the court set aside an order to continue: see Ingle v. Trent Health Insurance Services Corp. 2005 CarswellOnt 8169 (S.C.) aff’d 2006 CarswellOnt. 1133 (C.A.); and Bono General Construction Ltd. v. Trevor Nicholas Construction Co., 1996 CarswellOnt 2228 (S.C.) aff’d on June 3, 1998 under Docket C24900 (C.A.). I note that such a right is consistent with the administrative nature of an order to continue as a consequence of which CBS would have been entitled to an order to continue on an ex parte basis if it had properly requisitioned such an order in respect of the Reorganization.

[198] The test for an order for dismissal under Rule 11.03 has been addressed above. As discussed, the Master applied the wrong test insofar as she applied the test in Langenecker. In doing so, I agree that the Master also misconstrued the nature of an order to continue. However, such a finding is only grounds for granting the appeal in conjunction with the first two findings of an absence of prejudice to Clarity and an absence of the alleged litigation strategy. In other words, it does not constitute an independent ground for setting aside the Order.

[199] Based on the analysis above of the nature of an order to continue contemplated by Rule 11.02 and the absence of any basis for a finding that the applicant acted in bad faith, I also conclude that the Master erred in denying the appellant leave to bring a further requisition or motion for an order to continue in respect of the Reorganization. The consequence of this conclusion is addressed below.

Conclusion

[200] Given the findings above, there is no basis for the Master’s decision to dismiss the action pursuant to Rule 11.03. As discussed, I am of the view that the Order should be set aside on the basis of the absence of any demonstrable prejudice to Clarity resulting from the appellant’s failure to obtain an order to continue in respect of the Reorganization. However, to the extent that the modified test proposed by the appellant is applicable, the absence of any basis for the Master’s finding of the appellant’s alleged litigation strategy would, together with the absence of any prejudice to Clarity, also require that the Order be set aside.

Analysis and Conclusions Regarding the Master’s Disposition of the Cross-Motion

[201] In its Cross-Motion, the appellant sought an order varying the 2015 Order to Continue to correct the errors therein by referring to the Reorganization in the preamble and by including a paragraph confirming that Outfront had assumed the right, title and interest and liabilities of CBS in and to the action. The Master dismissed the Cross-Motion.

[202] Although the Master made several observations in her Reasons pertaining to this issue and expressed her decision in terms of the operation of the stay under Rule 11.01 since the date of the Reorganization, it appears that the basis of the Master’s decision was that the 2015 Order to Continue was a nullity. Given that the requisition to the Registrar was made on the basis of a name change, which could not give rise to a transfer or transmission of CBS’s interest in the action, the Registrar had no authority under Rule 11.02 to grant the 2015 Order to Continue. On this basis, any motion to vary the 2015 Order to Continue must also be a nullity.

[203] I therefore see no error of law in the Master’s decision on this issue.

[204] However, as set out above, given the administrative nature of an order to continue and the absence of any finding that the appellant acted in bad faith, there is no basis for the Master’s exercise of her discretion to deny leave to the appellant to seek an order to continue on a fresh motion or requisition under Rule 11.03.

[205] In these circumstances, I would be sympathetic to an approach that granted the appellant a fresh order to continue pursuant to Rule 11.02 with leave to Clarity to bring a motion to vary or set aside the order to continue if it so chooses.

[206] However, as the Master noted, the appellant did not move in its Cross-Motion for a fresh order to continue the action under Rule 11.02 as a result of the Reorganization. I therefore reluctantly conclude that this aspect of the applicant’s appeal of the Order must be dismissed for the reason that the Court does not have the authority to treat the Cross-Motion as a requisition for a fresh order to continue. For clarity, however, based on the Court’s conclusions above, including the reasoning in respect of the appellant’s fourth ground of appeal, the applicant remains at liberty to requisition a fresh order to continue under Rule 11.02 in respect of the Reorganization and Clarity would similarly remain at liberty to bring a motion to vary or set aside any such order to continue if obtained by the appellant.

Conclusion

[207] Based on the foregoing, the appellant’s appeal of the Order is granted insofar as the Order dismissed the action for delay in obtaining an order to continue under Rule 11.02 in respect of the Reorganization but is dismissed insofar as the Order dismissed the appellant’s Cross-Motion to vary the 2015 Order to Continue.

Costs

[208] The appellant seeks costs on a partial indemnity basis of $18,000. However, the appellant was only partially successful on this appeal. Further, as discussed in some detail above, the actions of the appellant and its counsel contributed in large measure to the circumstances giving rise to the Motion and the Cross-Motion. In addition, the approach of the Master departed in certain important respects from Clarity’s submissions in the proceedings before her. In view of these considerations, I think that it is fair and reasonable that the parties each bear their own costs of this appeal.

Wilton-Siegel J.

Date: September 26, 2017