Court of Appeal for Ontario

Date: 2018-10-17 Docket: C65207 Judges: Hourigan, Miller and Trotter JJ.A.

Parties

Between

Luke Van Aert and Sandra Van Aert, Sanlu Family Poultry Farms Limited, formerly Sanlu Holsteins Ltd., and 174421 Ontario Inc.

Plaintiffs (Respondents)

and

Sweda Farms Ltd., c.o.b. as Best Choice Eggs

Defendant (Appellant)

Counsel

For the Appellant: Varoujan Arman and Jessica Wuthmann

For the Respondents: Philip Morrissey and Isha Wadhwa

Hearing and Appeal

Heard: October 4, 2018

On appeal from: The order of Justice Helen A. Rady of the Superior Court of Justice, dated March 16, 2018, with reasons reported at 2018 ONSC 1545.

Reasons for Decision

Background

[1] The appellant, Sweda Farms Ltd., is in the business of producing, grading and selling eggs. The respondents are egg suppliers. For a time, the parties did business with each other pursuant to supply agreements between them. That ended with each side claiming the other was in breach of the agreements. In 2008, the respondents brought an action for the price of eggs supplied, and the appellant counterclaimed for damages.

[2] A trial was scheduled for September 9, 2013. The appellant's previous counsel (not Mr. Arman and Ms. Wuthmann) sought an adjournment that morning. The adjournment was granted on terms that included the appellant consenting to judgment in the amount of $164,560.92, with an order that the judgment be stayed pending the disposition of a future motion to add the respondents as defendants to an existing action in Toronto. This sum included $34,830.03 in costs. The appellant was required to pay the amount of the judgment into court on or before October 15, 2013. According to the terms of the order, if the motion failed and the respondents were not added as defendants in the Toronto action, the stay would be lifted and the respondents would be entitled to realize on their judgment.

[3] The appellant did not pay the funds into court. Neither did the appellant bring the motion to add the respondents as defendants to the Toronto action. The appellant did not take any further steps to advance the counterclaim. The respondents took some steps to collect on the judgment. These were largely unsuccessful. A representative of the appellant failed to appear on an examination in aid of execution in 2015.

[4] On January 25, 2018, five years after the judgment was entered, the appellant returned to court seeking an order: (1) permitting it to proceed with the counterclaim once it paid the judgment funds into court, (2) permitting it to amend its counterclaim, and (3) fixing a timetable for the remaining steps in the litigation. In support of this motion, the appellant's president swore an affidavit claiming that his former counsel acted without instructions and did not advise the appellant of the judgment. The president asserted that he only learned of the judgment in November 2014 when he sent an agent to review the court file in London.

Motion Judge's Decision

[5] The motion was dismissed.

[6] The motion judge concluded that there was no rule governing a request to belatedly comply with an order. She reasoned that it most closely approximated a motion to set aside an order dismissing an action for delay pursuant to Rule 48 of the Rules of Civil Procedure. She reached this conclusion on the basis that, unlike a motion under Rule 24.01, the appellant is asking for an indulgence – to be relieved of the consequences of failing to comply with the court order five years earlier requiring it to pay funds into court.

[7] Accordingly, she placed the onus on the appellant to establish: (1) that there is an acceptable explanation for the litigation delay; and (2) the respondents would suffer no non-compensable prejudice if the action was permitted to proceed.

[8] She concluded that there was no acceptable explanation for the delay of nearly two years between discovery of the judgment in November 2014 and reaching out to counsel for the respondents in October 2016. She rejected the argument that the appellant was frustrated in doing so by not receiving the full file from former counsel until October 2016. A search of the court file in London would have provided sufficient information to enable the appellant to contact counsel for the respondents to take steps to set aside the judgment.

[9] With respect to prejudice, the motion judge concluded there was actual prejudice, given that the appellant seeks to renew an action, pursue increased damages and set a timetable for further steps that would involve increased costs for the respondents.

Appeal

[10] The appellant appeals on the basis that the motion judge applied the wrong legal test, and misapprehended the facts in the application of that test.

[11] We disagree. The motion judge did not err in analogizing from the situation before her to Rule 48. The appellant was in default of an order and was seeking an indulgence from the court. It was appropriate that the onus be on the appellant to provide an explanation for the delay.

[12] As this court has held, deference is owed to the motion judge in her factual findings and weighing of the factors courts use to make the discretionary determination whether there is an adequate explanation for the delay: see Langenecker v. Sauvé, 2011 ONCA 803, 286 O.A.C. 268, at para. 15; Faris v. Eftimovski, 2013 ONCA 360, 363 D.L.R. (4th) 111, at para. 22. It was open to the motion judge, on the evidence before her, to conclude that the appellant knew of the judgment in 2014, particularly given the respondents' attempts at enforcement beginning in 2014 and the affidavit evidence of the appellant's own president. Nor did the motion judge err in concluding that the delay in the transfer of the file did not prevent the appellant from contacting the respondents to take steps to set aside the judgment.

[13] Although that is sufficient to dispose of the appeal, we also note that the motion judge did not err in concluding that the respondents would suffer actual prejudice from the revival of the counterclaim. The appellant attempted to broaden a claim that would otherwise have been tried five years earlier. It did not file any materials on the motion to establish that there would be no prejudice from this delay but simply asserted that the respondents did not lead evidence of actual prejudice. However, there is no onus on the respondents to lead evidence to demonstrate actual prejudice: Chrisjohn v. Riley Estate, 2015 ONCA 713, 391 D.L.R. (4th) 695, at para. 40. The motion judge was entitled to consider all of the circumstances of the case in determining whether there was a risk of prejudice in light of the passage of time: H.B. Fuller Co. v. Rogers, 2015 ONCA 173, 386 D.L.R. (4th) 262, at para. 38, citing MDM Plastics Ltd. v. Vincor International Inc., 2015 ONCA 28, 124 O.R. (3d) 420, at para. 32. She did not err in finding that the appellant's decision to broaden its claim gave rise to a risk of prejudice to the respondents that the appellant did not rebut.

[14] It is no answer to say that the prejudice identified is compensable by an award of costs. The appellant had not paid the outstanding costs award pursuant to the September 2013 judgment, and this judgment remained largely unsatisfied. The motion judge rightly noted that there was some evidence the appellant had attempted to avoid the payment of costs in the Toronto action by transferring funds to a trust. Notably, the appellant did not respond to the motion one of its judgment creditors brought seeking a Mareva injunction in response to this transfer, a motion which the court granted on an interim basis.

Disposition

[15] The appeal is dismissed. The respondents are entitled to costs in the amount of $12,000 inclusive of disbursements and HST.

C.W. Hourigan J.A.

B.W. Miller J.A.

Gary T. Trotter J.A.