Court File and Parties
CHATHAM COURT FILE NO.: 2603/93 WINDSOR COURT FILE NO.: 94-OC-00618 DATE: 20160727
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Laurie-Mae Meriano, Estate Trustee for the Estate of Antonio James Meriano, Deceased, and Laurie Meriano Plaintiffs – and – Clint Benoot and Theresa Benoot, Musical Strings N’ Things Ltd., C & T Investments Inc., both Ontario Registered Corporations Defendants
Counsel: James E.S. Allin, for the Plaintiffs/Defendants by Counterclaim Jerry F. O’Brien and James. D. Allingham, for the Defendants/Plaintiffs by Counterclaim
AND BETWEEN:
Musical Strings N’ Things Ltd. and Clint Benoot Plaintiffs by Counterclaim – and – Antonio Meriano, carrying on business as BY Studios Defendants by Counterclaim
HEARD: February 29, 2016
REASONS FOR JUDGMENT
HOWARD J.
Overview
1It happened in the year 1993.
2William Jefferson Clinton had been inaugurated as the 42nd U.S. President in January of that year. Sir John Major had won re-election as Prime Minister of the United Kingdom the year prior. Boris Yeltsin, then alive, was two years into his term as the first President of the newly-created Russian Federation. In the Canadian federal election held June 25th, the Progressive Conservative Party of Canada, then alive, was elected to power for the last time in its history, and leader Kim Campbell made history by becoming the nation’s first female prime minister. However, Ms. Campbell’s government would remain in office for less than five months, falling in the general election of October 25th, when it was swept by the Liberal landslide that gave Jean Chrétien his first mandate as Canadian prime minister.
3In word events, 1993 saw Czechoslovakia separate into the Czech Republic and Slovakia. The federal trial of four Los Angeles police officers charged with civil rights violations over the beating of Rodney King began in February of that year; two of the officers were convicted in April. Just days later, on April 19th, after a 51-day siege by the F.B.I., seventy-six people died in the Branch Davidian compound near Waco, Texas. On October 15th, Nelson Mandela and South African president F.W. de Klerk were awarded the Nobel Peace Prize for their role in ending apartheid in that country.
4The year saw the passing of Thurgood Marshall on January 24, 1993, the first African-American justice of the U.S. Supreme Court, who sat on that court from 1967 through to 1991. Pat Nixon, U.S. First Lady from 1969-1974, lost her battle with lung cancer on June 22nd. Other prominent individuals who died in 1993 include jazz great “Dizzy” Gillespie, Russian dancer Rudolph Nureyev, screen legend and humanitarian Audrey Hepburn, and Raymond Burr, the Canadian-born actor who played the iconic trial lawyer in the Perry Mason television series.
5In the world of entertainment, the televised interview of Michael Jackson, then alive, by Oprah Winfrey on February 10, 1993, drew an astonishing 90 million viewers worldwide. The brilliant musician Prince, then alive, celebrated his birthday on June 7th by changing his name to a symbol. While the popular television series Cheers aired its final episode in May of that year, new soon-to-be-favourites Frasier and The X-Files premiered in September. The radio airwaves and the iTunes Store were then both bereft of ubiquitous Taylor Swift songs, chiefly because the talented Ms. Swift was not quite four years of age at the time, and Apple Inc. would not invent and release its iTunes media player until more than seven years later, in January 2001. Indeed, it was only in April 1993, that scientists at CERN, the European Organization for Nuclear Research, first put the World Wide Web software in the public domain.
6In the sports world, on January 12, 1993, National Hockey League great Mario Lemieux announced that he had been diagnosed with Hodgkin’s lymphoma, which would cause him to miss the following hockey season. The NHL expanded that year, with the Walt Disney Company founding The Mighty Ducks of Anaheim, later simply the Anaheim Ducks, who would play their first pre-season game against Lemieux’s Pittsburgh Penguins on September 18th, and would go on to win their first Stanley Cup in 2007. The Toronto Maple Leafs had lost the conference finals earlier that spring, four games to three, to the Los Angeles Kings, who themselves were defeated by the Montreal Canadiens in the next and final round of the Stanley Cup playoffs. (Leaf fans had only just begun to learn to use decades to count the intervals since their team had last won the Cup.)
7And on October 23, 1993, Joe Carter of the Toronto Blue Jays hit a three-run home-run in the bottom of the ninth inning of game 6 to defeat the Philadelphia Phillies and win the Jays their second consecutive World Series championship of Major League Baseball.
8It was that very same day – 23 years ago – that the critical event in this case happened. Because it was that day, in the same year that all of the events recounted above transpired, that the instant proceeding was commenced by notice of application dated October 23, 1993.
9This proceeding arises out of the dissolution of a business partnership and a minority shareholder dispute that came to a head in April 1993, involving the corporation known as Musical Strings N’ Things Ltd., a musical equipment and supply store in Chatham, which was incorporated in 1975. The defendant Clint Benoot is the president of Musical Strings and owns 60% of the company’s common shares. The former plaintiff Antonio Meriano, since deceased, was the treasurer and a director of Musical Strings, owning 40% of the common shares.
10Over the years, the company had its ups and downs. In February 1993, Mr. Meriano advised Mr. Benoot that he was intent on leaving Musical Strings and wished to liquidate the assets of the company and divide up the net proceeds. The company accountant was asked to come up with a value of the shareholder’s equity. With the information in hand, Mr. Benoot made a buy/sell offer to Mr. Meriano. The offer was rejected.
11In April 1993, Mr. Meriano left Musical Strings and became involved with a competing business. In October 1993, Mr. Meriano commenced this proceeding, seeking to have Mr. Benoot purchase his shares of Musical Things. The litigation made some initial progress, then became stalled in December 1994, lay dormant for some three years, was briefly revived in the summer of 1997, and then fell silent once more, where it has remained for more than 17 years.
12Sadly, in March 2010, Mr. Meriano, the primary plaintiff in the action and a critical witness in the proceeding, passed away after a prolonged illness. Mr. Meriano was never examined for discovery. In fact, no examinations for discovery have been conducted.
13Twenty-three years after the initial dispute, Mr. Benoot and the defendants bring this motion to have the plaintiffs’ claims dismissed for delay.
14The issue is whether, given the inordinate and inexcusable delay in the litigation, the plaintiffs are able to rebut the presumption of prejudice to the defendants by establishing that all documentary evidence has been preserved and all necessary witnesses are available with detailed recollection of the events in question.
15In my view, given especially the death of the primary plaintiff, who was the only other partner and shareholder of the business, the outstanding documentary productions of the plaintiffs, which are apparently no longer available, and the effect of the inordinate delay on the memory of the witnesses, a fair trial is no longer possible in this proceeding. Accordingly, for the reasons that follow, the plaintiffs’ action is dismissed for delay.
Factual background
History of the business
16For the most part, the defendants’ recitation of the underlying facts and history of the litigation is not challenged by the plaintiffs.
17In 1972, Mr. Benoot and Mr. Meriano formed a partnership, on a 60-40 basis, known as Musical Strings N’ Things, which was engaged in the sale and rental of musical instruments and sound systems. In November 1975, Musical Strings N’ Things Ltd. was incorporated. Both gentlemen were made officers and directors of the company, with Mr. Benoot serving as the president of the company, and Mr. Meriano as its treasurer. The 60-40 structure of the original partnership was retained and reflected in the shareholdings of the corporation, with Mr. Benoot owning 60% of its common shares, and Mr. Meriano owning 40%.
18There were no other shareholders, officers, or directors of Musical Things. There was no written shareholders agreement.
19The defendant Theresa Benoot, who is the wife of Mr. Benoot, had served as the bookkeeper of Musical Things since it was a partnership. When the company incorporated, Mrs. Benoot continued as the bookkeeper, and although she was not paid for her services in the initial years, by 1984 was employed by the company on a full-time and paid basis. She remains in that position today.
20The defendants’ evidence is that Mr. Meriano never voiced any objection to Mrs. Benoot serving as Musical Strings’ bookkeeper until 1993 when Mr. Meriano told Mr. Benoot he was leaving the company. That evidence is unchallenged.
21As the business of the company grew, it became apparent that in order to encourage further sales of larger, more expensive musical instruments, it would be necessary to offer customers a payment plan to purchase such equipment over time. The company thus began to use third party financing through a leasing company so that its customers could acquire their instruments by making payments on a lease. Accordingly, in September 1983, Musical Strings engaged the assistance of the leasing company A&J Sharp Limited in order to finance such purchases.
22Musical Strings dealt with A&J Sharp as its leasing company for approximately four years, during which time Mr. and Mrs. Benoot started to make arrangements to start their own leasing business, C&T Investments Inc. (“C&T”), in order to finance purchases of musical equipment by customers of Musical Strings. Mr. and Mrs. Benoot are each one-half owners of C&T.
23Over time, C&T took over the financing arrangements for customers of Musical Things that previously had been offered through A&J Sharp. These leasing arrangements have remained in place since that time.
24The defendants’ evidence is that Mr. Meriano never complained about the relationship between C&T and Musical Strings until 1993. That evidence is unchallenged.
25By 1985, the partners had renovated the store premises of Musical Strings in order to allow for classroom instruction. Mr. Meriano raised the idea of building a recording studio within the store premises, but there was insufficient space within the premises at that time. Mr. Benoot agreed that construction of a recording studio was a good idea, but he thought it preferable to have a separate building or a completely isolated part of the building from the sound studio. Accordingly, both partners agreed that Musical Strings should acquire the property immediately adjacent to the existing store on the understanding that a future addition could be constructed there to expand the existing store premises and accommodate a recording studio.
26The defendants’ evidence is that Mr. Meriano never expressed any opposition to the purchase of the abutting property. That evidence is unchallenged.
27The purchase of the abutting property was completed in 1988, at which time Mr. Meriano and his accountant requested that his portion of the capital contribution to the purchase of the property be reflected on Musical Strings’ financial statements in a manner that would permit him to claim the interest payable by him on the moneys borrowed to make the contribution as a personal write-off on his income tax return.
28Around the same time that Musical Strings acquired the abutting property, Mr. Meriano started to set up his own recording studio called “Barnyards Studios” or “BY Studios.” Mr. Benoot said Mr. Meriano did this without advising him. The defendants’ evidence is that Mr. Meriano was actually running his studio business from the Musical Strings premises, and he was dealing with his studio customers both on the telephone and in person through the Musical Strings store. That evidence is unchallenged.
29For reasons that were not fully explained in the evidence, in February 1993, Mr. Meriano advised Mr. Benoot that he was intent upon leaving Musical Strings.
30The evidence of the plaintiffs (through the affidavit of Mr. Meriano’s widow, Mrs. Laurie-Mae Meriano) is that the plaintiffs believed that in the early 1990s Mr. Benoot began to operate the company as though he were the sole owner, excluding Mr. Meriano from the operations of the company. I believe it is fair to say that version is not accepted by the defendants. Mrs. Meriano’s evidence is that her husband had decided to leave the company by April 1992, i.e., almost a year earlier.
31The allegations in the defendants’ statement of defence would indicate that their position is that profit of Musical Strings began to decline in 1990 because of a downturn in business due to the recession. The operating loan of the company was at its maximum. Mr. Benoot had put further capital into Musical Strings, but Mr. Meriano refused to contribute any further capital or provide further security for business loans. As a result, as of April 1992, both Messrs. Benoot and Meriano began to take a reduced draw or no draw from the company from time to time.
32In any event, Mr. Benoot says that when Mr. Meriano told him he was leaving Musical Strings in February 1993, Mr. Meriano indicated that he wished to liquidate the assets of the company and divide up the net proceeds. Mr. Benoot told Mr. Meriano at that time that they should obtain a price for the business and that one of them should buy out the interest of the other. Accordingly, both parties agreed to have Gary Saunders, the company’s accountant, prepare a pro forma balance sheet as at January 31, 1993, in order to come up with a value of the shareholders’ equity.
33The evidence is that, originally, Mr. William Beatty had served as the accountant for Musical Strings. However, Mr. Beatty passed away in 1991, at which time Mr. Saunders, who had previously been the personal accountant for Mr. Meriano, was appointed as the accountant for Musical Things. Mr. Saunders has since passed away. In other words, both of the company’s original accountants at the time of the alleged incidents have since died.
34The pro forma balance sheet prepared by Mr. Saunders was in evidence before me. It indicated that total shareholders’ equity was then $139,639, with Mr. Benoot’s 60% holding equal to $83,783, and Mr. Meriano’s 40% holding equal to $55,856.
35After the parties received the information from Mr. Saunders, Mr. Benoot then offered either to sell his interest to Mr. Meriano for the amount of Mr. Benoot’s shareholder’s equity plus certain indebtedness owing to Mr. Benoot and C&T or, alternatively, to buy Mr. Meriano’s interest for the amount of his shareholder’s equity.
36Mr. Meriano rejected Mr. Benoot’s offer.
37Evidently, but not surprisingly, the working atmosphere at the store became strained. Mr. Meriano left his employment with Musical Strings by April 1, 1993. His intention not to continue at the store was confirmed by his lawyer’s letter to Mr. Benoot’s lawyer of the same date.
38The defendants’ evidence is that shortly after Mr. Meriano left the company, he began competing directly with the business of Musical Strings. Mr. Benoot says it was made clear within the Chatham music community that both Mr. and Mrs. Meriano had moved to Frank’s Music Centre, the main business competitor of Musical Strings, and that Mr. Meriano began operating a part of their BY Studios business out of the premises of Frank’s Music Centre. That evidence is unchallenged.
39By letter dated April 7, 1993, Mr. Benoot’s lawyer wrote to Mr. Meriano’s lawyer to reiterate Mr. Benoot’s previous offer that he was willing to either buy Mr. Meriano’s interest or sell his interest to Mr. Meriano based upon the shareholders’ equity figures in Mr. Saunders’ pro forma balance sheet. That letter also indicated that the plaintiffs were aware that Mr. Meriano was now engaged in a competing business to that of Musical Strings, that such activity for a competitor would undoubtedly negatively impact the business of Musical Strings, and that Mr. Meriano was therefore in breach of his fiduciary duties as an officer, director, and shareholder of Musical Strings.
40Mr. Meriano did not reply to the reiterated offer.
41Mr. Meriano later opened up and operated a musical equipment and supply store known as “Tony’s One Stop Music Shoppe,” which directly competed with the business of Musical Strings and continues to do so at the present time.
42The existing mortgage financing of Musical Strings with National Trust Company came due for renewal in or about April 1993. Mr. Benoot executed the requisite mortgage renewal agreement and then sent it to Mr. Meriano for his signature. However, Mr. Meriano refused to execute the document. As a result, Musical Strings had to continue to pay interest at the old mortgage rate of 11.5% even though available renewal rates, as set out in the mortgage renewal agreement, were expressed to be as low as 7.75%. Accordingly, Mr. Meriano’s refusal to execute the mortgage renewal cost Musical Strings over $500 per month in additional interest costs. Over the five-year term of the renewal agreement, the cost to Musical Strings amounted to $30,000.
43In June 1993, Mr. Meriano’s lawyer indicated that he had retained the services of an accountant to review the financial records of Musical Strings. The defendants were agreeable to making the company’s records available to the plaintiffs for inspection; however, there were some difficulties in agreeing upon which accountant would conduct the review. Ultimately, in July 1993, Mr. Meriano’s lawyer advised that another accountant, Dolores Leader, had been retained by the plaintiffs to review Musical Strings’ financial records. The plaintiffs’ accountant, Ms. Leader, spent five days at the premises of Musical Strings, reviewing the books and records of the company, including documentation relating to the contractual relationship between Musical Strings and C&T.
44No report was ever provided to Mr. Benoot or his lawyer arising from Ms. Leader’s attendance and review of the financial records of Musical Strings, despite the parties’ agreement that such a report would be produced.
History of the litigation
45By way of notice of application issued October 23, 1993, Mr. Meriano commenced an application against Musical Strings, Mr. Benoot, and Mrs. Benoot, seeking an order requiring the defendants to purchase Mr. Meriano’s shares in Musical Strings. Mrs. Meriano was named in the application even though she was not, and never has been, a shareholder of the company.
46In response, Mr. Benoot filed a cross-application seeking an order requiring Mr. Meriano to transfer his interest in Musical Strings to Mr. Benoot at a price based upon a liquidation or debt-asset value of the corporation less all amounts found owing by Mr. Meriano to Mr. Benoot.
47In November 1993, Mr. Meriano brought a motion for an order winding up Musical Strings and related relief. Mr. Benoot brought a cross-motion to direct that the application proceed to trial as an action. The motions came before Justice K.F. Ross on December 21, 1993. Mr. Meriano’s motion for the closing of the company was dismissed. Ross J. allowed the defendants’ cross-motion and directed that the application be converted into an action, that Mr. Meriano serve a statement of claim by January 15, 1994, that Mr. Benoot serve the statement of defence by January 30, 1994, and that discoveries be held within 45 days of the close of pleadings.
48On January 14, 1994, Mr. Meriano delivered his statement of claim, which named not only Mr. Meriano as plaintiff but also his wife, Mrs. Meriano, and Musical Strings itself as plaintiffs. Mr. Meriano named only Mr. and Mrs. Benoot as defendants and not Musical Strings, despite the fact that no order had been made by Ross J. permitting such additions or deletions of parties. Moreover, there had been no authorization by Musical Strings as a corporate plaintiff to commence proceedings against Mr. Benoot.
49The defendants delivered a statement of defence and counterclaim in order to comply with the timetable established by the order of Ross J., but perceived that it would be necessary to bring a motion to clean up the pleadings.
50In an effort to comply with the litigation schedule set out in the order of Ross J., on February 24, 1994, counsel for the defendants scheduled the examination for discovery of Mr. Meriano for March 7 and 8, 1994, and served the appropriate notice of examination.
51In contemplation of the discoveries, on March 3, 1994, the defendants served the plaintiffs with an affidavit of documents on behalf of Mr. and Mrs. Benoot and Musical Strings.
52However, Mr. Meriano did not attend the scheduled discoveries. The defendants obtained their certificate of non-attendance.
53Further motions by both parties came before the court in September 1994. At the return of the motion, an agreement was reached between counsel, and on the basis of a consent signed by all parties, an order was issued by Higgins J. dated September 22, 1994, which, generally, determined the proper parties to the proceeding, set out a further timetable for the conduct of the litigation, and ordered both parties to make production of certain financial information.
54Further to the order of Higgins J., Mr. Meriano delivered a fresh statement of claim dated September 30, 1994, adding Mr. Meriano as a plaintiff and C&T as a defendant. On October 7, 1994, the defendants delivered their amended statement of defence and counterclaim. On October 12, 1994, the plaintiffs served a reply and defence to counterclaim.
55It is clear from a review of the amended pleadings that this proceeding does not merely involve a simple claim for the value of Meriano’s shares in Musical Strings. Broadly speaking, it presents widespread allegations of oppression, breach of fiduciary duty, conspiracy, misappropriation, misrepresentation, appropriation of a business opportunity, wrongful dismissal, and manipulation of documents going back 30 years. In particular:
a. the prayer for relief in the plaintiffs’ fresh statement of claim seeks $450,000 in damages, including a claim for $100,000 in punitive damages; b. para. 9 of the claim seeks damages “attributable to the systematic oppressive conduct engaged in by the defendants”; c. para. 10 alleges that the business relationship “began to deteriorate in 1986” when Mr. Benoot “unilaterally determined” to purchase the adjacent property; d. para. 12 similarly alleges that Mr. and Mrs. Benoot made unilateral decisions that affected the business of Musical Strings; e. para. 14 alleges that Mr. and Mrs. Benoot breached their fiduciary responsibility to the company “by conspiring to appropriate monies” (i.e., steal) and “fraudulently manipulated the books of accounts” of Musical Strings to the detriment of the shareholders; f. para. 15 alleges a further conspiracy by Mr. and Mrs. Benoot in the treatment of Mr. Meriano’s interest on his loan to the company for the purchase of the adjacent property; g. para. 17(5) alleges that Mr. and Mrs. Benoot falsified receivables and inventory of the company; h. para. 17 (8) alleges that Mr. Benoot “unilaterally sold” the store delivery truck; i. para. 17 (14) alleges that the defendants “sold inventory for cash without properly recording sales in order to avoid accountability”; j. there is a general allegation that the books and records of the company do not reflect the actual value of the business; k. para. 20 claims that an immediate winding down of Musical Strings and C&T is necessary for proper assessment of the value of Mr. Meriano’s interest in the company and “to preclude further misappropriation by the defendants”; l. para. 29 alleges that the defendants improperly treated or recorded Mr. Meriano’s loan to the company for the purchase of the adjacent property (the plaintiffs’ underlying claim being, essentially, that Musical Strings should assume the mortgage on an unrelated property on Couture Drive in Chatham); and m. in paras. 30-39, there are allegations of breach of employment contract on behalf of Mrs. Meriano, including that she was wrongfully dismissed (para. 30), that her hours were unilaterally cut (para. 31), that she was discriminated against (para. 32), that she was not properly compensated (para. 33), that she is owed vacation pay (para. 34), and that the defendants gave her a warranty that “her position was secure and long-term” (para. 36), as a result of which Mrs. Meriano claims damages for “mental anguish and anxiety” (para. 39).
56In the defendants’ counterclaim, Mr. Benoot claims an order requiring Mr. Meriano to transfer his shares in Musical Strings for a value “found appropriate in circumstances,” an order requiring Mr. Meriano to execute the mortgage renewal agreement, and damages in the amount of $200,000 in connection with Mr. Meriano’s competing business.
57In the plaintiffs’ reply and defence to counterclaim, the plaintiffs allege that the defendants have manipulated the court proceedings. They also plead, in para. 26, that the defendants are estopped from claiming any damages in connection with the operation of Mr. Meriano’s competing business (BY Studios) because Mr. Meriano had proposed that the BY Studios be operated within the framework of Musical Strings, and Mr. Benoot had rejected the proposal. The defendants’ position is that no estoppel can arise where it was proposed to Mr. Benoot that he engage in a business that would compete with the one that he was already running. The defendants also argue that the plaintiffs’ claim of estoppel by conduct depends upon an oral understanding or agreement between Mr. Meriano and Mr. Benoot.
58In paras. 11, 13, and 19 of their reply, the plaintiffs essentially plead that particulars of the false and improper conduct that they had alleged against the defendants would be provided at discovery.
59In response to the plaintiffs’ reply and defence to counterclaim, the defendants served a demand for particulars on October 13, 1994, seeking, inter alia, particulars of their alleged wrongful and fraudulent conduct. The plaintiffs never delivered an answer to the defendants’ demand for particulars.
60In sum, it is neither accurate nor fair to suggest that this is simply a document case. The issues raised in the pleadings deal with the verbal interactions, conduct, and other dealings between Messrs. Benoot and Meriano, which reach back to 1986 at least.
61Paragraph 7 of the order of Higgins J. dated September 22, 1994, ordered the parties to attend at examinations for discovery by November 30, 2014.
62Following the order of Higgins J., the defendants served the plaintiffs in October 1994 with a supplementary affidavit of documents on behalf of Mr. and Mrs. Benoot and Musical Strings, and an affidavit of documents on behalf of C&T.
63On October 11, 1994, copies of volumes 1 to 7 of the defendants’ documents brief (which contained all Schedule “A” documents of the defendants’ original affidavit of documents) were delivered to the plaintiffs, together with an invoice for same.
64The balance of the defendants’ productions, volumes 8 to 19 of the defendants’ documents brief, which arose from the order of Higgins J., were provided to counsel for the plaintiffs on October 21, 1994, together with an invoice for same.
65The invoice for producing volumes 1 through 7 of the defendants’ documents brief amounted to $461.44, and the invoice for producing volumes 8 through 19 was $2,172.74. The first invoice was paid by the plaintiffs; the second was not.
66Paragraph 1 of the order of Higgins J. provided that the defendants were to produce to the plaintiffs certain financial, income tax, and other records within 21 days of the date of the order. The defendants complied with that order.
67Paragraph 2 of the order of Higgins J. provided that the plaintiffs were to produce to the defendants with 21 days of the date of the order:
a. the BY Studios documents listed in tab 2 of the affidavit of documents; b. business income tax returns, T-4 Slips, financial statements for BY Studios from the time of formation of BY Studios onward; c. personal t-4 slips and income returns for Mr. and Mrs. Meriano for the period of 1985 and onward; d. personal bank statements from 1987 onward.
68On October 14, 1994, the plaintiffs delivered a joint affidavit of documents on behalf of the plaintiffs.
69Upon review of the plaintiffs’ productions, counsel for the defendants believed the plaintiffs’ production was deficient. By letter dated October 20, 1994, defendants’ counsel wrote to plaintiffs’ counsel to advise that the affidavit of documents and accompanying productions received from the plaintiffs in response to the order of Higgins J. were deficient, including the following:
a. other than the items of correspondence up to number 61, each document was not separately listed in Schedule A of the affidavit of documents and this resulted in productions at tab 2 being essentially chaotic in nature. It was uncertain as to what the documents were and how they were referred to in the affidavit of documents; b. productions were not paginated; c. there were no financial statements for BY Studios; d. most of the ledger sheets were illegible and have not been reproduced in a fashion that would allow anyone to reasonably understand what was being disclosed; e. the payroll records or T4 summary slips from BY Studios were not produced; f. the cancelled cheques provided were incomplete; g. the bank statements provided were incomplete and only referred to bank statements for Mr. Meriano at Scotiabank for November 1993 to September 1994. The plaintiffs have had other accounts at the Bank of Nova Scotia in Chatham, and at Canada Trust. The plaintiffs were advised that the order of Higgins J. required production of all of the documentation pertaining to any accounts held by Antonio Meriano and Laurie Meriano from 1986 onward; h. Mr. Meriano has only produced one income tax return for the year 1986 and had not produced income tax returns for 1985 or 1987, as required by the order of Higgins J.; i. the income tax returns for Mrs. Meriano were incomplete in that there was only part of a return for 1986, pages were missing from the 1989 return, pages were missing from the 1993 return, and there were no returns produced for 1985, 1986, 1990, 1991, or 1992; j. sales invoices for BY Studios were incomplete and there was no sales documentation produced other than for the year 1994. The order of Higgins J. clearly stated that the BY Studios documentation to be produced was from the commencement of the company to the present date; k. none of the banking documentation associated with BY Studios or the plaintiffs had been produced; l. part of the documentation required to be produced were copies of all orders for musical equipment and other items ordered by BY Studios from distributors or other suppliers; m. there was no documentation produced relative to 23-25 Couture Drive, any encumbrances thereon, or documentation in connection with the acquisition and encumbrancing of that particular property; n. the plaintiffs produced no documentation that would indicate or provide information about their opinion of the value of Musical Strings or C&T; o. copies of all invoices to support any cheques written by BY Studios had not been produced; p. the plaintiffs had not produced an inventory list in connection with BY Studios; q. the plaintiffs had not produced any payroll records in connection with BY Studios; r. the productions made by the plaintiffs revealed that Visa Credit had been used in connection with some of the business acquisitions of BY Studios and, accordingly, the defendants requested copies of all Visa statements of either Mr. or Mrs. Meriano from the inception of BY Studios up until the present time.
70In all, the October 20th letter from counsel for the defendants identified 18 deficiencies with the plaintiffs’ productions.
71Those deficiencies were never addressed. I appreciate that Mrs. Meriano takes the position in para. 75 of her affidavit sworn January 27, 2016 that “[a]s far as I am concerned my husband with my assistance fully complied with the Order of Justice Higgins. We have dealt with the documentation and information that my husband was ordered to produce.” I do not share Mrs. Meriano’s view. I do not doubt that, as reflected in para. 76 of her affidavit, some considerable effort was spent on assembling some documentation. To be clear, the defendants do not say that the plaintiffs made no production; rather, they say that the production that was made was deficient, and they identified in detail what the deficiencies were. I prefer the evidence of the defendants on point. In any event, as will be seen, in December 1994 counsel for the plaintiffs gave an undertaking to remedy the deficiencies in the plaintiffs’ production as identified by the defendants in the October 20th letter.
72The plaintiffs then wanted to pursue their motion for a second inspection of Musical Strings’ books and records by an accountant, and for other relief, and in connection with those motions the defendants conducted cross-examinations of Mr. Meriano and Mr. Porter, the plaintiffs’ legal counsel, on their motions filed in support of the plaintiffs’ motions.
73On November 1, 1994, counsel for the defendants conducted a cross-examination of Mr. Porter on his affidavit. Five undertakings were given on Mr. Porter’s cross-examination, which dealt directly with issues relevant to not only the plaintiffs’ motion but also the underlying action. For example, the defendants sought information about alleged complaints made against the accountant Mr. Saunders to his professional regulating body; the defendants sought information about that because one of the plaintiffs’ allegations in the action was that the valuation performed by Mr. Saunders could not be relied upon because Mr. Saunders was incompetent (this despite the evidence that Mr. Saunders had served as Mr. Meriano’s personal account for several years before being retained as the company’s accountant).
74Counsel for the defendants made requests for fulfillment of the plaintiffs’ undertakings by way of letters dated November 18 and 23, 1994.
75None of the undertakings was ever answered.
76On December 5, 1994, counsel for the defendants conducted a cross-examination of Mr. Meriano. A number of undertakings were given, a significant number of which, again, were relevant for the underlying action as well. In particular:
a. an undertaking was given to produce outstanding income tax returns for both Mr. and Mrs. Meriano, which originally had been ordered to be produced by para. 2 of the order of Higgins J.; b. an undertaking was given to produce the report of Delores Leader, the accountant who had spent five days in July 1993 examining the financial books and records of Musical Strings and C&T, and Brenda Warner (who had assisted Ms. Leader); c. an undertaking was given to produce the documentation and information requested in defence counsel’s letter of October 20, 1994 (i.e., the 18 enumerated items, as reviewed above); and d. an undertaking was given to provide the defendants with a copy of the mortgage documentation on the Couture Drive property, i.e., the mortgage that the plaintiffs allege should be assumed by Musical Strings.
In all, there were three pages of undertakings given.
77None of the undertakings was ever answered.
78Paragraph 7 of the order of Higgins J. had ordered, on consent, that the parties would complete discoveries in the action by November 30, 1994. As it turned out, discoveries were scheduled, on consent, for December 7, 8, and 9, 1994.
79Counsel for the defendant had asked Mr. and Mrs. Benoot to attend his examination of Mr. Meriano, not because parties to a proceeding have a right to attend the discoveries, but because counsel believed he needed his clients present to instruct him. It will be remembered that there were various paragraphs in the plaintiffs’ reply and defence to counterclaim where it was said that particulars of the allegations against the defendants would be provided at discovery. Counsel believed he needed his clients present at the examination to listen to the evidence of Mr. Meriano so that his clients could give counsel proper instructions that would allow him to properly conduct his examination.
80However, Mr. Meriano refused to answer any questions of defence counsel with his clients present. The three days of discovery had to be aborted. The defendants obtained certificates of the plaintiffs’ non-attendance for each of the three days.
81The plaintiffs did not and have not still conducted any examination for discovery of the defendants.
82At that point, with the plaintiffs’ refusal to attend at discovery, the litigation stalled.
83And nothing happened for almost three years.
84Then, three years later, in the summer of 1997, the plaintiffs emerged again with, apparently, some rekindled interest in their proceeding. At that point, the plaintiffs continued to be represented by the same lawyer who had represented them from the days of the first notice of application (i.e., Mr. Porter of the Corrent & Macri firm). The plaintiffs then brought a motion for:
a. an order that Musical Strings immediately assume the mortgage payments for the Couture Drive property; b. an order allowing the plaintiffs’ “investigative accountants complete and unimpeded access to the entire existing financial records, business records and corporate records pertaining to each of the defendants personally, as well as the defendant corporations”; and c. an order that the defendants make an immediate advance payment of $60,000 in order to fund the plaintiffs’ litigation.
85I pause to note that the request to have the company immediately assume responsibility for the mortgage payments on Couture Drive was made in the face of the plaintiffs’ undertaking – that had remained unfulfilled for three years – that the plaintiffs would produce a copy of the mortgage documentation to the defendants. The request to have further accountants examine the defendants’ records was made in the face of an undertaking – that had remained unfulfilled for three years – that the plaintiffs would produce the report of accountant Delores Leader, who had spent five days examining the company’s books and records.
86The defendants brought their own motion for an order finding the plaintiffs in contempt of the order of Higgins J. for failure to make proper production, attend at discoveries, and comply with their undertakings.
87Counsel for the parties then agreed upon a resolution that addressed not only the plaintiffs’ motion but also the defendants’ sanction motion. At that point, the plaintiffs’ file had been re-assigned to another lawyer within the same firm (i.e., Mr. Iannetta of the Corrent & Macri firm). By letter dated August 28, 1997, Mr. Iannetta wrote to counsel for the defendants to confirm his earlier discussions with counsel and his clients that the plaintiffs were prepared to resolve the outstanding motions on the following basis:
a. the plaintiffs would retain a forensic expert for the purpose of preparing business valuations of Musical Strings and C&T, which valuations would be completed within 60 days; b. the valuation of C&T would be without prejudice to the defendants’ position that the plaintiffs were not entitled to any interest in C&T; c. the plaintiffs’ forensic report would be served on the defendants, who would then have 60 days to respond and obtain their own report if necessary; d. all undertakings of the plaintiffs would be satisfied by September 15, 1997, “inclusive of the undertaking to provide a copy of the accounting report prepared by Brenda Warner”; e. the resolution was without prejudice to the defendants’ right to argue at a later date the issue of sanctions with respect to the noncompliance of the plaintiffs with the court orders; and f. the two motions would be adjourned sine die, returnable on 30 days’ notice.
88Counsel for the defendants accepted the offer, and the two motions were then resolved on that basis. From the defendants’ perspective, they then had not only court orders that production would be made, not only numerous undertakings, but now also an agreement through counsel that production would be made.
89Except that production was never made. The resolution was never implemented. The plaintiffs never retained their expert to perform the business valuation. None of the operative items of the August 28th letter were ever performed.
90And the litigation stopped there, again, for the second time.
91This time it remained stagnant for more than 17 years.
92It remained stagnant until the summer of 2014, when Mr. Allin, the plaintiffs’ current counsel, was retained. To his credit, Mr. Allin attempted to resurrect the proceeding. He has faced some significant challenges in that regard, to be sure.
93As referenced, Mr. Meriano passed away on March 3, 2010. His 40% shareholding in Musical Strings is now owned by his estate, and Mrs. Meriano is the estate trustee. Mr. Allin obtained an order to continue on April 21, 2015.
94As appears generally from Mrs. Meriano’s affidavit, much if not most of her knowledge of the events in question and the handling of the litigation, which is limited, came from what Mr. Meriano had told her.
95Further, it appears that the entire file of the plaintiffs is now no longer available to Mr. Allin or the plaintiffs. Mrs. Meriano’s evidence is that the file was last in the possession of one Stafford Quinlan, who approached Mr. Meriano in or about 2006 or 2007 and apparently represented himself to be a lawyer. It appears Mr. Meriano first retained Mr. Quinlan for some minor debt collection matters, but then retained him to assume carriage of this litigation, paid him a $10,000 retainer, and authorized him to attend at his former solicitors’ offices in Windsor and obtain possession of the entire file. Mr. Quinlan then disappeared in 2007, together with the file, and the retainer, and the plaintiffs have had no contact with Mr. Quinlan since.
96Mr. Allin was able to obtain a copy of the court file, i.e., the pleadings and court filings, but gone with the plaintiffs’ original file are the plaintiffs’ productions and other original documents relating to the matter. A copy of the defendants’ file, with correspondence, affidavits of documents, and the defendants’ productions, etc., was produced to the plaintiffs in December 2015. However, as confirmed by Mrs. Meriano’s affidavit, para. 69, she still does not have the benefit of all of the documentation that was in the plaintiff’s original file.
Analysis
The test
97The defendants seek to dismiss the action for delay, relying primarily on Rule 24 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 24.01(1)(c) provides that a defendant who is not in default may move to have an action dismissed for delay where the plaintiff has failed to set the action down for trial within six months after the close of pleadings.
98There was some disagreement before me as to the applicable test on a rule 24.01 motion. The defendants submit that the well-established test under rule 24.01 was reiterated by Doherty J.A. in Langenecker v. Sauvé, 2011 ONCA 803, 286 O.A.C. 268, at para. 5, who, while observing that the formulation of the test varies slightly in the authorities, expressed a preference for the following language when describing the power of the court to dismiss a proceeding for delay:
It should not in any event be exercised without giving the plaintiff an opportunity to remedy his default, unless the court is satisfied either that the default has been intentional and contumelious, or that the inexcusable delay for which the plaintiff or his lawyers have been responsible has been such as to give rise to a substantial risk that a fair trial of the issues in the litigation will not be possible at the earliest date at which, as a result of the delay, the action would come to trial if it were allowed to continue.
99For their part, the plaintiffs rely heavily on the recent decision of the Ontario Court of Appeal in Carioca’s Import & Export Inc. v. Canadian Pacific Railway Ltd., 2015 ONCA 592, 128 O.R. (3d) 143, and submit that all they need do is “provide an ‘acceptable explanation’ for the delay and satisfy the court that there would be no prejudice to the defendant if the action were to proceed” (at para. 44).
100Carioca’s Import involved a motion to restore an action to the trial list under rule 48.11. The court in Carioca’s Import referred repeatedly to their earlier decision in Nissar v. Toronto Transit Commission, 2013 ONCA 361, 115 O.R. (3d) 713; those repeated references were evident in the passages in Carioca’s Import to which counsel referred me.
101Nissar also involved a motion to restore an action to the trial list under rule 48.11. Writing for the unanimous Court of Appeal, Tulloch J.A. addressed the differences between a rule 48.11 motion and a rule 24.01 motion in the following terms, at paras. 23-26:
In an appeal released contemporaneously with the case at bar, Faris v. Eftimovski, 2013 ONCA 360 (Ont. C.A.), I analyzed the provisions of the Rules of Civil Procedure concerning the procedures by which an action could be dismissed for delay.
Faris was an appeal from a judge’s decision to dismiss an action for delay after a status hearing pursuant to rule 48.14(13) of the Rules of Civil Procedure.
In Faris, I noted that Rule 48 provides a mechanism enabling the court to control the pace of litigation and ensure that disputes are resolved efficiently. A rule 24.01 motion, on the other hand, enables a defendant, who has complied with the rules, to take a deliberate procedural step to dismiss an action where the plaintiff has been delinquent in a manner enumerated under that rule.
For the reasons I gave in Faris, a court should treat as distinct a defendant’s motion to dismiss for delay under Rule 24 from those procedures made available to the court under Rule 48. Like a status hearing, the requirement that leave be obtained to restore an action to the trial list under rule 48.11 is simply another weapon in the Rule 48 judicial arsenal “to promote the timely resolution of disputes, to discourage delay in civil litigation and to give the courts a significant role in reducing delays” … [Emphasis supplied.]
102In the companion decision in Faris v. Eftimovski, 2013 ONCA 360, 363 D.L.R. (4th) 111, at para. 25, Tulloch J.A. observed that the Court of Appeal “has made it clear that the tests to be applied under rules 24.01 and 48.14(13) are distinct from one another: Bolohan v. Hull, 2012 ONCA 121, 99 C.C.E.L. (3d) 307 (Ont. C.A.), at para. 12.”
103In describing the distinct context of rule 24.01 motions and the applicable test in that context, Tulloch J.A. expressly quoted, at para. 28, from the analysis of Doherty J.A. in Langenecker.
104For these reasons, I prefer to approach the rule 24.01 analysis in the instant case using the Langenecker formulation, rather than the rule 48.11 test in Carioca’s Import.
Intentional and contumelious default
105The first type of case attracting the exercise of the court’s discretion under rule 24.01 is classically described as where the default has been “intentional and contumelious.”
106The defendants do not contend that the plaintiffs’ delay in the instant case is intentional and contumelious. As such, I give this ground no further consideration.
Inordinate, inexcusable delay that substantially risks a fair trial
107As described by Doherty J.A. in Langenecker, at para. 7, the second type of case that attracts rule 24.01 scrutiny bears three characteristics: delay that is (a) inordinate, (b) inexcusable, such that (c) “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.”
Inordinate delay
108In my view, there can be no question but that delay in this case – amounting to almost 22 years – has been inordinate.
109In Langenecker, at para. 8, Doherty J.A. explained that the inordinance of the delay “is measured simply by reference to the length of time from the commencement of the proceeding to the motion to dismiss.” Here, the original proceeding was commenced by notice of application issued October 23, 1993, and the defendants’ motion to dismiss was served on plaintiffs’ counsel and filed in court on August 11, 2015.
110In Langenecker, at para. 8, the Court of Appeal observed that there can be no doubt that a delay of 15 years was inordinate, even acknowledging that most litigation does not move at a quick pace.
111Mrs. Meriano herself conceded, in para. 4 of her affidavit sworn January 27, 2016, that the action has had “a long and difficult progression” and, in para. 85, “that the amount of time this case has taken to date is unreasonable.” Very fairly, Mr. Allin conceded as much in argument before me.
Inexcusable delay
112In order to conclude that the delay is “inexcusable,” the court must determine “the reasons for the delay and whether those reasons provide an adequate explanation for the entire delay”: Langenecker, at para. 9. The courts have recognized that where the explanations are “reasonable and cogent” or “sensible and persuasive,” they may serve to excuse the delay. The Court of Appeal has said that in “assessing the explanations offered, the court will consider not only the credibility of those explanations and the explanations offered for individual parts of the delay, but also the overall delay and the effect of those explanations considered as a whole”: Langenecker, at para. 10.
113The Court of Appeal has also said that “the longer the delay, the more cogent the explanation must be,” describing this as a “common sense observation”: Southwestern Sales Corporation Limited v. Spurr Bros. Ltd., 2016 ONCA 590, at para. 17; and Kara v. Arnold, 2014 ONCA 871, 328 O.A.C. 382, at para. 17.
114In considering the adequacy of the explanation offered by the plaintiffs here, it is instructive at the outset to remind the parties that the courts have repeatedly held that it is the plaintiff in an action who bears the responsibility for moving the case forward; this burden is not borne by the defendant, although it is open to the defendant to progress the litigation (as I find the defendants attempted to do here). See Premium Properties Limited v. Aird & Berlis, 2015 ONSC 5067, 78 CPC (7th) 123 (S.C.J.), at para. 33; Wallace v. Crate’s Marine Sales Ltd., 2013 ONSC 7384 (S.C.J.), at para. 22, affirmed 2014 ONCA 671, [2014] O.J. No. 4606; Farhi Holdings Corp. v. Lambton (County), [2009] O.J. No. 5475 (S.C.J.), at para. 15; Woodheath Developments Ltd. v. Goldman (2003), 66 O.R. (3d) 731, at paras. 6-10; DeMarco v. Mascitelli, [2001] O.J. No. 3582, 14 C.P.C. (5th) 384 (S.C.J.) at para. 22; and Standard Civil Trust v. Jackson, [1993] O.J. No. 2764 (S.C.J.), at para. 15.
115In this case, the plaintiffs attempt to explain the delay by, essentially, blaming the 22-year delay on their lawyers. Most of the affidavit sworn by Mrs. Meriano on January 27, 2016, is devoted to that single issue. Indeed, as Mrs. Meriano states in para. 5 of her affidavit: “ the main reason is that my husband and now myself have been required to retain no less than 11 lawyers to shepherd this matter through the justice system [emphasis supplied].”
116With respect, in my view, the plaintiffs cannot so easily evade their ultimate responsibility for the lack of progress of their litigation over its 22-year history, a delay which Mrs. Meriano herself characterizes as unreasonable. As the parties who commenced the action, the plaintiffs retain primary responsibility for its progress. Retaining a lawyer or lawyers to represent them in their action did not lessen that obligation. See Southwestern Sales, at para. 21. The plaintiffs were required to take reasonable steps to supervise their lawyers’ work “to ensure that there would be an expeditious determination of the [action] on its merits”: Southwestern Sales, at para. 22.
117In reviewing Mrs. Meriano’s affidavit, it is difficult to distinguish between those lawyers who were specifically retained to assume carriage of the litigation and those lawyers with whom the plaintiffs may have merely consulted.
118For example, in paras. 55-56 of her affidavit, Mrs. Meriano states that she consulted with solicitor Dennis Asher about her husband’s estate, and that in the course of her discussions about the estate, the topic of this litigation arose. I was advised by counsel before me that Mr. Asher’s practice involves solicitor’s work, primarily in the areas of corporate/commercial and estates matters, and that he practises in the same building as does Mr. Allin. Hence, I accept Mrs. Meriano’s evidence, in paras. 58-59 of her affidavit, that Mr. Asher advised her that it would be necessary to refer her to litigation counsel to deal with her lawsuit, and in that vein Mr. Asher referred Mrs. Meriano to Mr. Allin.
119My point is that Mr. Asher clearly was not retained to assume carriage of this litigation, and as such he cannot fairly be regarded as being responsible for or contributing to the delay in the prosecution of the litigation. He was consulted with respect to the estate, a question arose in the context of those estate matters about this litigation, and Mr. Asher quite properly advised Mrs. Meriano that she needed to retain litigation counsel, and he then assisted her by referring her to experienced litigation counsel in the person of Mr. Allin. And yet, evidently in Mrs. Meriano’s eyes, Mr. Asher is one of the 11 lawyers that the plaintiffs “have been required to retain … to shepherd this matter through the justice system,” and that has been the “main reason” why the litigation has stagnated for 22 years. I do not accept that explanation. It is unfair to the evidence, and it is unfair to Mr. Asher. It tarnishes Mrs. Meriano’s credibility in my eyes.
120Similar concerns are also relevant to Mrs. Meriano’s explanation of the body of work performed by the other lawyers who were involved one way or the other.
121Mr. Porter had carriage of the matter from the inception of the litigation in October 1993 until the summer of 1997. Although Mr. Porter seems to be a primary target of the plaintiffs’ blame, one cannot say that the litigation was not actively pursued under Mr. Porter’s carriage from its inception until December 1994.
122It is true that the matter then fell dormant from December 1994 until the summer of 1997, but there is no evidence that Mr. Porter was responsible for that almost three-year period. There is, for example, no evidence of any instructions given to Mr. Porter during the three-year hiatus that he did not follow. It is true that para. 20 of Mrs. Meriano’s affidavit speaks to certain personal and professional difficulties that Mr. Porter was apparently experiencing, but as I read the affidavit and the chronological context of Mrs. Meriano’s evidence as a whole, those difficulties appear to be advanced as the reason why the file was transferred to Mr. Iannetta, a colleague of Mr. Porter within the same firm, in the summer of 1997. There is no evidence that the difficulties of Mr. Porter described in para. 20 of Mrs. Meriano’s affidavit were experienced throughout the period from December 1994 to summer 1997 and/or were the cause of that entire three-year delay.
123I pause to note Mrs. Meriano’s evidence on the period from 1993 to 1997. In para. 18 of her affidavit, Mrs. Meriano states that “it is clear that the law suit proceeded from 1993 until 1997.” With respect, I disagree with such a sweeping statement. It is clear that, as I have explained, the lawsuit proceeded from 1993 to December 1994; but nothing was done from that point until the summer of 1997. There is, therefore, no basis for Mrs. Meriano’s statement. Such sweeping propositions give me cause to question her credibility.
124Mrs. Meriano believes that Mr. Iannetta was involved in the matter for a period of only one month. Paragraph 25 of her affidavit indicates that “for reasons that are not known to me,” Mr. Iannetta transferred the file to a fifth lawyer, “Glen Matthews,” who assumed “carriage of the file in the late summer of 1997.” As appears from the letterhead of correspondence that was tendered in evidence before me, Glenn E. Matthews also practised within the same law firm as Messrs. Iannetta and Porter. It was another inter-office transfer.
125Again, I pause to note that there is no evidence of what instructions may have been given to Mr. Iannetta or to Mr. Matthews by Mr. Meriano. There is no evidence that they did not follow the instructions they were given. There is no evidence as to the reason why the file was transferred from Mr. Iannetta to Mr. Matthews. There is no evidence as to whether Mr. Meriano requested the transfer or was content with either lawyers’ work or approach. There is simply no evidence.
126Mrs. Meriano’s affidavit then accounts for the next 10 years of the litigation’s delay in, essentially, a mere two paragraphs. As such, it is instructive to set out that evidence in full. Mrs. Meriano deposes in paras. 26 and 27 that:
From here [i.e., late summer of 1997] I do not have detailed knowledge. I only know that Mr. Matthews had carriage of the file for a period of time. The exact period of time is unknown to me. However, I do know that the file was subsequently transferred to a sixth lawyer from Mr. Matthews to a Mr. Murphy. Mr. Murphy was a Solicitor in the law firm of Martini and Barile. While handling the file Mr. Murphy changed law firms from Martini and Barile to Hulka Porter.
I believe that Mr. Murphy had carriage of the file for a period of approximately two to three years. From my review of the file and my discussions with my husband it appears as though Mr. Murphy was not able to advance the file during this period of time.
127The next event that Mrs. Meriano describes in her affidavit (at para. 28) is when Mr. Quinlan entered the picture “[i]n or about 2006 or 2007,” she is not sure which.
128Accordingly, the two paragraphs quoted take us from the summer of 1997 to 2006 or 2007 – in other words, about 10 years. Those two paragraphs are wholly unsatisfactory in providing the court with an “adequate explanation” of a period of delay in the litigation of some 10 years. In that regard, I would underscore that:
a. Mrs. Meriano concedes she does not have “detailed knowledge” of, essentially, what happened for the 10-year period; b. all she knows is that Mr. Matthews had carriage of the file “for a period of time”; c. that said, given her evidence in para. 27 that she believes Mr. Murphy had carriage of the file for only a period of two to three years, and given further that Mr. Quinlan entered the picture in or about 2006-2007, presumably that would leave Mr. Matthews having carriage of the file from 1997 to 2003-2005, or about six to eight years; d. Mrs. Meriano concedes that for the two to three years that Mr. Murphy had carriage, he “was not able to advance the file.” There is no explanation as to why; e. however, while the same might presumably be said of Mr. Matthews, i.e., that during his tenure of some six to eight years, it appears that he also “was not able to advance the file,” again, it must be acknowledged that there is no evidence of what instructions may have been given to Messrs. Matthews and/or Murphy by Mr. Meriano. There is no evidence that they did not follow the instructions they were given. There is no evidence as to the reason why the file was transferred from Mr. Matthews to Mr. Murphy. There is no evidence as to whether Mr. Meriano requested the transfer or was content with either lawyers’ work or approach. Again, there is simply no evidence; f. there is also no evidence from the plaintiffs’ former solicitors (as might have been obtained and presented) as to what, if any, instructions they received from the plaintiffs with respect to proceeding with the action; g. there is no evidence of any inquiries having been made by Mr. or Mrs. Meriano of their lawyers during this period as to what, if anything, was being done to advance the action. There is no evidence of how often the plaintiffs contacted their lawyers to inquire as to the progress of the action. There is no evidence that the plaintiffs investigated and demanded that steps be taken. There is no evidence as to why the plaintiffs did not investigate and demand that steps be taken; h. what we do know from the history of the litigation recounted above is that nothing at all happened to progress the plaintiff’s litigation forward during that 10-year period; i. in the end, there is simply no “adequate explanation” of the reasons why the litigation was delayed for a period of some 10 years, from the late summer of 1997 to 2006 or 2007, when Mr. Quinlan appeared.
129The intervention of Mr. Quinlan in 2006 or 2007 was unfortunate, to say the least. It led to the loss of the plaintiffs’ entire file, which resulted in significant consequences for the litigation.
130That said, and without wishing to sound like I am in any way attempting to minimize the severity of the misdeeds of Mr. Quinlan, I am left with certain questions of the plaintiffs.
131In short, there is no evidence that Mr. Meriano or the plaintiffs conducted any due diligence on Mr. Quinlan. Again, I make no excuses for a rogue who misrepresents himself as a lawyer and then, once retained, absconds with the client’s property, file, and retainer moneys. But for the moment, I focus not on Mr. Quinlan’s misdeeds; rather, I simply ask what due diligence was taken by Mr. Meriano or the plaintiffs to satisfy themselves, or at least inquire, as to Mr. Quinlan’s background, experience, expertise, or standing. On the evidence before me, the answer would seem to be: next to nothing.
132That is, it would appear that because Mr. Quinlan had some success in collecting some unpaid accounts for Mr. Meriano’s store, Mr. Meriano apparently entrusted him to assume carriage of a major piece of litigation, at that time knowing that, on the plaintiffs’ own account of matters, they had already consulted or retained six previous lawyers on the file, which had lingered, at that point, for some 13-14 years, from October 1993 until 2006-2007.
133If a plaintiff’s explanation for an inordinate delay must be “sensible” or “reasonable,” then surely in such circumstances it would be sensible or reasonable to think that Mr. Meriano might have made at least some effort to conduct some basic due diligence into the rogue Quinlan’s background. Surely, it would not have taken much effort to confirm whether Mr. Quinlan was, at the very least, a qualified lawyer or someone licensed to practise law in Ontario. A simple telephone call to the Law Society of Upper Canada would have done that. A quick search of the Law Society’s online registry of licensed lawyers and paralegals, available to the general public over the internet, would have done the same. Surely such minimal steps are the type of things one does, at the very least, before one hands over a major piece of litigation, in which one is claiming close to half-a-million dollars, to some relative stranger who happened to walk in to one’s store one day.
134Then again, in fairness to Mr. Meriano, perhaps he actually did. The problem is that there is no evidence before the court that he did so. There is no reasonable or sensible explanation for the 10-year delay.
135One cannot help but think that, had the plaintiffs conducted some minimal due diligence on the Mr. Quinlan, their original file might not have been lost and perhaps they would not find themselves in their current circumstances.
136I accept without question Mrs. Meriano’s evidence that during the time from when her husband’s health started to fail in 2008, throughout the period in 2008 when her pregnant daughter-in-law was diagnosed with cancer and the baby was born prematurely with serious health impairments, leading up to the time when Mr. Meriano passed away in March 2010, her attention was not, understandably and justifiably, focused on this litigation. I accept without hesitation that Mrs. Meriano’s evidence provides a sufficient explanation of the delay in the litigation during that relatively brief time period.
137That said, I am not satisfied on the evidence that the whole of the following five to six years of delay are adequately explained. I am left with many of the same questions that trouble me with respect to the 10-year delay from 1997 until Mr. Quinlan’s intervention.
138I note the general tone of Mrs. Meriano’s affidavit, which suggests that the litigation was entirely her husband’s separate enterprise (e.g., para. 47: “this ongoing law suit that my husband had originally commenced”; para. 49: “whether anything could be done with the law suit that my husband had originally started”; para. 58: “to deal with the ongoing law suit that my husband commenced”).
139However, I would note that Mrs. Meriano is a separate and independent plaintiff in her own right, and she has advanced significant claims for compensation against the defendants in her own name, for wrongful dismissal, breach of employment contract, discrimination, etc. There is no evidence before the court to suggest that Mrs. Meriano paid any greater attention to the claims advanced in her own name or assumed any greater responsibility for the progress of her claims than the plaintiffs generally did (or, rather, did not) with respect to the litigation as a whole.
140In Langenecker, at para. 10, the Court of Appeal found that the appellants there had offered a “sensible and persuasive” explanation for part of the 15-year delay in completing the discovery process but had offered little by way of cogent explanation for the many other lengthy delays that occurred in the course of the 15 years since the action was commenced.
141Similarly, here, I find that the plaintiffs have offered a sensible explanation for certain, minor parts of the 22-year delay (i.e., for the period from October 1993 to December 1994, and from 2008 to 2010). But no reasonable, cogent, sensible, or persuasive explanation has been presented for, specifically, the 10-year period of delay from 1997 to 2006-2007. Moreover, on the whole, the plaintiffs’ overall 22-year delay and the effect of those explanations considered as a whole, leaves me thinking that the plaintiffs could have done, and ought to have done, more to keep their litigation on track. They simply cannot disclaim all responsibility for the lack of progress of their litigation by attempting to blame a 22-year period of delay on their lawyers, whom, after all, they instruct.
142I find that there has been inexcusable delay on this ground.
143The plaintiffs also assert, as reflected in para. 92 of Mrs. Meriano’s affidavit, that the defendants have “also been complicit in the delay in this matter” and that Mr. Benoot “seemed to sit back and do nothing with the file” (para. 93). In that vein, counsel before me submitted that the defendants ought to have brought their motion to dismiss many years earlier, as Mrs. Meriano’s affidavit expressly suggested in para. 94. (That argument was drained of its force when counsel then also submitted in argument before me, rather contradictorily, that the defendants’ motion to dismiss was “premature.”) Counsel before me suggested that all Mr. Benoot needed to do, and ought to have done, is write one letter to the court requesting a status hearing. Counsel criticized Mr. Benoot (as did Mrs. Benoot in paras. 10-11 of her supplementary affidavit sworn February 24, 2016) for instructing his lawyers, in or about March 2003, to close out their file, based on his observation that the plaintiffs had evidently abandoned their litigation, the significant legal costs already incurred by the defendants in defending the action, and the anticipated additional costs of having to bring a motion to dismiss the action.
144I reject all such submissions. Each of them impliedly depends on the false assumption that the defendants bear some onus for advancing the plaintiffs’ litigation, whereas the courts have made it clear, as referenced in para. [114] above, that it is the plaintiff who bears the burden of the progress of the litigation.
145On the contrary, in my view, the defendants in this case have done considerably more than the plaintiffs to advance the orderly conduct of this litigation. That is made clear by the history of the litigation, recounted above.
146There is no merit in the plaintiffs’ contentions. Taken as a whole, the plaintiffs have failed to provide “cogent” and “persuasive” evidence to account for the delay. Indeed, their evidence raises far more questions than it answers. In sum, I find that there has been inexcusable delay in this litigation.
Substantial risk that a fair trial of the issues will not be possible
147The Court of Appeal has said that the “third branch of the test focuses on whether a defendant’s ability to put its case forward on the merits or have a fair trial is prejudiced by the delay. ‘Prejudice’ can be of two sorts: presumed prejudice, which is inherent in a long delay, and actual prejudice to a defendant because of the delay”: Ali v. Fruci, 2014 ONCA 596, 122 O.R. (3d) 517, at para. 15.
148For the reasons that follow, I accept that the defendants have suffered both kinds of prejudice here.
Presumed prejudice
149The courts have repeatedly recognized that prejudice is inherent and presumed in cases of long delay. “Memories fade and fail, witnesses become unavailable, and documents and other potential exhibits are lost”: Langenecker, at para. 11; Wallace v. Crate’s Marine Sales, at para. 20 (S.C.J.); and Canadian National Railway Co. v. Kitchener (City), 2015 ONCA 131, 66 C.P.C. (7th) 251, at para. 16.
150The longer the delay, the stronger the inference of prejudice to the defendant’s case. Tanguay v. Brouse, 2010 ONCA 73, at para. 2; Langenecker, at para. 11; Ali v. Fruci, at para.17; and Clairmonte v. Canadian Imperial Bank of Commerce, [1970] 3 O.R. 97, 1970 CarswellOnt 606 (C.A.), at p. 116 (cited to O.R.).
151In Canadian National Railway Co. v. Kitchener (City), the Court of Appeal indicated that there was a strong presumption of prejudice given that 25 years had elapsed since the action was commenced (paras. 12 and 16). In Tanguay v. Brouse, at para. 2, the Court of Appeal said the presumption of prejudice was strong in a case that involved an 18-year delay.
152Moreover, prejudice to the defendant is to be considered relative to the time the case will likely be reached for trial, if permitted to proceed. See Christie Corp. v. Lee, [1999] O.J. No. 495, 29 C.P.C. (4th) 181 (C.A.), at pp. 471-472 (cited to C.P.C.); and Armstrong v. McCall, [2006] O.J. No. 2055, 28 C.P.C. (6th) 12 (C.A.), at para. 12.
153In the instant case, examinations for discovery have not even been completed. One may expect it will take some years yet before the case is ready for trial. It is not unreasonable to think the eventual delay will surpass 25 years by the time of trial.
154Accordingly, given the current 22-year delay in the instant case, I also consider there to be a strong presumption or inference that the defendants have been prejudiced.
155It is well-settled that where there is a presumption of prejudice, a defendant need not lead actual evidence of prejudice and the action will be dismissed for delay unless the plaintiff rebuts the presumption. In Armstrong v. McCall, at para. 11, the Court of Appeal reiterated the oft-cited description of how a plaintiff may discharge its onus of rebutting the presumption, as follows:
The presumption of prejudice may be rebutted by evidence that all documentary evidence has been preserved and the issues in the lawsuit do not depend on the recollection of witnesses or that all necessary witnesses are available with detailed recollection of the events. If the presumption is rebutted then the action may still be dismissed if the defendant leads convincing evidence of actual prejudice. [Emphasis supplied.]
156The plaintiffs here argue that they have successfully rebutted the presumption of prejudice because, while their original documentation has been lost, the defendants’ productions have been largely preserved, from which they have been able to retain an expert to perform a business valuation of Mr. Meriano’s interest in Musical Strings using the defendants’ records. That report was dated February 18, 2016.
157I agree with Mr. O’Brien’s submission that the plaintiffs’ response does not provide a complete answer to the concerns in this case.
158First, the report itself indicates that its conclusions are qualified by various scope limitations, including, for example, their inability to speak with the shareholders of Musical Strings, in that, they did not have access to Mr. Benoot and Mr. Meriano passed away years ago, as a result of which a number of questions that the valuators raised were not answered. At least some of the information that was not available to the valuators would seem to be within the possession or control of the plaintiffs (e.g., “information for the years 1993 to 1999 setting out the total interest Mr. Meriano and his wife Laurie paid to retire their personal mortgage …”), and presumably was lost with their original file.
159Second, the valuators have brought into their calculations amounts relating to the plaintiffs’ mortgage on the property on Couture Drive – the liability for which is strongly contested. Those amounts total over $84,000 and account for a considerable portion (44%) of the estimated loss. But that is the same mortgage for which information was sought by the defendants – including a simple copy of the mortgage – but the plaintiffs’ undertaking and agreement to produce the information was never forthcoming. Moreover, it arises out of the discussions between Mr. Benoot, Mr. Meriano, since passed, and the company accountant at the time, Mr. Saunders, also since passed.
160Finally, and perhaps most importantly, it puts the defendants at some disadvantage in attempting to critique the report when the plaintiffs have not produced, contrary to their undertakings and the 1997 agreement of counsel, the reports of accountants Delores Leader and Brenda Warren and information surrounding the five-day review and assessment of the company’s books and records that Ms. Leader conducted in July 1993.
161In any event, this action is not solely about the valuation of Musical Strings at the time Mr. Meriano left the company in 1993. The action involves widespread allegations and multifaceted claims. In their claim, the plaintiffs allege oppressive conduct engaged in by the defendants that forced the plaintiffs from their employment at Musical Strings, lost profits from Musical Strings and C&T due to the appropriation of a business opportunity, manipulation of the books of account as between Musical Strings and C&T in order that more profit be derived through C&T, as well as other claims involving breach of fiduciary duty, conspiracy, misappropriation, misrepresentation, wrongful dismissal, and manipulation of documents going back 30 years.
162In my view, the preservation of the defendants’ documentation and the qualified valuation of Musical Strings do not overcome the significant prejudice to the defendants arising from the passage of some 23 years since the dispute arose, and the fact that the plaintiffs have lost all of their own financial documentation and business records, which are clearly relevant to the action, as recognized by the order of Higgins J.
163Again, with the loss of the plaintiffs’ original file, it appears that important financial documentation with respect to BY Studios and the plaintiffs’ personal financial records are no longer available. It will be remembered that BY Studios is the company that Mr. Meriano set up in direct competition with the business of Musical Strings both before and after Mr. Meriano left the company. The information and records of BY Studios is a key component of the defendants’ defence to the plaintiffs’ action, and would now appear to have been lost with the plaintiffs’ original file.
164Further, this is not an action where the multifaceted issues can be determined solely by documentation. What transpired between the two partners and sole shareholders, both prior to and subsequent to Mr. Meriano leaving the company in 1993, with respect to the purchase of the abutting property, the establishment and operation of C&T by Mr. and Mrs. Benoot, the establishment and operation of BY Studios by Mr. Meriano, and the subsequent establishment and operation of Tony’s One Stop Music Shoppe in direct competition with Musical Strings, are all issues in the litigation and the subject of much controversy in the evidence. While many of the documents concerning Musical Strings may be available, that alone does not remove the substantial risk that, more than two decades after the incidents in question, a fair trial can still take place. In my view, given the disparate evidence from the parties, reflected in even the affidavits filed on the motions, this is a case where the testimony of the parties at trial is extremely important.
165Moreover, many of the issues in dispute involve issues of credibility and relate to meetings and conversations between Messrs. Meriano and Benoot dating back to the early 1990s, and in some instances, longer.
166It is clear that Mr. Meriano’s evidence will not be available at trial. Indeed, apart from the transcript of the cross-examination of Mr. Meriano on the motion in 1994, there is no available transcript from the examination for discovery of Mr. Meriano – because the discoveries never took place.
167In sum, I find that the plaintiffs have not rebutted the presumption of prejudice to the defendants.
Actual prejudice
168As referenced above, even if the presumption of prejudice is rebutted, the motion to dismiss the action for delay may yet succeed if the defendants lead convincing evidence of actual prejudice.
169For many of the same reasons outlined above, I find that the defendants have suffered actual prejudice in this case.
170The death of a plaintiff has been found to constitute actual prejudice to a defendant. See Sider v. City of Toronto, [2008] O.J. No. 913, 2007 CarswellOnt 9101 (Div. Ct.), at para. 14 per Ferrier J.; Jacob v. Playa El Agua Development Limited Partnership, 2014 ONSC 6581, at paras. 57-59 per Wilson J., affirmed 2015 ONCA 372, [2015] O.J. No. 2622; and Lingard Estate v. Nesbitt Thomson Inc., [2001] O.J. No. 1306 (S.C.J.), at paras. 34-38 per Swinton J.
171No doubt there is much merit in Mr. Allin’s submission that it is the plaintiffs’ case that will be most prejudiced by the death of Mr. Meriano. That, however, does not mean that the defendants are not also prejudiced by the death of the main plaintiff and the unavailability of his evidence. The defendants no longer have the opportunity to cross-examine Mr. Meriano, and have his credibility tested in court, on the serious allegations of oppressive conduct, appropriation of a business opportunity, conspiracy, and fraudulent manipulation of accounts.
172Further, as indicated, Mr. Meriano was never examined for discovery by the defendants. He refused to attend and answer questions on two separate occasions. The purpose of discoveries includes the opportunity of the examining party to obtain admissions from the deponent that will assist the examining party’s case. That opportunity has been denied to the defendants.
173I would also note that the company’s accountant at the time, Mr. Saunders, has since deceased. The accountant before him, Mr. Beatty, is also deceased, having passed away in 1991.
174Actual prejudice also occurs when important documentation is missing or no longer available.
175Here, the plaintiffs have admittedly lost all of their original file contents. According to Mrs. Meriano, all efforts to retrieve the file from Mr. Quinlan were unsuccessful, and the former lawyers did not retain a copy of the file. Therefore, it appears that a significant portion of the plaintiffs’ documentary productions, including their personal financial documentation, the business records of BY Studios, as well as other documentation that was ordered to be produced by Higgins J. on September 22, 1994, are now lost to all.
Summary
176In allowing the defendants’ motion to dismiss this action for delay, I am acutely aware that the plaintiffs are hereby deprived of an adjudication on the merits of their claim. It is obviously a most severe penalty. As Mr. Allin colourfully put it, it represents a remedy of capital punishment for a civil proceeding.
177However, the competing interest engages the integrity of the civil justice system itself, as our Court of Appeal very recently observed in Southwestern Sales, at para. 9, where it held:
The timeliness of adjudication is one measure of the health of a justice system. In respect of the criminal justice system, the Supreme Court of Canada has stressed the need to change a “culture of delay and complacency towards it”: R. v. Jordan, 2016 SCC 27, at para. 29. The same can be said of the Ontario civil justice system.
178An order dismissing an action for delay “is sometimes the only order that can adequately protect the integrity of the civil justice process and prevent an adjudication on the merits that is unfair to a defendant”: Langenecker, at para. 3.
179I find that such an order is necessary in the instant case.
Conclusion
180For these reasons, I dismiss the plaintiffs’ action for delay.
181The defendants are entitled to their costs, if demanded. In argument before me, counsel indicated that in the event that the court were to grant the defendants’ motion, they would require some time to work out between themselves how much time they would realistically need in the circumstances (i.e., in the absence of Mr. Allin having a complete file) to make submissions on costs.
182Accordingly, I direct counsel to deliver brief submissions to the court, within two weeks of the release of this decision, on their proposed schedule for addressing the issue of costs.
Original signed “ Howard J. ”
J. Paul R. Howard
Justice
Released: July 27, 2016