COURT FILE NO.: CV-11-428135 DATE: 2017/05/31

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Cedrom-SNi Inc. et al. v. Meltwater Holding B.V. et al.

BEFORE: Master A. Graham HEARD: March 23, 2017

APPEARANCES: A. Cameron and N. Kharouba for the plaintiffs (moving parties) W. Richardson and A. Lewis for the defendants

REASONS FOR DECISION

(Motion for a status hearing)

[1] The plaintiff Cedrom is an exclusive licensee for the content of the plaintiff publishers Halifax Herald Limited, Transcontinental Inc. and Le Devoir Inc. and delivers and sublicenses that content to its customers for a fee. Cedrom alleges that the defendants, without authorization from the plaintiffs, copy the content of the publishers’ websites and provide the content to its subscribers for a fee. Cedrom claims damages on the basis that this conduct constitutes an infringement of the plaintiffs’ copyright in the content in question.

[2] The statement of claim was issued on June 7, 2011 and the action has not yet been set down for trial. The plaintiffs now bring a motion for a status hearing under rule 48.14(5), so that they may show cause why the action should not be dismissed for delay, and for an order establishing a timetable for the completion of further steps in the action. For the reasons set out below, I have concluded that the plaintiffs have shown cause and the action should proceed.

The law

[3] Under rule 48.14(1), the registrar was to dismiss the action for delay in the event that the action was not set down for trial by January 1, 2017:

48.14(1) Unless the court orders otherwise, the registrar shall dismiss an action for delay in either of the following circumstances, subject to subrules (4) to (8):

1. The action has not been set down for trial or terminated by any means by the later of the fifth anniversary of the commencement of the action and January 1, 2017.
2. The action was struck off a trial list and has not been restored to a trial list or otherwise terminated by any means by the later of the second anniversary of being struck off and January 1, 2017.

[4] As this action has not been set down for trial, the potential dismissal of the action would be under rule 48.14(1)1.

[5] Under, rule 48.14(4), the dismissal contemplated by rule 48.14(1) can be avoided if the parties consent to a timetable setting deadlines for further steps in the action, including the setting down of the action. In this case, no such timetable was agreed to, so subrules 48.14(5) – (7) apply:

48.14(5) If the parties do not consent to a timetable under subrule (4), any party may, before the expiry of the applicable period referred to in subrule (1), bring a motion for a status hearing.

(6) For the purposes of subrule (5), the hearing of the motion shall be convened as a status hearing.

(7) At a status hearing, the plaintiff shall show cause why the action should not be dismissed for delay, and the court may,

(a) dismiss the action for delay; or

(b) if the court is satisfied that the action should proceed,

(i) set deadlines for the completion of the remaining steps necessary to have the action set down for trial or restored to a trial list, as the case may be, and order that it be set down for trial or restored to a trial list within a specified time,

(ii) adjourn the status hearing on such terms as are just,

(iii) if Rule 77 may apply to the action, assign the action for case management under that Rule, subject to the direction of the regional senior judge, or

(iv) make such other order as is just. [emphasis added]

[6] In considering whether a plaintiff has shown cause why the action should not be dismissed for delay, the court is guided by the following case law:

1. The onus is on the plaintiff to demonstrate why the action should not be dismissed for delay. The test requires the plaintiff to demonstrate that there was an acceptable explanation for the delay and establish that, if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice. (See: Khan v. Sun Life Assurance Co. of Canada, 2011 ONCA 650, and Faris v. Eftimovski, 2013 ONCA 360, [2013] O.J. No. 2551 at para. 32)
2. The test is conjunctive, not disjunctive. Even if the plaintiff can provide a satisfactory explanation for the delay, the action will be dismissed if there would be prejudice to the defendant. And if the plaintiff is not able to provide a satisfactory explanation for the delay, it is still open to the court to dismiss the action, even if there is no proof of actual prejudice to the defendant. (See: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 at para. 33)
3. The responsibility to move the action along lies chiefly with the plaintiff. (See: Faris, supra, at para. 33) However, the conduct of a defendant is also a factor to be considered in determining whether the action should be dismissed for delay or allowed to proceed. (See: Carioca’s Import & Export Inc. v. Canadian Pacific Railway, 2015 ONCA 592 at para. 53)
4. The possible dismissal of an action for delay involves a careful balancing between the interests of the parties and society in timely and efficient justice on one hand and in the resolution of disputes on their merits, on the other. (See: Kara v. Arnold, 2014 ONCA 871 at para. 9)
5. There is little to be gained in debating whether there is a bright line between the “contextual approach” applicable to motions to set aside registrar’s dismissal orders (per Scaini v. Prochinicki, 2007 ONCA 63 at para. 23) and the approach taken in Faris, supra to status hearings. In considering the reasonableness of any explanation for delay, the status hearing court will almost invariably engage in a weighing of all relevant factors in order to reach a just result. (See: Kara, supra, at para. 13)
6. It is reasonable to approach the plaintiff’s explanation for the delay in an action on the basis that “the longer the delay, the more cogent the explanation must be”. (See: Kara, supra at para. 17)
7. Settlement discussions can constitute a reasonable explanation for litigation delay. A party should not be penalized for not pursuing the costly steps of litigation while engaged in a settlement process that was ultimately unsuccessful. (See: Apotex Inc. v. Relle, 2012 ONSC 3291 at paras. 7, 50 and 51)
8. The prejudice at issue is to the defendant’s ability to defend the action as a result of the plaintiff’s delay, not as a result of the sheer passage of time. (See: MDM Plastics Ltd. v. Vincor International Inc., 2015 ONCA 28 and Carioca’s Import & Export Inc., supra at para. 57)
9. A defendant’s lack of display of any sense of urgency undercuts any claim of actual prejudice. (See: Aguas v. Rivard Estate, 2011 ONCA 494 at para. 19 and H. B. Fuller Co. v. Rogers, 2015 ONCA 173 at para. 42)

The issue

[7] The issue on this status hearing is whether the plaintiff can both provide an acceptable explanation for the delay in the action and establish that, if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice.

Chronology of the action

[8] As stated above, the statement of claim in the action was issued on June 7, 2011. The subsequent events in the action occurred as follows:

• August 31, 2011: The defendant Meltwater Canada served a 15 page demand for particulars.
• October 20, 2011: The plaintiffs provided their response to the demand for particulars and requested a confidentiality order as a condition of producing certain requested documents.
• November 9, 2011: The defendants refused to consent to the confidentiality order.
• December 5, 2011: Low J. scheduled the plaintiffs’ motion for a confidentiality order and the defendants’ motion to strike the claim.
• January and February, 2012: The parties exchanged motion materials for the motions.
• April and May, 2012: Cross-examinations were held of five deponents of affidavits sworn for the motions.
• May 16, 2012: Three of the plaintiffs discontinued their claims.
• June 11, 2012: The plaintiffs delivered answers to their undertakings from cross-examinations.
• June 15 and 26, 2012: Both sets of parties served further motion materials.
• July 9, 2012: The parties attended before Stinson J. to argue the motions. Argument was not completed and Stinson J. endorsed that the parties would discuss potential procedural solutions to some of the issues that were identified.
• October 15, 2012: A case conference was held before Stinson J. at which it was agreed that the plaintiffs would circulate a draft amended statement of claim to advance claims in respect of specific “test cases”.
• November 7, 2012: Plaintiffs’ counsel provided the defendants’ counsel with a proposed revised statement of claim.
• December 12, 2012: Plaintiffs’ counsel requested a further case conference with Stinson J.
• January 17, 2013: Counsel attended a further case conference before Stinson J.
• April 2, 2013: Counsel attended a further case conference before Stinson J.
• June 10, 2013: Following an exchange of correspondence in February and May, 2013, the plaintiffs attended before Morawetz J. seeking to issue a statement of claim on the Commercial List. Morawetz J. ruled that the subject matter of the action was not appropriate for the Commercial List and endorsed that the parties could appear before Stinson J. to address issues relating to both the existing civil list matter and the proposed new matter.
• July 4, 2013: The parties attended at a case conference before Stinson J. at which time they agreed to attend a mediation.
• September 12, and 13, 2013: The parties attended a mediation with the Honourable George Adams.
• September, 2013-August, 2015: The parties engaged in ongoing settlement discussions which culminated in a draft agreement in August, 2015. These discussions included regular correspondence sent in every month during this period except July and December, 2014 and April, 2015.
• April 15, 2014 and July 16, 2014: Two more plaintiffs discontinued their claims.
• August 14, 2015: A final draft agreement was prepared.
• September 14, 2015: The defendants advised that they did not approve of the proposed agreement.
• September 30, 2015: The defendants tendered a settlement agreement in a different form.
• October 8, 2015: The plaintiffs advised that the defendants’ revised proposal was not acceptable.
• November, 2015-April, 2016: The plaintiffs, who were represented by other counsel, consulted the Fasken law firm.
• May 3, 2016: The plaintiffs made a further offer to settle the action by way of correspondence from their vice-president of legal affairs Mr. Lemieux to defendants’ counsel.
• May 6, 2016: The defendants served their statement of defence and counterclaim.
• May 16, 2016: The plaintiffs served a Notice of Change of Lawyer, appointing the Fasken firm as counsel.
• May 26, 2016: The plaintiffs served a reply and defence to counterclaim.
• May 27, 2016: The plaintiffs served an amended claim.
• June 17, 2016: The defendants advised by correspondence that they intended to proceed with a motion to strike the amended claim.
• June 28, 2016: The defendants served a demand for particulars.
• July-October, 2016: Further settlement discussions took place.
• August 4, 2016: The plaintiffs made a written settlement proposal.
• October 12, 2016: The defendants made a responding proposal.
• November 14, 2016: The plaintiffs provided the defendants with a proposed timetable.
• November 25, 2016: The defendants refused to consent to the timetable and required that the plaintiffs show cause for why their claim should not be dismissed for delay.
• November-December, 2016: Further settlement negotiations continued between the parties directly.
• December 28, 2016: The plaintiffs served their notice of motion for this status hearing.

Have the plaintiffs provided an acceptable explanation for the litigation delay?

[9] The period of time between the issuing of the statement of claim in June, 2011 and the service of the plaintiffs’ notice of motion for this status hearing in December, 2016 is 5.5 years and on this status hearing, the plaintiffs are required to explain this delay. A delay of this length requires a cogent explanation.

[10] The plaintiffs submit that during the period from the issuing of the statement of claim in June, 2011 until the mediation in September, 2013, the parties were addressing both the pleadings issues raised in the defendants’ demand for particulars and the issues raised in the plaintiffs’ request for a confidentiality order. This initially involved the scheduling of motions to be brought by both sets of parties, the exchange of materials, cross-examinations of five deponents on their affidavits, answering undertakings and the appearance to argue the motions before Stinson J. on July 9, 2012. This first appearance was followed by a case conference, the drafting of a proposed revised statement of claim, and a further case conference on January 17, 2013. There was no unreasonable delay during this period.

[11] There was then correspondence between the parties and a further case conference on April 2, 2013 prior to the attendance before Morawetz J. on June 10, 2013 and a further attendance before Stinson J. on July 4, 2013. The parties then attended the two day mediation on September 12, and 13, 2013. There is no unreasonable delay during this period.

[12] The parties then engaged in settlement discussions over a period of approximately two years from September, 2013 until October, 2015. Counsel for the defendants submits that these settlement discussions were neither meaningful nor fruitful and that accordingly, the plaintiffs have not provided a reasonable explanation for the delay during this period.

[13] At his cross-examination on his affidavit sworn February 10, 2017, the defendants’ deponent Daren Benzi gave the following evidence:

• Qs. 136-139: Mr. Benzi acknowledged in an email dated December 20, 2013 to the plaintiffs’ representative Mr. Fernandez with respect to a “proposed settlement offer” that “Our objective in these discussions is to reach an agreement with all three Plaintiffs and to exit the litigation”.
• Qs. 213-217: Mr. Benzi acknowledged that “between the mediation [September 12 and 13, 2013] and this October 8, 2015 date [the date on which the plaintiffs rejected the defendants’ settlement proposal], the parties were entirely focused on settlement talks”. He further acknowledged that both the defendants and the plaintiffs pursued settlement talks in good faith.
• Qs. 211-212: Mr. Benzi acknowledged that the defendants took no steps in the litigation between October 8, 2015 and the service of their statement of defence and counterclaim on May 6, 2016.

[14] In Apotex v. Relle, supra, Master Glustein, as he then was, considered and rejected a similar submission of the defendant as follows (at paras. 49-51):

“49 Relle submits that the court should not consider settlement discussions as a basis to find a reasonable explanation for the litigation delay since Apotex could have proceeded with the action even while engaged in such discussions. I do not agree.

50 Parties should be encouraged to participate in settlement discussions without having to incur the costs associated with preparing affidavits of documents and participating in examinations for discovery, which may make settlement much more difficult. Relle’s position would discourage counsel from participating in settlement discussions during the course of litigation, if counsel were then to be faced with an argument that such time was not a reasonable explanation for litigation dely.

51 Consequently, I find that frequent settlement discussions are a reasonable explanation for litigation delay without requiring a plaintiff to vigorously pursue the action during those settlement discussions.”

[15] The evidence of the defendants’ representative Mr. Benzi is that during the period between September, 2013 and October, 2015, the parties were entirely focused on settlement talks conducted in good faith. There is therefore no merit to the submission of the defendants’ counsel that the settlement discussions do not constitute a reasonable explanation for the delay in the litigation during that period. To hold otherwise would be a disincentive to good faith attempts at settlement.

[16] The plaintiffs took no steps in the litigation between October 8, 2015 and their further settlement proposal of May 3, 2016, a period of approximately seven months. It was during this period that the plaintiffs consulted and apparently came to the decision to change counsel and to retain the Fasken law firm to represent them in the action. Although a change of counsel will inevitably result in some delay in an action, while the party contacts and meets with its new lawyers and while those lawyers acquaint themselves with the case, a period of seven months with no communication is excessive. The plaintiffs’ retaining of new counsel provides a partial but not a complete explanation for this period of delay.

[17] However, it should not be forgotten that when the settlement negotiations ended in October, 2015, the metaphorical litigation ball was in the court of the defendants, who had not yet defended the action and whose motion to strike was in abeyance pending the mediation and settlement discussions. When the plaintiffs rejected the defendants’ last proposal, it was open to the defendants either to renew their motion to strike or to deliver their statement of defence. The defendants served their statement of defence and counterclaim on May 6, 2016 but there is no reason that they could not have done so earlier. The conduct of a defendant may be considered in assessing the reasonableness of a period of delay (Carioca’s Import, supra) and accordingly, any unexplained delay on the part of the plaintiffs during the October, 2015 to May, 2016 period is mitigated by the defendants’ own failure to take any step during that same period.

[18] Subsequent to May 6, 2016, there was regular communication between the parties, initially with respect to the plaintiffs’ service of an amended statement of claim followed by another demand for particulars, and then by way of an exchange of further settlement proposals. These communications essentially ended six months later, in November, 2016 when the defendants’ counsel informed the plaintiffs that they would not agree to a litigation timetable.

[19] Between the defendants’ further demand for particulars on June 28, 2016, and November 14, 2016 when the plaintiffs’ provided their proposed timetable, the parties engaged in further settlement discussions which would again provide an explanation for the delay during this period.

[20] Based on my review of what has transpired in this action since its inception, the only possible period of unexplained delay is part of the seven months between October 8, 2015 and May 3, 2016. Not all unexplained delay constitutes a failure of a plaintiff to show cause why an action should not be dismissed and even absent any explanation at all, a delay of seven months would not be fatal to the action. As stated above, this period of seven months is partly explained by the plaintiffs’ change of counsel. Further, it was incumbent on the defendants to proceed with their defence of the action, either by renewing their motion to strike or by delivering a statement of defence; they did neither for seven months. Although “the responsibility to move the action along lies chiefly with the plaintiff” (Faris, supra), where the defendants fail to comply with their own obligations in the litigation, they must assume some of the responsibility for any ensuing delay.

[21] For these reasons, I conclude that the plaintiffs have provided an acceptable explanation for almost all of the delay in the action and any unexplained delay is both sufficiently minor as not to be fatal to the action and is partly the responsibility of the defendants. The plaintiffs have satisfied the first part of the applicable test on this status hearing.

Have the plaintiffs established that, if the action were allowed to proceed, the defendants would suffer no non-compensable prejudice?

[22] The plaintiffs submit that, based on the evidence of their deponent Mr. Lemieux, they have taken steps to preserve relevant documents; documents relating to the publishers’ websites and content that have been added to Cedrom’s database have not been removed or erased. Further, the defendants have been aware of and participated in the action from its inception in 2011 and have therefore been in a position to preserve all relevant documents. The evidence of the defendants’ deponent Mr. Benzi on cross-examination was that he had made no attempt to identify what evidence to preserve or what key witnesses might exist. Essentially, the defendants have been aware of the action since 2011 and should have known to preserve relevant documents and keep track of witnesses.

[23] The defendants submit that the material witnesses in the action would include authors of individual articles included in the publishers’ publications, authors of headlines, photographers, graphic designers and illustrators, and editors of compilations and websites. The defendants further submit that there is no evidence from the plaintiffs that any of these persons are available. However, the lack of availability of any such witnesses would be to the detriment of the plaintiffs themselves, who would not be able to rely on their evidence to support their claims, and would not result in prejudice to the defendants. In fact, it may well be to the defendants’ benefit that any such witnesses not be available.

[24] Most significant, however, is that for prejudice to be fatal to the action, any prejudice to the defendants’ ability to defend the action must result from the plaintiffs’ delay, and not merely from the passage of time (Carioca’s Import, supra). As stated above, the only delay in this case for which the plaintiffs could be faulted is at most a few months and no prejudice can be attributed to this limited period of time.

[25] Accordingly, I also conclude that the plaintiffs have demonstrated that any unexplained delay in the action has not resulted in any prejudice to the defendants and they have met the second part of the test.

Conclusion

[26] I conclude that the plaintiffs have shown cause why the action should not be dismissed for delay and the action shall proceed.

[27] The plaintiffs submitted a timetable with their amended notice of motion, but as discussed at the hearing, the proposed timetable is not realistic. As a term of the order allowing the action to proceed, the parties require a new deadline for the setting down of the action. In that regard, I hereby order that the plaintiffs set the action down for trial by September 30, 2018.

[28] If the parties cannot agree to a timetable that fits within that deadline, or require a longer deadline, they may arrange to address the issue before me by way of a telephone case conference. If they can agree to a timetable and require an order requiring that the action proceed in accordance with any such timetable, they may submit the timetable in writing, along with a draft order. Any order shall stipulate that the timetable may be varied on consent except for the deadline for the setting down of the action which can only be varied by court order.

[29] The plaintiffs also sought an order that the action be assigned for case management. Considering the criteria in rule 77.05(4), as there are only two sets of counsel and parties, the action is only moderately complex and this is the first occasion on which a timetable has been ordered, case management is not warranted at this time.

Costs

[30] Counsel for both sets of parties have filed costs outlines. If the parties cannot agree to the disposition of the costs of the motion, they shall provide written submissions, not to exceed three pages, the plaintiffs within 30 days and the defendants within 20 days thereafter. In considering a resolution of the issue of costs, the defendants should note that the partial indemnity fees claimed in their outline of $66,712.50 plus H.S.T. and disbursements are greater than the $61,425.00 plus H.S.T. and disbursements in the plaintiffs’ outline.

MASTER A. GRAHAM DATE: May 31, 2017