Court File and Parties

COURT FILE NO.: CV-13-00479225 MOTION HEARD: 20181002 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Key Anlouis Investments Limited, Plaintiff AND: 800246 Ontario Inc., Mark Winacott, Olena Klipitch and Oleg Klipitch, Defendants

BEFORE: Master B. McAfee

COUNSEL: A. Engel, Counsel for the Moving Party, the Plaintiff P. Bakos, Counsel for the Responding Parties, the Defendants Olena Klipitch and Oleg Klipitch

HEARD: October 2, 2018

Reasons for Decision

[1] This is a motion brought by the plaintiff Key Anlouis Investments Limited (the plaintiff) for a status hearing pursuant to Rule 48.14(5) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the Rules). The defendants Olena Klipitch and Oleg Klipitch (collectively the Klipitch defendants) oppose the motion and ask that the action be dismissed against them. On or about April 5, 2018, the action was discontinued against the defendants 800246 Ontario Inc. (800246 Ontario) and Mark Winacott (Winacott).

[2] In this action the plaintiff claims damages for breach of contract. The plaintiff is a commercial landlord and owner of lands municipally known as 97 George Street North, Peterborough, Ontario. The property is a former gas station site that closed on August 31, 2012. The defendant Oleg Klipitch subleased the gas station from 800246 Ontario, who originally leased the gas station from the plaintiff. The Klipitch defendants and Winacott also entered into an indemnity agreement with the plaintiff. In this action the plaintiff alleges that the defendants have not decommissioned the gas station in accordance with their obligations under the lease and indemnity agreements.

[3] The applicable Rules are as follows:

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 fifth anniversary of the commencement of the action.

2. The action was struck off the trial list and has not been restored to a trial list or otherwise terminated by any means by the second anniversary of being struck off.

(4) Subrule (1) does not apply if, at least 30 days before the expiry of the applicable period referred to in that subrule, a party files the following documents:

1. A timetable, signed by all the parties, that,

i. identifies the steps to be completed before the action may be set down for trial or restored to a trial list, as the case may be,

ii. shows the date or dates by which the steps will be completed, and

iii. shows a date, which shall be no more than two years after the day the applicable period referred to in subrule (1) expires, before which the action shall be set down for trial or restored to a trial list.

2. A draft order establishing the timetable.

(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 a 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.

1.04(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

[4] In Cedrom-Sni Inc. v. Meltwater Holding, 2017 ONSC 3387 (Master) at paragraph 6, Master Graham provides a summary of the applicable principles:

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. Prochnicki, 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)

[5] I am also mindful of the Ontario Court of Appeal’s decision in 1196159 Ontario, supra at paragraphs 17 to 20:

[17] The civil justice system aims to resolve disputes fairly, on the merits and in a timely and efficient manner. The Rules of Civil Procedure provide that the rules are to be “liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits”: rule 1.04(1).

[18] Achieving that goal in cases involving dismissal for delay requires a careful balance of two fundamental principles. The first is that civil actions should, if possible, be decided on their merits and procedural rules should be interpreted accordingly. The second is that the procedural rules that aim to resolve disputes in a timely and efficient manner can only achieve their goal if they are respected and enforced.

[19] Time lines prescribed by the Rules of Civil Procedure or imposed by judicial orders should be complied with. Failure to enforce rules and orders undermines public confidence in the capacity of the justice system to process disputes fairly and efficiently. On the other hand, procedural rules are the servants of justice not its master. We must allow some latitude for unexpected and unusual contingencies that make it difficult or impossible for a party to comply. We should strive to avoid a purely formalistic and mechanical application of timelines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits. As Laskin J.A. stated in Finlay v. Van Paassen, 2010 ONCA 204, 101 O.R. (3d) 390 (Ont. C.A.) at para. 14, “the Rules and procedural orders are construed in a way that advances the interests of justice, and ordinarily permits the parties to get to the real merits of their dispute.”

[20] The challenge posed in cases involving dismissal for delay is to find the right balance between, on the one hand, the need to ensure that the rules are enforced to ensure timely and efficient justice and, on the other, the need to ensure sufficient flexibility to allow parties able to provide a reasonable explanation for failing to comply with the rules to have their disputes decided on the merits.

[6] In determining this matter, I have applied the foregoing principles.

[7] I am satisfied that an acceptable explanation has been provided for the litigation delay.

[8] On April 29, 2013, the action was commenced by statement of claim. On May 18, 2013, the Klipitch defendants were served with the statement of claim. By June 7, 2013, the Klipitch defendants had retained a lawyer and served a notice of intent to defend. By June 19, 2013, the Klipitch defendants had initiated settlement discussions with the plaintiff. On July 23, 2013, the Klipitch defendants served a statement of defence and crossclaim on the plaintiff. On August 1, 2013, the plaintiff delivered a reply. These parties proceeded with resolution discussions that ultimately resulted in a settlement on or about May 8, 2014.

[9] Pursuant to the minutes of settlement dated May 8, 2014, the plaintiff agreed to discontinue the action against the Klipitch defendants if the Klipitch defendants decommissioned the gas station in accordance with the provisions of the minutes of settlement and to the satisfaction of the Technical Standards and Safety Authority (TSSA) and the Ontario Ministry of the Environment.

[10] In July of 2014, the Klipitch defendants began decommissioning the gas station.

[11] On January 30, 2015, the TSSA approved the decommissioning. There is no evidence before me of the approval of the Ministry.

[12] On February 6, 2015, the plaintiff received a report prepared by AiMS Environmental prepared on behalf of the Klipitch defendants and received the TSSA letter.

[13] On May 25, 2015, following review of the AiMS report and the TSSA letter with the plaintiff’s consultant, the plaintiff advised the Klipitch defendants that the work done as described in the AiMS report did not comply with the minutes of settlement. It is the plaintiff’s position that the gas station has not been decommissioned in accordance with the minutes of settlement. It is the plaintiff’s position that the Klipitch defendants have failed to remove the concrete slab upon which the tanks had been situated and have failed to test for contamination under that slab.

[14] Between May 25, 2015 and December 21, 2016, plaintiff’s counsel and counsel for the Klipitch defendants engaged in communications concerning the compliance with the minutes of settlement. On consent, plaintiff’s counsel also spoke directly with the Klipitch defendants’ environmental consultant.

[15] In a letter from counsel for the Klipitch defendants dated November 24, 2016, the Klipitch defendants confirmed their position that the work was done to TSSA standards and in compliance with the minutes of settlement.

[16] In a letter from plaintiff’s counsel dated December 21, 2016, plaintiff’s counsel proposed that the concrete slab could remain in place depending on the outcome of further testing.

[17] On November 29, 2017, plaintiff’s counsel telephoned counsel for the Klipitch defendants to determine the status of the action. On December 5, 2017, plaintiff’s counsel emailed counsel for the Klipitch defendants to follow up on the telephone call of November 29, 2017. Counsel for the Klipitch defendants responded that day stating that he was awaiting instructions to prepare an offer on behalf of the Klipitch defendants.

[18] Between December 13, 2017 and February 27, 2018, plaintiff’s counsel followed up with counsel for the Klipitch defendants for an update on the position/instructions of the Klipitch defendants.

[19] On February 27, 2018, plaintiff’s counsel proposed a timetable for the action.

[20] On March 2, 2018, counsel for the Klipitch defendants advised that the Klipitch defendants would likely be retaining new counsel.

[21] On March 15, 2018, plaintiff’s counsel proposed a further timetable for the action.

[22] On March 20, 2018, the plaintiff conducted its own environmental testing that confirmed the presence of petroleum hydrocarbon contamination.

[23] On April 2, 2018, counsel for the Klipitch defendants were served with the within motion record.

[24] The delay has been adequately explained in these circumstances. The plaintiff and Klipitch defendants resolved the matter on the basis that the Klipitch defendants would decommission the gas station. Although steps were taken to decommission the gas station, an issue arose with respect to whether the gas station had been decommissioned in accordance with the minutes of settlement. While there was a period of delay of eleven months between December 21, 2016 and November 29, 2017, the letter from plaintiff’s counsel dated December 21, 2016, confirmed that the plaintiff will continue with the claim until the matters were addressed to the plaintiff’s satisfaction.

[25] I am satisfied that the plaintiff has rebutted any presumption of prejudice. The plaintiff has served an affidavit of documents. The Klipitch defendants retained a consultant who prepared a report. The plaintiff has also conducted testing.

[26] I am not satisfied of any actual prejudice.

[27] The affidavit of Lauren Daneman, an associate lawyer at the law firm of defendants’ counsel, states that there is now likely non-compensable prejudice for a number of reasons.

[28] Ms. Daneman’s affidavit states that the property and its condition “could have changed” since the 2014 testing and 2015 TSSA review. The affidavit evidence of Barry Fienberg, president of the plaintiff, is that the former gas station site has remained in the same condition as left by the Klipitch defendants in 2014.

[29] Ms. Daneman’s affidavit states that in addition to witnesses’ memories fading, Winacott, the original tenant, cannot be located. There is no evidence of the efforts made by the Klipitch defendants to locate Mr. Winacott. To the extent that witnesses’ memories may fade, witnesses can refresh their memories with the relevant documentation.

[30] Ms. Daneman’s affidavit also states that the discontinuation of the plaintiff’s action against 800246 Ontario and Winacott has made it difficult for the Klipitch defendants to proceed with their crossclaim. The Klipitch defendants did not serve their statement of defence and crossclaim on the co-defendants or seek any relief from the court in this regard. When the plaintiff discontinued the action against 800246 Ontario and Winacott, the Klipitch defendants did not take any steps to continue the crossclaim. The Klipitch defendants cannot create prejudice by failing to do something they reasonably ought to have done.

[31] Ms. Daneman’s affidavit also states that it will be more difficult for the defendants to obtain and bring a claim against previous tenants. I have already addressed the claims against 800246 Ontario and Winacott. To the extent there is alleged actual prejudice based on other previous tenants, the Klipitch defendants do not identify any specific previous tenant identified other than 800246 Ontario and Winacott.

[32] I am satisfied that any presumption of prejudice has been rebutted. I am not satisfied of any actual prejudice.

[33] For these reasons, I am satisfied that the plaintiff has shown cause why the action should not be dismissed for delay. I am satisfied that it is just that the action proceed.

[34] Having regard to the submissions of the parties with respect to timetabling, the following timetable is ordered:

a. The parties shall agree to a discovery plan on or before January 18, 2019; b. Affidavits of documents, to the extent not yet served, shall be served on or before February 28, 2019; c. Examinations for discovery shall take place on or before April 30, 2019; d. Mediation shall take place on or before July 31, 2019; e. The action shall be set down for trial on or before September 30, 2019.

The parties may consent to extend any of the foregoing dates without a court order, save for the new set down date of September 30, 2019, that can only be extended by court order.

[35] With respect to costs, the plaintiff and the Klipitch defendants seek costs. Although the plaintiff was successful, the motion was initially short served and originally scheduled for only fifteen minutes. The moving motion material included four supplementary motion records. The parties shall bear their own costs of the status hearing. There shall be no costs payable to any party.

[36] Summary of Order:

1. The action shall proceed.
2. The parties shall comply with the following deadlines for the completion of the remaining steps: a. The parties shall agree to a discovery plan on or before January 18, 2019; b. Affidavits of documents, to the extent not yet served, shall be served on or before February 28, 2019; c. Examinations for discovery shall take place on or before April 30, 2019; d. Mediation shall take place on or before July 31, 2019; e. The action shall be set down for trial on or before September 30, 2019.
3. The parties may consent to extend any of the foregoing dates without a court order, save for the new set down date of September 30, 2019, that can only be extended by court order.
4. There shall be no costs of the within motion convened as a status hearing.

Master B. McAfee Date: October 16, 2018