Reasons for Decision

Court File No.: CV-16-553128
Date: 2025/04/15
Ontario Superior Court of Justice
Between:
1 Royal Gate Village Properties Ltd., Plaintiff
– and –
CCI Group Inc., Defendant

Appearances:
S. Kelly appearing for the Plaintiff/Moving Party
T. Crljenica appearing for the Defendant/Responding Party

Heard: January 16, 2025
Associate Justice Eckler

Overview

[1] The plaintiff, 1 Royal Gate Village Properties Ltd., moves for a status hearing pursuant to Rule 48.14(5) of the Rules of Civil Procedure, seeking an order extending the deadline for setting the action down for trial and a timetable order for the completion of the remaining steps in this action. The plaintiff is also seeking an order permitting it to amend the statement of claim.

[2] This litigation relates to a property condition assessment (“the Assessment”) completed by the defendant CCI Group Inc. (“CCI Group”) on or about May 22, 2014. The plaintiff, 1 Royal Gate Village Properties Ltd. (“Royal Gate”), alleges that the Assessment and related report (“the Report”) completed by CCI Group were deficient as the Report failed to identify deficiencies at the Property which resulted in Royal Gate paying more for the Property than it otherwise would have and further resulted in Royal Gate having to pay approximately five million dollars to remediate the deficiencies at the Property which were allegedly not identified by CCI Group when completing the Assessment.

[3] This action was commenced by way of notice of action issued on May 19, 2016. A statement of claim was filed on May 27, 2016 and served shortly thereafter. The defendant CCI Group Inc. was granted a waiver of defence and no defence was demanded until almost eight years later on May 9, 2024.

[4] Rule 48.14(1) directs the registrar to dismiss actions that have not been set down for trial within five years. Given that the notice of action was issued in this action on May 19, 2016, the five-year period under Rule 48.14 expired on May 19, 2021.

[5] Ontario Regulation 73/20 under the Emergency Management and Civil Protection Act, issued March 20, 2020, suspended all limitation periods and time periods within which steps must be taken in a proceeding in Ontario. While this regulation was eventually revoked, the suspension under the regulation caused the time for this action to be set down for trial under rule 48.14 to be extended from May 19, 2021 to November 17, 2021. Administrative dismissals by the Registrar did not resume until May 13, 2024.

[6] On May 9, 2024, approximately eight years after the litigation was commenced and two and a half years after the expiry of the COVID-extended 48.14 deadline, counsel for the plaintiff wrote to defence counsel to advise that the plaintiff would be proceeding with the action. Plaintiff’s counsel requested CCI Group’s statement of defence within 20 days and confirmed that the plaintiff would set the matter down for trial if defence counsel did not respond by the next day. Royal Gate then took steps to initiate this motion in May of 2024. After these steps were initiated, the procedure for addressing status hearing motions required parties to attend Status Hearing Assignment Court (SHAC). The parties attended SHAC in August of 2024 and shortly thereafter, this motion was scheduled as a long motion to be heard on January 16, 2025.

[7] The defendant, CCI Group, opposes this motion and requests that Royal Gate’s action be dismissed for delay, pursuant to Rule 48.14(7)(a) of the Rules of Civil Procedure. In this regard, CCI Group highlights that in the eight years between the commencement of this litigation on May 19, 2016, and the demand for CCI’s statement of defence on May 9, 2024, the plaintiff took no steps to move this action forward. CCI Group’s position is that Royal Gate’s action should be dismissed for delay as the plaintiff has failed to provide a reasonable explanation for the delay in moving this action forward and has failed to meet its burden to demonstrate that CCI Group will not suffer non-compensable prejudice if this action is permitted to continue.

[8] At the outset of this motion, the defendant confirmed that if the plaintiff’s motion is granted and a timetable is put in place, the defendant does not oppose Royal Gate’s motion seeking to amend the statement of claim.

[9] I have carefully reviewed the evidence filed and considered the arguments of both the plaintiff and defendant. For the reasons that follow, I have determined this action should be dismissed for delay pursuant to Rule 48.14(7)(a) of the Rules of Civil Procedure.

Applicable Legal Principles

[10] Pursuant to Rule 48.14, an action shall be dismissed by the registrar for delay if the action has not been set down for trial by the fifth anniversary of the commencement of the action. The fifth anniversary in this matter, as extended by six months, was November 17, 2021.

[11] Notwithstanding that this motion has been brought after the expiry of the set-down deadline, there is no dispute between the parties that a status hearing is the proper procedure in these circumstances. (Yang v. The Christian World Korea Inc., 2019 ONSC 6131 at paras. 4-10; 34366012 Ontario Inc. v. Boudreau et al., 2022 ONSC 2525 paras. 14-15; Martellacci v. Pitney Bowes of Canada Ltd., 2024 ONSC 320 para. 3)

[12] The parties are in agreement on the test to be applied for this motion. At a contested status hearing, the plaintiff has the burden of showing: (1) that there is an acceptable explanation for the delay in the litigation, and (2) that if the action were to proceed, the defendant would suffer no non-compensable prejudice: (Faris v. Eftimovski, 2013 ONCA 360 at para. 32; Khan v. Sun Life Assurance Company of Canada, 2011 ONCA 650 at para. 1).

[13] In 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 at paras. 32-33, the Ontario Court of Appeal confirmed that the test is conjunctive. In this regard, J.A. Sharpe stated the following:

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 judge to dismiss the action, even if there is no proof of actual prejudice to the defendant.

[14] The Ontario Court of Appeal has set out a number of guiding principles that have been developed in the application of the two-part test. (Faris v. Eftimovski, 2013 ONCA 360; Kara v. Arnold, 2014 ONCA 871; Carioca's Import & Export Inc. v. Canadian Pacific Railway Limited, 2015 ONCA 592; Beshay v. Labib, 2024 ONCA 186; 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544)

• Status hearings provide the court with a mechanism to prevent abuse of its processes and dilatory behaviour on the part of plaintiffs. Status hearings serve an important function in ensuring that disputes are resolved efficiently. (Faris, para. 52)
• A party who commences the proceeding bears primary responsibility for its progress. However, a defendant’s passivity in the face of inaction by the plaintiff may be a relevant factor in the contextual analysis. (Faris, at para. 46 and 1196158 Ontario Inc., supra, at paras. 28-29)
• The Rules previously required dilatory plaintiffs to bring a motion under r. 48 if an action had not been set down for trial within two years, but this deadline has now been extended to five years. This affects the balance between the competing policy goals of having civil actions decided on their merits and of “ensur[ing] timely and efficient justice”. (Beshay, para. 12)
• The adjudication of a status hearing motion requires a delicate balancing between efficiency and deciding disputes on their merits. In this regard, Rule 48.14 requires that courts balance the objective of resolving disputes on their merits with the objective of resolving disputes in a timely and efficient manner in order to maintain public confidence in the administration of justice. The role of the judge presiding over a status hearing is to ensure that justice is served for all of the litigants. (Beshay, at para 31, 1196158 Ontario Inc., at paras. 17-20 and Burgess v. University Health Network, 2022 ONCA 105, at para. 11)
• In balancing these objectives, a court should not merely engage in a formalistic analysis of the branches of the test for dismissal for delay, but must step back and consider the overall justice in the case. (Henderson v. Kenora-Rainy River Districts Child & Family Services, 2022 ONCA 387 at para. 10)
• The court must apply a contextual approach weighing all of the relevant factors to determine the order which is just in the circumstances. (Kara at paras. 12-14)
• While Rule 48.14 was designed to have some “teeth”, the court should not take a rigid or purely formalistic approach to the application of the timelines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits. (Kara, at para. 10)
• A decision to dismiss an action for delay at a status hearing is discretionary. (1196158 Ontario Inc., at para. 16)
• There is no presumption that actions that have not been set down for trial by the five-year mark should be allowed to continue if there will not be “inordinate” further delay, even when the plaintiff has not provided an acceptable explanation for the delay. (Beshay, supra, at para. 31)
• The test for measuring the period of delay is to be based on the length of time between the start of proceedings and the motion to dismiss. (Ali v. Fruci, 2014 ONCA 596 at para. 11; Ticchiarelli v. Ticchiarelli, 2017 ONCA 1 at para. 15)

[15] This decision is rooted in the application of the legal principles outlined above.

Evidence Filed in Support of this Motion

[16] In support of its position on this motion the plaintiff relies on the affidavit of Domenico Gagliano (“Gagliano Affidavit”) sworn on June 17, 2024. Mr. Gagliano is the President of the plaintiff, 1 Royal Gate Village Properties Ltd.

[17] In support of its position on this motion, the defendant relies on the following affidavits:

• The affidavit of Jon Juffs sworn on July 25, 2024. (“Juffs’ Affidavit”) Mr. Juffs is the Vice President, Building Facilities with Egis Canada Ltd. (“Egis”).
• The affidavit of Irina Yablonovsky sworn on July 25, 2024. (“Yablonovsky Affidavit – July 25, 2024”)
• The affidavit of Irina Yablonovsky sworn on August 19, 2024. (“Yablonovsky Affidavit – August 19, 2024”)
• The affidavit of Ian Gold sworn on July 26, 2024. (“Gold Affidavit”)

[18] All of the affiants were cross-examined on their respective affidavits. The transcripts from the cross-examinations are in the record before me.

[19] The plaintiff, 1 Royal Gate Village Properties Ltd. (“Royal Gate”/ “the plaintiff”) is the owner of property municipally known as 1 Royal Gate Boulevard, Vaughan, Ontario (the “Property”). Situated on the Property is a large industrial warehouse which is leased to industrial/commercial tenants.

[20] The defendant CCI Group Inc. (“CCI Group”/ “the defendant”) was a corporation providing building science and engineering expertise across Canada. CCI Group was acquired by McIntosh Perry Ltd. in 2017. McIntosh Perry Ltd. was purchased by Egis Canada Ltd. in 2023. In this decision, the entities are collectively referred to as “CCI Group”.

[21] The Property was purchased by the plaintiff in 2014 from the receiver for the owner of the Property, the Rose & Thistle Group, with a closing date of June 26, 2014. In particular, the plaintiff purchased the Property for $19,545,000 from Schonfield Inc. Receivers + Trustees. The plaintiff secured $14,658,750 in financing for the purchase of the Property from Computershare Trust Company of Canada. (the "Computershare Loan"). The Computershare Loan was secured by way of a mortgage registered on the Property on June 27, 2014 (the "Computershare Mortgage").

[22] In 2013, the prior owner of the Property, Rose & Thistle Group, retained Construction Control Inc. (“Construction Control”), a professional engineering firm, to prepare a property condition report. (the “2013 Report”). Construction Control Inc. is not a party to this litigation. There is no dispute that Construction Control Inc. declared bankruptcy in or around 2018. The defendant, CCI Group Inc., in its statement of defence has pleaded that Construction Control Inc., also known as 10948411 Canada Inc. (“Construction Control”) is not amalgamated with any of the defendant CCI Group Inc, Mcintosh Perry Ltd. or Egis Canada Ltd., and the defendant is not responsible for any actions, negligence, breach of contract, if any, on the part of Construction Control.

[23] The plaintiff alleges that in 2014, Royal Gate contacted the defendant CCI Group, who it believed was affiliated with Construction Control, for a building condition assessment report. The defendant CCI Group attended the Property on May 22, 2014. Royal Gate alleges that following its inspection of the Property, CCI Group provided a written property condition assessment report to the Plaintiff in June of 2014 (“the 2014 Report” or “the June 2014 Report”) and agreed that the 2014 Report could be relied upon for financing purposes.

[24] The plaintiff alleges that it discovered physical damage to the Property (“Property Damage”) in or around October 2015. The plaintiff alleges that the Property Damage occurred as a result of industrial activities consisting of smelting of aluminum and silicon which were carried out at the Property by a former tenant of the property, Silicor Materials Inc. (“Silicor”). Royal Gate alleges that the 2014 Report failed to identify or make any recommendations, or warning or provide any estimates regarding the Property Damage.

[25] The cost to repair the Property Damage in 2015 was estimated by an engineering firm retained by the plaintiff to be in the range of approximately $7,000,000.00.

[26] On July 31, 2019, the plaintiff refinanced the Property with Toronto Dominion Bank, which provided a loan of $22,000,000 (the “Refinancing”). The Refinancing provided $7 million more than the previous mortgage in order to provide the funds required to address the Property Damage and to remediate the Property.

The Litigation

[27] On May 27, 2016, Royal Gate commenced an action against the former tenant Silicor for unpaid rent and damages associated with the Property Damage at the Property. (the “Silicor Action”).

[28] By way of Notice of Action issued on May 19, 2016 and statement of claim filed on May 27, 2016, Royal Gate commenced the immediate action against CCI Group as a result of alleged deficiencies in the 2014 Report. It is alleged that the 2014 Report failed to include any reference to the Property Damage which the plaintiff alleges was ascertainable on inspection (the “CCI Action”). The plaintiff alleges that had CCI provided details of the Property Damage, the valuation of the Property would have been reduced and the plaintiff would have sought a lower purchase price for the Property from the Receiver in order to account for the required remediation.

The Subject Litigation – CCI Action - Court File No. CV-16-553128

[29] In the CCI Action, the plaintiff claims as against the sole defendant, CCI Group, damages of $4,000,000.00 for negligence and breach of contract. The plaintiff retained counsel of the firm of Blaney McMurtry LLP (“plaintiff’s counsel”) to represent it in both actions.

[30] CCI Group appointed Ian Gold (“defence counsel”) of Thomas Gold Pettingill LLP (“TGP”) as counsel on October 13, 2016. On October 13, 2016, defence counsel contacted plaintiff’s counsel via telephone, to inform her of the retainer to defend CCI Group, and to request a waiver of defence. During this telephone call, plaintiff’s counsel provided defence counsel with an indefinite waiver of defence. Defence counsel wrote to plaintiff’s counsel the next day, on October 17, 2016, to confirm the retainer and the indefinite waiver of defence.

[31] On April 4, 2017, defence counsel contacted plaintiff’s counsel to inquire about the status of the action. Plaintiff’s counsel advised defence counsel that she did not require a defence from CCI Group, and that it would be at least another six months before the plaintiff decided whether it intended to proceed with this action.

[32] On October 16, 2017, defence counsel contacted plaintiff’s counsel by telephone and left a voicemail, asking that counsel return the call and advise him if the plaintiff intended on proceeding with the CCI action. Plaintiff’s counsel returned the call and advised defence counsel that she had not received instructions about whether the plaintiff intended to proceed with the CCI action.

[33] On March 14, 2018, defence counsel contacted plaintiff’s counsel by telephone to inquire about the status of this action. Plaintiff’s counsel advised defence counsel that she would be speaking with her client within the next month or so to determine how the plaintiff wished to proceed, and that she would contact defence counsel when she had instructions.

[34] Having not heard back from plaintiff’s counsel, on July 17, 2019, defence counsel sent an email to plaintiff’s counsel asking what the status of the action was, and what the plaintiff’s intentions were. Defence counsel did not receive a response to his July 17, 2019 communication.

[35] Given the lack of communication from plaintiff’s counsel and given that no steps had been taken by the plaintiff to move the action forward in four years, defence counsel received instructions from his client on or about June 24, 2020 to close his file.

[36] There were no communications from plaintiff’s counsel to defence counsel, for a period of more than six years, between March 14, 2018 and May 8, 2024.

[37] After six years of silence, on May 9, 2024, counsel for the plaintiff wrote to defence counsel stating that the plaintiff would be proceeding with the action, and requested CCI’s statement of defence within 20 days, and indicated that she would set the matter down for trial if defence counsel did not respond by the next day. In this May 9, 2024 correspondence, plaintiff’s counsel referenced the bankruptcy of the defendant CCI Group Inc. and stated: “We understand that CCI made an assignment in bankruptcy but there was insurance which could cover the claim and your office was retained”. Plaintiff’s counsel further advised that her office would seek an order to continue the action in light of the bankruptcy.

[38] Plaintiff’s counsel and defence counsel participated in a phone call on May 10, 2024 to discuss the status of the action and the purported bankruptcy of CCI Group.

[39] On May 10, 2024, plaintiff’s counsel sent an email to defence counsel enclosing a proposed timetable for the remaining steps in the action which proposed timetable included a date of October 15, 2024 for the completion of examinations for discovery and a date of May 31, 2025 for when the action would be set down for trial. Plaintiff’s counsel requested that defence counsel consent to the proposed Timetable.

[40] On May 14, 2024, plaintiff’s counsel sent a follow up letter to defence counsel asking for his position on the proposed Timetable.

[41] On May 15, 2024, defence counsel wrote to plaintiff’s counsel and referenced the bankruptcy of CCI Group and indicated that an Order to Continue would have to be obtained. Counsel further indicated that he was not in a position to agree to a litigation timetable as he anticipated receiving instructions to bring a motion to dismiss the action for delay pursuant to Rule 48.14. Defence counsel indicated that his file had been closed for approximately four years and he had just retrieved the file from storage.

[42] On May 16, 2024, plaintiff’s counsel wrote to defence counsel indicating that he had advised that CCI Group is bankrupt and that plaintiff’s counsel had relied on that information which “has turned out to be false”. Plaintiff’s counsel attached a number of bankruptcy searches and corporate profile searches which counsel indicated confirmed that in fact Construction Control Inc. was the bankrupt entity, not the defendant CCI Group. Plaintiff’s counsel noted in this same correspondence that Construction Control is “a stranger to the litigation”. Plaintiff’s counsel further indicated that if defence counsel did not provide a position of consenting to the proposed timetable by noon the following day, plaintiff’s counsel would immediately take steps to note the defendant in default.

[43] On May 17, 2024, defence responded to plaintiff’s counsel’s letter and advised that defence counsel had a call scheduled with his client and that plaintiff’s counsel could expect the defendant’s position later that same day.

[44] Defence counsel served a statement of defence on behalf of CCI Group on May 20, 2024.

[45] On May 21, 2024, plaintiff’s counsel wrote to defence counsel confirming receipt of the statement of defence served on May 20, 2024. Further reference was made to the proposed timetable and plaintiff’s counsel again requested defence counsel’s position on the proposed timetable. Plaintiff’s counsel also confirmed that a status hearing was now scheduled to proceed on December 18, 2024 which was the first available two hour time slot available on Calendly.

[46] On May 29, 2024, plaintiff’s counsel served the plaintiff’s sworn affidavit of documents and schedule “A” productions. Prior to this date, the plaintiff did not serve on defence counsel a draft or sworn affidavit of documents or any corresponding Schedule “A” documents.

The Companion Action Against Silicor – Court File No. CV-16-553127 (“the Silicor Action”)

[47] The plaintiff commenced an action against Silicor and four of Silicor’s directors and officers on May 27, 2016, which is the same day the statement of claim was filed against CCI Group in this action.

[48] In the Silicor action, the plaintiff claimed against the defendants, among other things, $15 million in damages for negligence, breach of contract, and/or nuisance for property damage to the Property resulting from the defendants’ business operations.

[49] The damages claimed in the companion Silicor action relate to the same Property and the same Physical Damage alleged in this action.

[50] Between October 2015 and May 2021, the plaintiff obtained a series of reports relating to the extent of the alleged damage at the Property and the quoted remediation costs. These reports were served in the companion Silicor action. None of these reports relating to damages were provided to CCI Group or its counsel until 2024.

[51] Between May 2016 and February 2024, the plaintiff moved the companion Silicor action from commencement to conclusion. After addressing pleadings’ issues and the removal of Silicor’s counsel, examinations for discovery were completed in July 2021. The plaintiff was granted an October 2021, Order by Justice Sanfilippo to extend the deadline to set the action down for trial. A failed mediation took place in November 2021 and the trial record was served before the end of 2021. The Silicor action was settled at a February 2024 pre-trial, in advance of a scheduled April 2024 trial date. None of the corresponding steps took place in the subject action, being the CCI Action.

[52] CCI was at no point added as a defendant in the Silicor action, nor was CCI added as third party in the Silicor action. An Order was not sought or obtained to have the companion Silicor action and the subject action heard together, one after the other, or to consolidate the two actions.

[53] The plaintiff’s affiant, Mr. Gagliano, confirmed on cross-examination that the only reason the plaintiff chose to move the CCI Action forward in May 2024, was because the settlement funds recovered in the companion Silicor action, pursuant to the settlement reached at the February 2024 pre-trial, were insufficient to cover the plaintiff’s claimed remediation costs.

[54] Throughout the period of eight years while the Silicor action was being moved forward, counsel for the plaintiff at no time advised CCI Group or its counsel of the existence of the Silicor action. Indeed, there is no evidence in the record before me which indicates that CCI Group and its counsel became aware of the Silicor action until sometime in 2024, approximately eight years after its commencement.

Issues

[55] This status hearing raises the following two issues:

1. Has the plaintiff provided a satisfactory explanation for the delay?
2. Has the plaintiff satisfied the court that there will be no non-compensable prejudice to the defendant if the action is allowed to proceed?

Issue #1 – Has the Plaintiff Provided a Satisfactory Explanation for the Delay?

[56] A plaintiff need not account for every minute of delay, but must at least explain most of the delay and certainly all significant periods of material delay. (1405217 Ontario Inc. v. Feren Signs & Graphics, 2024 ONSC 3495 at para. 16)

[57] Royal Gate has provided three explanations for the delay in moving this action forward:

i) A representation was made by counsel for the defendant, CCI Group, in 2018 that the defendant CCI Group was bankrupt;
ii) The COVID-19 pandemic;
iii) Royal Gate’s limited financial resources and its obligations to incur significant additional debt in order to remediate the Property.

[58] These three explanations are addressed below.

i) The Alleged Bankruptcy Representations in 2018 and 2024

The Alleged 2018 Representation

[59] Royal Gate’s position is that in 2018, and again in May of 2024, counsel for the defendant, relayed to counsel for Royal Gate that the defendant CCI Group was bankrupt. Royal Gate argues that at a minimum there was a mistake between the parties that CCI Group was bankrupt resulting in an automatic stay. Royal Gate argues that CCI Group’s counsel likely made the mistake as a result of similarities between the defendant CCI Group and Construction Control. Royal Gate advances the position that this alleged bankruptcy representation made by defence counsel or more specifically by “the lawyers for CCI from 2018”, resulted in delay in terms of moving this action forward.

[60] In support of this argument, as it relates to the 2018 representation, Royal Gate relies on evidence relating to a 2024 bankruptcy representation made by defence counsel and also primarily on the following evidence provided in the Gagliano Affidavit:

40. Information as to the bankruptcy of CCI originated from the lawyers for CCI from 2018. The lawyers for CCI believed and represented that CCI was a bankrupt company.

[61] The defendant raises concerns with respect to the plaintiff’s evidence regarding the alleged 2018 bankruptcy representation and highlights that the plaintiff’s affiant, Mr. Gagliano has no first-hand knowledge of the alleged 2018 communication. During his cross-examination, Mr. Gagliano confirmed that the alleged bankruptcy representation was not made to him directly by defence counsel and that he had no contemporaneous records to support that the 2018 communication occurred. No affidavit has been filed by the lawyer at plaintiff’s counsel’s office to whom this alleged bankruptcy representation was made.

[62] Royal Gate has also included as an exhibit to the Gagliano affidavit a bankruptcy certificate for Construction Control, which indicates that on or about September 6, 2018, Construction Control made an assignment in bankruptcy. The bankruptcy search results are dated May 10, 2024. There is no documentary evidence in the record before me confirming that any bankruptcy search results with respect to Construction Control or CCI Group were exchanged between counsel for the parties to this litigation in 2018.

[63] Construction Control is not a party to this proceeding and as noted in correspondence authored by plaintiff’s counsel and sent to counsel for the defendant on May 16, 2024, 10948411 Canada Inc., o/a Construction Control Inc. is “a stranger to the litigation”.

[64] In response to Royal Gate’s argument relating to the bankruptcy representation, CCI Group filed the affidavit of Ian Gold sworn on July 26, 2024. Mr. Gold is a partner at Thomas Gold Pettingill LLP and his firm was retained to defend CCI Group in this litigation, on October 13, 2016. Mr. Gold denies that he or anyone at his firm at any time made any representation of bankruptcy with respect to CCI Group in 2018 or at any time prior to May 10, 2024.

[65] With respect to the alleged 2018 bankruptcy representation, I find that there is a dearth of admissible evidence in the record before me which supports the conclusion that defence counsel or anyone from defence counsel’s firm made the alleged representation that the defendant was bankrupt. In Hamer v. Jane Doe, 2024 ONCA 721 at para. 72, the Ontario Court of Appeal confirmed that hearsay evidence on a motion is only admissible where the source of it is known and it is on uncontentious matters: Rule 39.01(4) of the Rules of Civil Procedure.

[66] In this regard, I agree with the submissions of CCI Group, that paragraph 40 of the Gagliano Affidavit, relied upon by Royal Gate in support of the bankruptcy representation argument, violates Rule 39.01(4) of the Rules of Civil Procedure, as the evidence relates to a contentious matter and the source of the information and the facts of the belief are not specified in the affidavit and as such, the statement constitutes inadmissible hearsay evidence. (Hamer v. Jane Doe, 2024 ONCA 721)

[67] However, even if I were to accept the evidence of Mr. Gagliano, I would still prefer the evidence of Mr. Gold over the evidence of Mr. Gagliano. All of Mr. Gold’s communications with plaintiff’s counsel are contained in Mr. Gold’s sworn affidavit and include Mr. Gold’s contemporaneous emails and phone logs. Mr. Gold swore in his affidavit that prior to May 10, 2024, neither he nor anyone at TGP communicated to counsel for the plaintiff that CCI Group was bankrupt. Mr. Gold’s evidence went unimpeached during his cross-examination.

[68] Moreover, I find it significant that in the record before me, there are no documents or correspondence exchanged between the parties between 2018 and May 8, 2024 which reference the alleged bankruptcy representation or the alleged bankruptcy of CCI Group, the alleged stay of the action and any required steps to address the alleged resulting stay including obtaining an Order to Continue. The lack of such documentation/correspondence further militates against a finding that the alleged bankruptcy representation was ever made by Mr. Gold or anyone at TGP in 2018.

[69] Based on the evidence in the record before me, I find that Mr. Gold made no such bankruptcy representation in 2018 or at any time prior to May of 2024. I also find that prior to May 2024, no one else from TGP communicated to counsel for the plaintiff that CCI Group was bankrupt.

The 2024 Bankruptcy Representation

[70] Royal Gate argues that Mr. Gold’s denial that he or anyone at his firm made the bankruptcy representation in 2018, should be questioned given that on May 15, 2024, Mr. Gold stated in an email that “As you know, CCI Group Inc. is bankrupt”. During his cross-examination, Mr. Gold agreed that, at the time of sending the May 15, 2024, email, he believed that the contents of the email were true to the best of his knowledge.

[71] Mr. Gold does not deny that on May 10, 2024 and May 15, 2024, he did communicate to plaintiff’s counsel that CCI Group was a bankrupt entity. However, the defendant argues that Mr. Gold’s mistaken representations on May 10, 2024 and May 15, 2024, flowed directly from correspondence dated May 9, 2024, authored by plaintiff’s counsel, in which she wrote:

We understand that you act for the insurer of CCI Group Inc. We are unable to find a Notice of Intent to Defend or Statement of Defence from your office to respond to the attached Statement of Claim. Our client has asked us to continue the action against CCI. We understand that CCI made an assignment in bankruptcy but there was insurance which would cover the claim and your office was retained.

We suggest the following timetable to be included in a draft order so the action is not administratively dismissed;

1. Provide your statement of defence within twenty days;
2. Affidavits of Documents and Discoveries to be held in the next four months after which we will set the action down for trial within the following four months.

If we do not hear from you by tomorrow we will set the action down for trial.

We will also seek an order to continue the action in light of the bankruptcy. (emphasis added)

[72] It was only after receiving plaintiff’s counsel’s correspondence dated May 9, 2024, referring to CCI Group as having made an assignment in bankruptcy, that Mr. Gold then made the two references to CCI Group being bankrupt.

[73] After the exchange of communications between counsel which occurred between May 9 and May 15, 2024, plaintiff’s counsel wrote to Mr. Gold on May 16, 2024, enclosing a series of bankruptcy and insolvency searches stating that Mr. Gold had provided false information that CCI Group was bankrupt and plaintiff’s counsel confirmed that in fact 109484111 Canada Ltd. operating as Construction Control was the bankrupt entity.

[74] After receiving this communication from plaintiff’s counsel, TGP acknowledged the mistake regarding CCI Group being bankrupt, and CCI Group admitted in its statement of defence served on May 20, 2024, that CCI Group was not bankrupt and that 10948411 Canada Ltd. operating as Construction Control was the bankrupt entity.

[75] Having made the finding that the 2018 bankruptcy representation was not made, the evidence in the record before me supports CCI Group’s position that plaintiff’s counsel is the person who made the first erroneous communication regarding CCI Group being bankrupt in her correspondence of May 9, 2024. I therefore accept CCI Group’s position that Mr. Gold’s communications of May 10 and May 15, 2024, were based on the incorrect information relating to the bankruptcy of CCI Group as contained in the communication from plaintiff’s counsel dated May 9, 2024.

[76] Based on the evidence in the record before me, I find that the incorrect information relating to the bankruptcy status of CCI Group was only a “live” issue for a period of eleven days between May 9, 2024 to May 20, 2024, when on May 20, 2024, CCI Group served its pleading admitting that CCI Group was not a bankrupt entity.

[77] I find that this misunderstanding or miscommunication between counsel relating to the alleged bankruptcy of CCI Group, which was cleared up in a period of 11 days, is a far cry from the explanation which would be required for the plaintiff to satisfy its onus to provide a reasonable explanation for the delay in this action moving forward, in the almost eight year period between the commencement of the plaintiff’s action in May of 2016 and the date when this motion was first scheduled in May of 2024.

[78] In summary, the evidence in the record before me does not support a finding that the alleged 2018 bankruptcy representation was made by Mr. Gold or anyone at TGP. I also find that any mistaken belief regarding the bankruptcy of CCI originated from plaintiff’s counsel’s correspondence dated May 9, 2024 such that the error or mistake relating to the alleged bankruptcy of CCI Group was cleared up within a period of 11 days, by May 20, 2024.

[79] In my view the timing of this miscommunication between counsel, which I find occurred in May of 2024, over eight years after this litigation was commenced cannot be said to represent a reasonable excuse for the plaintiff’s delay in moving this action forward.

[80] The alleged communication regarding the bankruptcy of CCI Group is not an acceptable excuse for the eight year delay in moving this action forward.

ii) The COVID-19 Pandemic

[81] In its factum, Royal Gate argues that the COVID-19 pandemic halted or delayed many Court proceedings including this action and the Silicor action. However, during oral submissions, counsel for Royal Gate deviated somewhat from this position and suggested that the COVID-19 pandemic stretched the financial resources of Royal Gate, resulting in Royal Gate having limited financial resources to move this action forward, thus melding arguments ii) and iii) together. I will therefore address this argument further below, in the analysis of Royal Gate’s position that it was unable to move this action forward due to its limited financial resources. However, I will also briefly address the issue of delay associated with the COVID-19 pandemic given that it is outlined in the moving party’s factum.

[82] This action was commenced in May 2016. The COVID-19 pandemic began in Ontario in March 2020. In the almost four-year period, between May 2016 and March 2020, the plaintiff took no steps to move this action forward. After March 14, 2018, plaintiff’s counsel stopped responding to defence counsel’s communications requesting to be advised of the plaintiff’s intentions in terms of pursing its action against CCI Group. After plaintiff’s counsel’s last communication with defence counsel on March 18, 2018, there was a lengthy period of silence from plaintiff’s counsel and inactivity in this action for a period of over six years, between March 18, 2018 and May 9, 2024. In this regard, the last communication between counsel occurred on July 17, 2019, when defence counsel wrote to plaintiff’s counsel to ask about the status of the action and what the plaintiff’s intentions were. However, plaintiff’s counsel did not respond to this communication.

[83] While the COVID-19 pandemic did lead to a province wide six-month suspension of the time period within which steps must be taken in proceedings, it did not permanently impair the plaintiff’s ability to advance this action. Indeed, in the companion action against Silicor, the plaintiff was able to obtain an expert report in May 2021, complete examinations for discovery in July 2021, obtain an Order in October 2021 to extend the deadline to set the action down for trial, participate in mediation in November 2021, serve the trial record before the end of 2021, and settle the action at a February 2024 pre-trial.

[84] This Court and the Ontario Court of Appeal have considered, and largely rejected, the COVID-19 pandemic as being an acceptable excuse for delay. This is particularly so, where, as in this case, there is evidence of several years of delay prior to the COVID-19 pandemic, and evidence of additional years of delay after the initial months of the pandemic. (See for example, 1405217 Ontario Inc. v. Feren Signs & Graphics, 2024 ONSC 3495 at paras. 16 to 23; Divisions 9 + 10 Inc. v. McDonald Brothers, 2024 ONSC 2423 at para. 37; NWG Investments Inc. v. Fronteer Gold Inc., 2023 ONSC 4826 at paras. 49 to 51, aff’d 2024 ONCA 331; Bonnechere Excavating Inc. v. His Majesty the King in Right of Ontario, 2023 ONSC 3828 at paras. 32 to 35; Beshay v. Labib, 2023 ONSC 2874 at para. 37, aff’d 2024 ONCA 186; Gordon v. Gordon, 2021 ONSC 273 at paras. 31 to 33)

[85] I find that the evidence in the record before me relating to the COVID-pandemic does not provide a reasonable excuse for the plaintiff’s delay in moving this action forward.

iii) Royal Gate’s Limited Financial Resources and its Obligations to Incur Significant Additional Debt in Order to Remediate the Property

[86] As a third and final reason for explaining the delay in moving this action forward, Royal Gate argues that as a result of the Property Damage, the plaintiff was required to expend significant resources and incur significant additional debt to remediate the Property. Moreover, the plaintiff raises issues of financial constraint relating to the prosecution of the Silicor action as a reason for delay in this action.

[87] The plaintiff argues that the Silicor Action resulted in the use of the plaintiff’s resources for legal costs and expert reports. In particular, the plaintiff’s position is that the strain on the plaintiff’s resources, which resulted in the plaintiff taking on $7 million in additional debt, represents an additional, and unintentional, reason for delay in this action.

[88] The evidence of Mr. Gagliano is that “the alleged bankruptcy of CCI Group as well as the expense to remediate the Property were the main factors in focusing on the Silicor action first before advancing this action”. His evidence is that efforts to remediate the Property cost the plaintiff $4,639,557.08. Mr. Gagliano has attached to his affidavit a two-page spreadsheet which he maintains “details the costs to repair the Property Damage”. No actual invoices have been included in the plaintiff’s motion record. The plaintiff has also presented evidence in the form of expert reports detailing the alleged damage to the Property and costs to remediate the Property which were estimated to be over $7 million. No further evidence in the form of financial records have been provided which support the plaintiff’s position that financial constraints prevented it from moving this action forward.

[89] The plaintiff’s affiant, Mr. Gagliano, admitted on cross-examination that if the plaintiff had recovered enough money in the companion Silicor action to cover the remediation costs, the plaintiff would not have then elected in May 2024, to pursue this action against CCI.

[90] In Beshay v. Labib, 2024 ONCA 186 at para. 39, the Court confirmed that when a party is requesting that the court find that their explanations for delay are reasonable, a party must put their best foot forward and present cogent evidence to support those explanations.

[91] In the context of the immediate case, I am not satisfied, based on the evidence in the record before me, that pursuing the Silicor action which resulted in the alleged financial inability to move this action forward, represents a reasonable explanation for failing to move this action forward.

[92] Royal Gate may have been financially stretched, but it appeared to have managed to sufficiently finance the Silicor action while this action remained on the back burner. The action against Silicor and this action against CCI relate to same alleged Property Damage. If the Plaintiff had the intention of advancing this action against CCI, the Plaintiff could have scheduled all major events, such as discoveries and mediation, to take place at the same time, or could have obtained an Order joining the two actions.

[93] Moreover, in addressing the prosecution of this action and the Silicor action, it should be noted that the mere fact that there are companion or overlapping actions does not amount to an acceptable reason for the delay. (Gordon v. Gordon, 2021 ONSC 273 at para. 19)

[94] Settlement discussions can be an acceptable reason for delay. (Gordon v. Gordon, 2021 ONSC 273 at paras. 29 and 30 referencing Postmedia Network Inc v. Meltwater Holding BV, 2017 ONSC 6036 at paras. 5 through 9 and 16 through 19; Apotex Inc v. Relle, 2012 ONSC 3291 at para. 51). However, there is no evidence in the record before me of any efforts aimed at resolution of the CCI Action at any time, nor any evidence of discussions relating to holding the CCI Action in abeyance pending the conclusion or settlement of the Silicor action.

[95] Based on the evidence in the record before me, I do not find that the plaintiff’s alleged stretched financial resources relating to remediating the Property and prosecuting the Silicor action, represent a reasonable explanation for the delay in this action moving forward.

Conclusion Issue #1 – The Plaintiff Has Not Provided a Reasonable Explanation for the Delay

[96] A plaintiff need not account for every minute of delay, but must at least explain most of the delay and certainly all significant periods of material delay. (1405217 Ontario Inc. v. Feren Signs & Graphics, 2024 ONSC 3495, citing Madore v. Metro Toronto Condominium Corp. No. 1228, 2015 ONSC 4750 at para. 26).

[97] In considering the reasonableness of any explanation for the delay in question, the court will “almost invariably engage in a weighing of all relevant factors in order to reach a just result”. (Kara v. Arnold, 2014 ONCA 871 at paragraph 13).

[98] Royal Gate attributes the eight year delay between when this action was commenced in May of 2016 until the time that counsel for Royal Gate requested a defence from CCI Group, to a combination of three factors being diminished resources of Royal Gate related to having to incur additional debts to remediate the Property, the COVID-19 pandemic as well as the alleged bankruptcy representation made by counsel for CCI Group in 2018.

[99] In considering these factors individually and as a whole, I find that they do not equate to an acceptable explanation for the delay. It is important to note that in the immediate case, there is a significant and uninterrupted gap of almost eight years between May of 2016 and May of 2024, where no steps were taken to advance this litigation other than the exchange of some correspondence prompted by counsel for the defendant to attempt to obtain status updates from plaintiff’s counsel.

[100] Having commenced this action, the enquiry at a status hearing focusses on the conduct of the plaintiff who bears the primary responsibility to ensure that the litigation progresses in a timely manner. While numerous decisions have highlighted that a defendant cannot sit back and wait in the weeds in hopes of gaining an advantage by hindering the progress of an action, a defendant is not responsible for advancing the action. (1196258 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 at paras. 27 to 30 and Prescott v. Barbon, 2018 ONCA 504 at para. 30). Ultimately, the conduct of a defendant is a factor to be considered in assessing delay. (Yang v. Christian World Korea Inc., 2019 ONSC 613 at para. 28, citing Prescott, supra, at para. 30)

[101] The issue of the inactivity of a defendant in terms of an action not moving forward was discussed in Gordon v. Gordon, 2021 ONSC 273 at paras. 36 to 39, where the Court rejected the suggestion that the inactivity of a defendant represented an excuse for the delay in moving the action forward. In this regard, the Court stated the following:

Apart from filing a defence, Blair did nothing to advance this matter. Over the last five years, he did not raise any concerns about the delay. Without some attention to a matter by the defendant, it is much easier for a plaintiff to sit idle. If the context included persistent requests by Blair to advance the matter, Roger’s argument that there are reasonable explanations for the delay would be even weaker.

At the same time, Blair did not do anything to frustrate the progress of the matter.

The Court of Appeal in Wellwood v. Ontario Provincial Police, 2010 ONCA 386 at para. 48 stated that “the party who commences a proceeding bears primary responsibility for its progress. For this reason, the initiating litigant generally suffers the consequences of a dilatory regard for the pace of the litigation.”

In Papp Plastics & Distributing Ltd. v. Unity Insurance Brokers (Windsor) Ltd., 2018 ONSC 5009 at para. 57, the court said, “The defendant is not obliged to take positive steps to move the action forward or assist a plaintiff in having the matter progress to trial.” See also Canadian Champion Auto v. Petro-Canada, 2011 ONSC 6794 at para. 47; Deutsche Postbank AG v. Kosmayer, 2019 ONSC 6997 at para. 27; Atlas Copco Canada Inc. v. Dirk Johannes Plate, 2020 ONSC 17 at para. 84. Additional considerations apply if the defendant has asked for delays or indulgences or alleges prejudice, but those considerations are not in issue here.

[102] In terms of the defendant’s conduct or lack thereof in this action, it should be noted that it was defendant’s counsel who wrote to plaintiff’s counsel on several occasions, over the first three years after the action was initiated to request updates regarding the status of the action. The last correspondence sent by defence counsel to plaintiff’s counsel was on July 17, 2019 wherein counsel asked for a status update and requested information on the plaintiff’s intentions. No responding communication was received from plaintiff’s counsel for a period of over six years between March of 2018 and May of 2024, when plaintiff’s counsel demanded a defence within 20 days.

[103] Indeed, the only specific conduct of the defendant raised by the plaintiff to explain the delay in this action relates to the bankruptcy representation. I have rejected the evidence of Royal Gate that the bankruptcy representation was made to counsel for Royal Gate in May of 2018.

[104] I do accept that there was a mistake or misunderstanding or miscommunication as between counsel for a period of 11 days between May 9, 2024 and May 20, 2024. However, I find that this error or misunderstanding between counsel first arose in 2024 and would not serve as a basis to explain the delay in this action moving forward between 2016 and 2024. Even if I were to accept that on one occasion in May of 2018, a bankruptcy representation was made by defence counsel, based on the record before me, I would still reject the argument that the alleged combined bankruptcy representation in May of 2018 and the bankruptcy representation made in May of 2024 represent acceptable explanations for why this action was not moved forward in close to eight years.

[105] In this regard, even if there had been a bankruptcy representation in 2018, one would expect counsel for the plaintiff to take steps, as plaintiff’s counsel did in 2024, to address the bankruptcy of a party opposite. Such steps would include conducting a bankruptcy search, advising opposing counsel that an Order to continue will be obtained and making enquiries of any available insurance. It is noteworthy that counsel for Royal Gate did indeed, immediately take all of these steps in May of 2024, within days of Mr. Gold’s May 10, 2024 letter being sent to counsel indicating that CCI Group was bankrupt.

[106] The impact of COVID was not felt from 2016 to March 2020 and certainly cannot excuse delay over those years. Even if Royal Gate’s finances were strained, over the eight year period since the commencement of this action, based on the evidence in the record before me, this does not result in a reasonable explanation as to why this action could not have moved forward in some capacity, including the exchange of documents and the establishment of a timetable. Indeed, the Silicor action, also commenced in 2016, moved through every stage of a proceeding and was scheduled to proceed to trial in April of 2024.

[107] I am mindful that the assessment of the progress of litigation should not be a one size fits all analysis. As stated by the Court in American Environmental Corp. v. Kennedy, 2020 ONSC 1662, “the overall dynamics of a particular piece of litigation must be considered”. In this regard, starting two actions at approximately the same time and moving one forward while holding one in abeyance as a back-up plan in case the one action does not lead to the desired result, is also not an acceptable explanation for the delay in the circumstances of the immediate case. Indeed, as noted by defence counsel, an action should not be considered an asset to hold in the back pocket as security, while awaiting the outcome of a companion action, which appears to be what the plaintiff has done in this case.

[108] In recent years, the Ontario Court of Appeal has increasingly renounced an indifference to delay in advancing civil actions. In this regard, in Barbiero v. Pollack, 2024 ONCA 904 at paras. 10 to 15, the Ontario Court of Appeal clearly confirmed that the Court’s traditional consideration of delay is “out of step with the contemporary needs of the Ontario civil court system” when it stated the following:

Hryniak singled out for criticism an unhealthy characteristic of the contemporary Ontario civil justice system: its indifference to delay. In calling for a “culture shift” in the civil justice system, the court in Hryniak stated at para. 25:

Prompt judicial resolution of legal disputes allows individuals to get on with their lives. But, when court costs and delays become too great, people look for alternatives or simply give up on justice.

Effecting a culture shift requires not only changing the entrenched culture of indifference to delay manifested by far too many litigants and their counsel, but also identifying and changing those judge-created rules or interpretative glosses that do not promote – and in some cases impede – the “prompt judicial resolution of legal disputes”.

Under the Langenecker approach, delay or the passage of time on its own cannot constitute harm or prejudice sufficient to support the dismissal of an action. Langenecker merely treats the existence of delay as giving rise to a rebuttable presumption of prejudice – that is to say, the lingering of an action in our courts for over two decades may or may not result in a harm or prejudice. According to Langenecker, it all depends.

I strongly question whether Ontario’s civil courts can achieve the culture shift demanded by the Supreme Court of Canada in Hryniak if they continue to cling to Langenecker’s lax attitude toward delay. The late Willard Z. Estey, former judge of the Supreme Court of Canada, succinctly described the social harm caused by such an attitude:

Disputes, unlike wine, do not improve by aging. Many things happen to cause a cause [sic] and to parties in a dispute by the simple passage of time, and almost none of them are good. Delay in settlement or disposal of conflicting claims is … a primary enemy of justice and peace in the community.” [2]

As well, Langenecker’s tolerant attitude toward delay is out of step with a key element of the general principle for civil litigation set out in r. 1.04(1) of the Rules of Civil Procedure, namely to secure the “most expeditious … determination of every civil proceeding on its merits”. A litigation culture based on Langenecker focuses more on justifying delay than on achieving the most expeditious determination of civil proceedings. To the extent that Langenecker denies that the passage of time, on its own, can constitute sufficient prejudice to dismiss an action for delay and not simply a rebuttable presumption of prejudice, it should not be followed.

[109] The Ontario Court of Appeal has clearly communicated that once commenced, actions should be pursued with diligence and moved forward in a timely manner. This is particularly so in the context of this case where Royal Gate at no time until 2024, advised CCI Group of the existence of the Silicor action nor did Royal Gate’s counsel advise counsel for CCI Group of very significant events as they occurred in the Silicor action. These events included but are not limited to the exchange of five expert reports and remediation efforts undertaken at the Property which essentially resulted in the inability of CCI Group to retain its own experts to review and assess the alleged deficiencies in the Property which CCI Group allegedly failed to identify in the Condition Assessment Report. Indeed, the evidence in the record before me suggests that counsel for CCI Group only became aware of the Silicor action in 2024, almost eight years after the action against CCI Group was commenced.

[110] I have also rejected the plaintiff’s raised issue of financial constraint relating to the prosecution of the Silicor action and the required remediation efforts at the Property as a reasonable explanation for delay in this action.

[111] It is my view that the plaintiff has not provided a reasonable explanation for the delay in moving this action forward.

Issue #2 – Has the Plaintiff Satisfied the Court That There Would Be No Non-Compensable Prejudice to the Defendant if the Action Were Allowed to Proceed?

[112] Even if Royal Gate had provided a reasonable explanation for the delay, I find that it has not satisfied the court that there would be no non-compensable prejudice to the defendant if this action were allowed to continue.

[113] As the relevant test is conjunctive, my determination that Royal Gate has failed to meet its onus of providing an adequate explanation for delay is a sufficient basis to order a dismissal of the action. However, I have nevertheless considered the issue of prejudice in order to address the issues raised at this status hearing in a fulsome manner.

[114] Case law has held that a plaintiff is not required to adduce affirmative evidence to rebut the presumption of prejudice that arises from the passage of time in prosecuting an action or from the expiry of a limitation period, but rather the court must consider all of the circumstances in evaluating the strength of the presumption of prejudice: (MDM Plastics Ltd. v. Vincor International Inc., 2015 ONCA 28, at para. 32, citing Aguas v. Rivard Estate, 2011 ONCA 494 at paras. 18–19).

[115] In the analysis of the issue prejudice, I am mindful that a finding of prejudice cannot be based solely on the mere passage of time. In Carioca’s Import & Export Inc., 2015 ONCA 592 at paras. 49 and 57, the Ontario Court of Appeal confirmed that prejudice is a question of fact and must be linked to the question of whether a fair trial is possible.

[116] Royal Gate argues that a fair determination can be made at a trial on the merits. Royal Gate’s position is that the fundamental allegation in this action is that the 2014 Report was deficient in failing to identify the Property Damage. It argues that the Court and the parties will have available to them for consideration the 2014 Report and documents including expert reports and remediation documents provided in the plaintiff’s affidavit of documents served on May 24, 2024 (the “AOD”). The evidence of the plaintiff’s affiant, Mr. Gagliano is that there is no prejudice to the defendant as the 2014 Report has been produced, the authors of this report are available and the evidence regarding damages and causation are contained in available and produced expert reports.

[117] In response to Royal Gate’s position, CCI Group highlights that significant events occurred between May of 2016 and May of 2024 which have prejudiced CCI’s ability to defend this action and which would ultimately preclude the defendant from having a fair trial. In particular, key witnesses have died, the memories of remaining witnesses will have faded, and Royal Gate completed all remedial work at the Property in 2017 and 2018 without notifying CCI Group or its counsel. CCI Group argues that these significant events, coupled with the companion Silicor action moving from inception to settlement, have prejudicially changed the litigation landscape, and will prevent CCI Group from advancing a full defence. These arguments are further considered below.

Relevant Witnesses Have Died and Faded Memories

[118] With respect to the issue of relevant witnesses, the Property Condition Assessment Report which is in issue in this litigation, was authored by four individuals who worked at CCI Group:

• Medil Gamage, P. Eng., Project Manager, Building Assessment Group;
• Richard Wood, Electrical-Mechanical;
• Rayomand Golwala, P. Eng., M.B.A., President and CEO; and
• Jeff Jeffcoat, P. Eng. B.D.S., R.C.M., Vice President, Condominium Group.

[119] There are two versions of the 2014 Assessment Report. One is dated May 2014 and one is dated June 2014.

[120] The June 2014 version of the Property Condition Assessment was completed by the same authors. However, the June 2014 version was signed by Irina Yablonovsky in place of author Jeff Jeffcoat. Ms. Yablonovsky was not otherwise involved in authoring the Property Condition Assessment.

[121] In her affidavit sworn on August 19, 2024, Irina Yablonovsky confirmed that the June 2014 version of the Assessment Report is identical to the May 2014 Assessment Report aside from the following differences which she noted:

(a) Page 18 has one additional recommendation on the top of the May 2014 version.
(b) Page 36 has different recommendations and quotes (lower quotes in June 2014 version).
(c) Pages 43/44 have different recommendations and quotes (lower quotes in June 2014 version).
(d) The June 2014 version has two appendices with quotes.
(e) Page 52 of June 2014 version has Ms. Yablonovsky’s name and signature in place of Jeff Jeffcoat's.

[122] With respect to the issue of relevant witnesses, Royal Gate acknowledges that the relevant witnesses are the authors of the 2014 Report. Royal Gate argues that the authors of the 2014 Report either continue to work for the defendant (now EGIS) or continue to work as engineers in Ontario. In particular, Royal Gate highlights that Irina Yablonovsky continues to work for the defendant. Moreover, the plaintiff argues that there is some evidence that Medil Gamage and Rayomand Golwala continue to work as engineers in Ontario.

[123] Royal Gate further highlights that, in any event, two of the authors, Richard Wood and Rayomand Golwala, ceased working with the defendant prior to this action being initiated.

[124] Royal Gate’s position is that the fact that some witnesses have left the employment of the defendant is not a basis to claim prejudice. Royal Gate argues that witnesses not currently in the employ of the defendant can be compelled to testify. Memories can be compensated for by a review of the 2014 Report, which includes the defendant's findings. Moreover, whether or not some of the persons are no longer employees of a corporation is not a ground to refuse to attempt to obtain information from those individuals. (Blue v. Metro Ontario Inc., 2024 ONSC 2609 at para. 46)

[125] The plaintiff argues that Mr. Gamage is theoretically available to give evidence, based on an internet search that shows that Mr. Gamage works at the City of Brampton. However, the plaintiff’s affiant conceded on cross-examination that he had not spoken to Mr. Gamage to confirm that the information sworn in his affidavit is accurate, nor had he spoken to Mr. Gamage to determine whether Mr. Gamage had any recollection of the Property Condition Assessment.

[126] The plaintiff also argues that Rayomand Golwala is theoretically available to give evidence, based on an internet search that shows Mr. Golwala lives in the greater Toronto area and works as a Professional Engineer. However, the plaintiff’s affiant, Mr. Gagliano, conceded on cross-examination that he had not spoken to Mr. Golwala to confirm that the information sworn in his affidavit is accurate, nor had he spoken to Mr. Golwala to determine whether Mr. Golwala had any recollection of the Property Condition Assessment.

[127] CCI Group argues that key witnesses have died, no authors of the Property Condition Assessment Report remain at CCI and memories of the events will not longer be fresh, all of which result in prejudice to the defendant in terms of a resulting inability to have a fair trial.

[128] Mr. Juffs is the Vice President, Building Facilities with Egis. His evidence is that two important witnesses have died since the commencement of the plaintiff’s action. In particular, his evidence is that Jeff Jeffcoat, Vice President, Condominium Group, and one of the four authors of the Property Condition Assessment Report died on August 25, 2024.

[129] Mr. Juffs has also provided evidence that Richard Derbecker, Vice President, Building Services at CCI Group, died on April 17, 2023. Mr. Derbecker was the Vice President responsible for oversight and review of the Property Condition Assessment. Mr. Juffs’ evidence is that from February 14, 2020 onwards, but for his death in April 2023, Mr. Derbecker would have been the defendant’s witness at examinations for discovery since he was the vice president and responsible for the authors of the May 2014 Property Condition Assessment and the only individual with any corporate knowledge of the completion of the 2014 Property Condition Assessment after Medil Gamage left McIntosh Perry Ltd. on February 14, 2020.

[130] This Court and the Court of Appeal have held that the death of important witnesses is evidence of actual prejudice. (NWG Investments Inc. v. Fronteer Gold Inc., 2023 ONSC 4826 at paras. 75 to 82, aff’d 2024 ONCA 331; Faris v. Eftimovski, 2012 ONSC 1126 at paras. 12 and 16, aff’d 2013 ONCA 360)

[131] Given that Mr. Jeffcoat is one of the authors of the Condition Assessment Report and given that Mr. Derbecker was responsible for oversight and review of the Property Condition Assessment, I accept that these individuals are both important witnesses whose deaths represent evidence of actual prejudice.

[132] With respect to Ms. Yablonovsky, while she is still employed with Egis, her evidence is that she has no recollection of being involved in the changes made to the June 2014 version of the Property Condition Assessment Report. Based on her personal knowledge and experience with past practices she believes that she may have signed the June 2014 version of the Property Condition Assessment Report in place of Jeff Jeffcoat due to his unavailability, rather than having any personal involvement with the Property Condition Assessment.

[133] This witness confirmed that she searched her work emails and has been unable to locate any emails indicating that she was involved in the changes or additions made to the June 2014 version of the Property Condition Assessment. Ms. Yablonovsky has no recollection of signing the June 2014 version of the Property Condition Assessment in place of Jeff Jeffcoat.

[134] No evidence has been presented with respect to the availability of Mr. Wood to give evidence. With respect to the other two authors of the Condition Assessment Report, Royal Gate has tendered very little evidence relating to the availability of these witnesses. Moreover, the defendant argues that the evidence relating to the current employment and potential availability of the authors, Mr. Gamage and Mr. Golwala, as contained in the Gagliano affidavit violates Rule 39.01(4), as the affiant has sworn information that is not within his own knowledge, and the source of the information and the facts of the belief are not specified in the affidavit. As such, the defendant argues that Mr. Gagliano’s evidence in this regard is not admissible evidence on this motion.

[135] CCI Group has presented evidence that the three remaining living authors of the Property Condition Assessment no longer work at CCI. Richard Wood left CCI on June 26, 2014. Rayomand Golwala left CCI on August 4, 2015. Medil Gamage left CCI on February 14, 2020.

[136] Even if I were to accept the evidence of the plaintiff that Mr. Gamage and Mr. Golwala can give evidence relating to their involvement in preparing the 2014 Report, I am satisfied that if these former employees are contacted and available to provide evidence, the passage of 10 years since the report was prepared, will make it more difficult for these witnesses to remember events surrounding the inspection of the Property and the preparation of the Property Condition Assessment Report. Indeed, the unchallenged evidence of Ms. Yablonovsky, one of the listed authors of the 2014 Report is that she has no memory of being involved in the changes made to the June 2014 version of the Property Condition Assessment and she has no memory of signing the report.

[137] This Court and the Ontario Court of Appeal have held that lack of available witnesses, and the likelihood that memories have faded with time, is sufficient evidence of non-compensable prejudice. (Beshay v. Labib, 2024 ONCA 186 at paras. 26 and 27; NWG Investments Inc. v. Fronteer Gold Inc., 2023 ONSC 4826 at para. 63, and 67 to 74, aff’d 2024 ONCA 331; DK Manufacturing Group Ltd. v. MDF Mechanical Limited, 2019 ONSC 6853 at paras. 26 to 41; 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 at para. 43)

[138] As noted by the Court in DK Manufacturing Group Ltd. v. MDF Mechanical Limited, 2019 ONSC 6853 at para. 28:

There is a well-established presumption of prejudice set out in case law. In Langenecker v. Sauvé, 2011 ONCA 803 at para. 11, the Court of Appeal describes how that presumption arises as follows:

Prejudice is inherent in long delays. Memories fade and fail, witnesses become unavailable, and documents and other potential exhibits are lost. The longer the delay, the stronger the inference of prejudice to the defence case flowing from that delay.

[139] In my view, a presumption of prejudice clearly arises on the facts of this case. In this regard, an inference of prejudice is reasonably drawn from eight years passing with no procedural steps having been undertaken. Witnesses’ memories will have faded, documentary discoveries have not been completed and oral discoveries have not yet taken place. In my view, the inference of prejudice is further reinforced by the fact that the Property inspection in issue as it relates to the 2014 Report, occurred approximately 10 years prior to this motion being launched.

[140] There is also evidence of actual prejudice given the death of two important witnesses.

Changes to the Property and Lack of Documents

[141] With respect to the Property in issue, it is not disputed that the plaintiff conducted remedial work on the property in 2017 and 2018.

[142] The fundamental allegation in this Action is that the 2014 Report was deficient in failing to identify the Property Damage. The plaintiff argues that a determination can be made at a trial on the merits, including a review of the 2014 Report and documents including expert reports and remediation documents provided in the Plaintiff's AOD.

[143] In support of this argument, the plaintiff also relies on the evidence given by the defendant’s affiant Jon Juffs, who confirmed that the 2014 Report would contain all relevant information as it related to the site assessment carried out by the defendant. Mr. Juffs confirmed that, upon learning of the claim against the defendant in 2016, the defendant would have preserved all relevant documentation. Indeed, Royal Gate notes that when counsel for CCI wrote to plaintiff’s counsel in May of 2024, he indicated that his file was in storage and did not indicate that the file associated with the CCI Action had been destroyed or misplaced.

[144] Despite Mr. Juffs providing this evidence, the evidence of the defendant is that Mr. Juffs worked at CCI Group beginning in approximately December of 2014 which is after the site assessment and Report were completed. Mr. Juffs’ evidence is that he was not aware that a statement of claim was served in October 2016 regarding the 2014 Report and he confirmed that he was not involved in site assessment or the preparation of the 2014 report in issue. He also confirmed that Rick Derbecker would have been the person responsible for having carriage of issues relating to service of the statement of claim in 2016. He acknowledged that it would be Mr. Derbecker who would have been responsible to liaise with lawyers, conduct searches for documents.

[145] In my view, the evidence in the record before me supports the position of the defendant that the remedial work irreversibly altered and removed the alleged Property Damage that is the subject of this litigation. There is no dispute that CCI was not notified that the remedial work would be taking place. CCI was not given an opportunity to inspect the alleged Property damage before the remedial work was completed. In its statement of defence, the defendant has pleaded at paragraph 13 that the property damage alleged in the statement of claim was not visible and/or was not reasonably discoverable by a competent and prudent professional engineering consultant at the time of the completion of the 2014 Property Condition Assessment.

[146] There is authority for the proposition that the inability to examine property is sufficient evidence of actual prejudice. (Fazal v. ABC Corporation, 2022 ONSC 4358 at paras. 346 and 362; DK Manufacturing Group Ltd. v. MDF Mechanical Limited, 2019 ONSC 6853 at para. 30; Dupuis v. W.O. Stinson & Sons Limited, 2019 ONSC 5762 at para. 28; Marciniuk v. Lombard Canada Ltd., 2015 ONSC 5707 at paras. 135 to 138)

[147] In support of its position in this action, the plaintiff relies on several expert reports. These reports have been filed as evidence for the purposes of this motion. The plaintiff’s experts were afforded the opportunity to not only inspect the Property but also to conduct testing and analysis.

[148] In particular, on October 27, 2015 Pinchin delivered an expert report which described the negative effects of the Manufacturing Process on the Property. In the executive summary of the report, Pinchin indicates that the methodology for its assessment was based on a visual walk-through assessment carried out over two days, and included localized test cuts of the roof membrane system to ascertain the condition of the roofing membrane assembly.

[149] On December 1, 2016, Dycon Roof Consultants Inc. delivered an expert report which described the Property Damage to the roof of the Property (the "Dycon Report"). In the introduction to the report, Dycon indicates that the inspection and roof evaluation included both a visual assessment and a physical analysis in the form of membrane test cuts and electronic moisture sensing probes, as required. Dycon noted that this process allowed Dycon to identify the underlying components and conditions to assist in determining the viability of the existing roof systems.

[150] On June 28, 2017 Pario Engineering & Environmental Sciences provided a report regarding samples extracted from the ceiling and roof of the Property (the "Pario Report"). In the introduction to the report, Pario confirms that Pario engineers attended the Property on several occasions where they met with various representatives attending on behalf of the plaintiff, and MTE Consultants Inc.

[151] On October 12, 2018, Jerol Technologies Inc. delivered an expert report. In the introduction to the report, Jerol Technologies confirms that it was engaged by TGA GROUP to perform a visual review of the structural condition of the Property being unit B at 1 Royal Gate drive (Unit B) in Mississauga.

[152] MTE Consultants Inc. authored a report dated May 26, 2021. MTE also references its report entitled "Warehouse Assessment Report" dated March 4, 2021, where MTE outlined the observed deterioration and mechanisms behind the material failures. The MTE Report concluded that the Property Damage was caused by noxious vapours from the Manufacturing Process and the lack of proper ventilation and that Property Damage had occurred over time.

[153] Given the nature of the allegations being raised in the immediate action, in my view, in order for the defendant to mount a full defence and have a fair trial, the defendant should have the ability to retain its own experts and have those experts conduct their own site assessments and analysis. The fact that the defendant is now deprived of these opportunities which were afforded to the plaintiff’s experts to examine the Property, conduct visual assessments, take samples and undertake their own analysis, in my view, will materially prejudice the ability of the defendant to have a fair trial.

[154] While the CCI report is available and the report contains photographs, the condition of the Property on the date of inspection and post inspection will be significant issues to be canvassed at the trial of this action in terms of the issues of liability and damages. I find that the plaintiff’s decision to make irreversible changes to the Property in 2017 and 2018, after the commencement of this litigation, without notifying CCI, which has resulted in the defendant’s inability to examine the Property, is sufficient evidence of actual prejudice to further support the dismissal of this action under Rule 48.14.

[155] Moreover, in my view, an inference of prejudice is reasonably drawn by the fact that the Property Condition Assessment in issue was completed and the report prepared approximately 10 years ago.

Conclusion Issue #2 – Prejudice

[156] In my view, in the immediate case, the evidence in the record before me supports the conclusion that a presumption of prejudice arises and actual prejudice exists which has created a substantial risk that a fair trial of the issues will not be possible.

[157] I find that the plaintiff has failed to satisfy its onus of demonstrating that there will be no non-compensable prejudice to the defendant if this action were permitted to proceed.

Disposition

[158] After weighing all relevant factors in order to reach a just result, and in considering the overall justice in the case and using a contextual approach, I find that the plaintiff has failed to show cause why the action should not be dismissed for delay. As a result, this action shall be dismissed for delay.

Costs

[159] The parties have agreed on costs in the amount of $25,000.00 inclusive of fees, disbursements and HST.

[160] The defendant being the successful party is entitled to its costs. In this regard, the plaintiff shall pay the defendant costs of $25,000.00 inclusive of fees, disbursements and HST, within 30 days of the release of this decision.

Associate Justice Eckler
Released: April 15, 2025