COURT OF APPEAL FOR ONTARIO

CITATION: McGroarty v. CIBC Mellon Trust Company, 2012 ONCA 241

DATE: 20120418

DOCKET: C54446

Doherty and LaForme JJ.A., and Turnbull J. (ad hoc)

BETWEEN

Ross McGroarty

Applicant (Appellant)

and

CIBC Mellon Trust Company

Respondent (Respondent)

Counsel:

R. G. Chapman, for the applicant (appellant)

R. Foerster and E. Krajewska, for the respondent

Heard: April 2, 2012

On appeal from the order of the Divisional Court, dated December 17, 2010.

Doherty J.A.:

I

[1] This is an appeal, brought with leave, from the order of the Divisional Court dismissing an appeal from the order of the Master refusing to grant to the appellant an extension of time to serve a notice of action and statement of claim on the respondent, CIBC Mellon Trust Company ("CIBC Mellon"). There were other orders challenged before the Master and the Divisional Court, but they are not at issue in this appeal.

[2] Normally, the focus of this appeal would be on the reasons of the Divisional Court. However, those reasons did not address the appeal from the Master's order refusing the extension of time. The reasons of the Divisional Court addressed the other orders which are not in issue on this appeal. Consequently, this appeal focuses on the Master's reasons for refusing the extension of time.

[3] I would allow the appeal. In my view, the Master erred in addressing prejudice based on the passage of time since the relevant events giving rise to the claim rather than focusing on prejudice caused by the delay in filing the necessary documents. Here, the delay was brief, approximately 30 days, and it occasioned no prejudice to CIBC Mellon.

II

[4] The procedural history in this matter is somewhat complicated. The appellant initially brought an application against a company called Ontex Resources Limited ("Ontex") in September 2007, seeking delivery to him of new share certificates for 400,000 Ontex shares which the appellant claimed he beneficially owned. CIBC Mellon was not a party to that application. An attempt to add CIBC Mellon as a party to the application in 2008 failed and there is no appeal from that refusal. The appellant also commenced a claim against CIBC Mellon in 2009. That claim was struck by the Master and there is no appeal from that order.

[5] In early December 2008, the appellant filed a notice of action naming CIBC Mellon as a defendant. The appellant filed a statement of claim referable to that notice on December 30, 2008. The allegations in the claim relate to the same 400,000 shares that were the subject matter of the application commenced against Ontex.

[6] The appellant did not serve the statement of claim on CIBC Mellon within six months as required by rule 14.08(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The appellant made a tactical choice not to serve the documents while his attempt to add CIBC Mellon to the application brought against Ontex was pending.

[7] CIBC Mellon was aware of the notice of action sometime in June 2009. On July 2, 2009, slightly less than 30 days after the time within which to serve the statement of claim had expired, the appellant advised CIBC Mellon that it would seek an extension of time to serve the statement of claim.

III

[8] The parties agree that in deciding whether to grant an extension under rule 14.08(2), a court must consider whether the extension would advance the just resolution of the dispute without prejudice or unfairness to either party: Chiarelli v. Wiens (2000), 2000 CanLII 3904 (ON CA), 46 O.R. (3d) 780, at para. 12.

[9] In declining to extend the time, the Master accepted CIBC Mellon's argument that it was prejudiced by the long lapse of time between the relevant events and the commencement of the action (13 years), and by the destruction of CIBC Mellon documents in the normal course of its business. The Master did not limit her consideration of prejudice to prejudice caused by the delay in service of the statement of claim.

[10] In Chiarelli, at para 16, Laskin J.A. indicates:

...prejudice that will defeat an extension of time for service must be caused by the delay. Prejudice to the defence that exists whether or not service is delayed ordinarily is not relevant on a motion to extend the time for service.

[11] With respect, the Master feIl into the error described in Chiarelli. She failed to distinguish between prejudice caused by the passage of time since the relevant events giving rise the claim and prejudice arising through the failure to serve the statement of claim within the required time period. Here, the relevant delay was approximately 30 days and occurred long after the documents in question had been destroyed by CIBC Mellon in the normal course of its business.

[12] The Master's finding of prejudice, which I have concluded is based on an error in law, played a central role in her refusal to grant the extension. On a proper application of the concept of prejudice as described in Chiarelli, CIBC Mellon suffered no prejudice.

[13] The Master referred to two other factors in refusing the extension. She referred to the tactical nature of the decision that precipitated the delay in the service of the statement of claim and to the arguable absence of any "tenable cause of action" pleaded in the statement of claim.

[14] A tactical decision to delay service beyond the timeframe allowed for service by the Rules will certainly redound against a party who subsequently seeks an extension of time. Delay precipitated by tactical considerations does not, however, in and of itself prejudice the other side. It is that prejudice which must remain the primary focus on a motion to extend the time for service of the statement of claim. The fact that the brief delay in issue here was the product of a tactical choice is not, in my view, a reason to refuse the extension.

[15] With respect to the tenability of any of the claims advanced by the appellant in the statement of claim, I agree with the Master that the pleadings might not disclose any cause of action. However, I do not think that a motion to extend the time for service of the claim is the proper forum in which to address the adequacy of the pleading.

[16] I think the adequacy of the pleadings is potentially relevant on a motion to extend the time for serving a statement of claim only where the pleadings clearly do not disclose any cause of action and the motion judge sees no possibility, based on any material filed on the motion to extend for any amendment that could give legal life to the pleadings. However, even if the causes of action are badly pleaded and of doubtful merit, the court should not refuse an extension of time to serve the statement of claim on that basis. The defendant can attack the pleadings after the extension is granted. It would also be open to the plaintiff if the pleadings are attacked to take steps to attempt to cure any defects in the pleadings.

[17] I have sympathy with the Master's consideration of what she referred to as the "big picture". Having regard to the procedural history of this matter, the long passage of time since the relevant events occurred, and the inadequacies in the claims as presently pleaded, it is tempting to conclude that this lawsuit is going nowhere and that to grant an extension of time is only to delay the inevitable dismissal of the claim at added and needless cost to CIBC Mellon and the administration of justice. However, as tempting as it might be, I am satisfied that a motion to extend the time for service is not the stage at which to eliminate cases that seem to have little chance of success. On a motion to extend, the focus must be on the prejudice, if any, caused by the delay in the service of the claim and the justice of allowing the extension. If the extension is allowed, the defendant will have ample opportunity to challenge the pleadings and the merits of the allegations under the appropriate Rules.

IV

[18] I would allow the appeal, set aside the order of the Divisional Court and the order of the Master and grant an order permitting service of the notice and statement of claim within 14 days of the release of these reasons.

[19] Counsel for the appellant conceded that in the circumstances the appellant should not have his costs even if successful on the appeal. I agree with that concession. I would make no order as to costs.

RELEASED: "DD" APR 18 2012"

"Doherty J.A."

"I agree H.S. LaForme J.A."

"I agree Turnbull J. (ad hoc)"