COURT OF APPEAL FOR ONTARIO

CITATION: Faris v. Eftimovski, 2013 ONCA 360

DATE: 20130604

DOCKET: C55205

Blair, Rouleau and Tulloch JJ.A.

BETWEEN

Robert Faris

Plaintiff (Appellant)

and

Chris Eftimovski, CLE 72330 Limited, The Estate of Wally Magee,

Horst Rosner, Carriage South Simcoe Real Estate Services Ltd.,

Exit Realty (or Exit Realty Advance), Re/Max Rouge River

Realty Ltd., Anthony John Laskowsky (first named in these proceedings

as Anthony Laskowsky, Jr.) in his own capacity and as Litigation

Administrator representing the interest of the Estate of Anthony

Edward Laskowsky (first named in these proceedings as

Anthony Laskowsky, now deceased)

Defendants (Respondents)

Alfred J. Esterbauer and Demetrios Yiokaris, for the appellant

Kelly A. Charlebois, for the respondent, Re/Max Rouge River Realty Ltd. and agent for Chris Eftimovski and CLE 72330 Limited

Todd Robinson, for the respondent, Wally Magee

Heard: November 21, 2012

On appeal from the order of Justice Susan E. Healey of the Superior Court of Justice, dated April 11, 2012 with reasons reported at 2012 ONSC 1126.

Tulloch J.A.:

A. INTRODUCTION

[1] This appeal concerns a frequently encountered issue in civil litigation: under what circumstances should an action be dismissed by the court following a status hearing?

[2] The appellant appeals from the order of Justice Healey dismissing his action for delay after a status hearing held at the Superior Court of Justice in Barrie on February 2, 2012 (the “Barrie Action”). In addition, he seeks leave to appeal the costs fixed by the status hearing judge on April 11, 2012.

B. Background

(1) Facts giving rise to the appellant’s claim

[3] The appellant commenced this action in 2007 alleging damages arising from two real estate transactions that occurred in 2003 and 2005, both relating to the same property. The property is a 100 acre farm property which was owned by the appellant. At the time, the respondent Walter Magee (Magee) was a real estate agent, employed by Advanced Realty Inc., c.o.b. as Exit Realty Advanced. The respondent, Horst Rosner (“Rosner”) was also a real estate agent, and was employed by the real estate brokerage firm, Carriage South Simcoe.

[4] In 2001, the appellant listed the property for sale jointly and exclusively with Exit Realty and Carriage South Simcoe, and both Magee and Rosner were co-listing agents.

[5] The key events in the lawsuit include a sale of the property in 2003, which did not close (“the 2003 deal”), a February 24^th, 2003 offer, prepared by Magee, relating to the 2003 Deal (“the 2003 offer”), and the eventual sale of the property in 2005 to the respondent CLE 72330 Ontario Ltd. (“CLE”), whose principal is Chris Eftimovski (“Eftimovski”).

[6] In his statement of claim, the appellant alleges breach of contract and breach of fiduciary duties on the part of Magee and Rosner in their representation of the appellant as real estate agents in the listing, marketing and selling of the property. Re/Max is alleged to be vicariously liable for Magee in relation to the 2005 transaction only, as Magee was not associated with Re/Max at the time of the 2003 transaction. The Laskowsky respondents are solicitors alleged to have been retained by the appellant in relation to the 2005 transaction. The claims against them involve allegations of professional negligence and an accounting of the proceeds of the sale.

[7] The genesis of the various actions was a charge that the appellant placed on his property on October 23, 2001, in favour of Three Seasons Homes Limited (“Three Seasons”). This charge became the source of conflict between the appellant and the respondents and eventually gave rise to this action and another action in London (the “London Action”).

[8] The London Action was commenced in February 2007 as a claim by Eftimovski and his company, CLE, against the appellant for breach of contract and declaration that any and all amounts awarded to either of Eftimovski and/or CLE may be set off against a mortgage between CLE as mortgagor and the appellant as mortgagee registered against the property. The appellant was noted in default in the London Action in June 2007. In August 2010, the appellant successfully brought a motion to have the default judgment in the London Action set aside. Subsequently, the appellant filed a statement of defence and counterclaimed against Eftimovski and CLE. There was no evidence placed before this court as to the current status of the London Action.

(2) The Evolution of the Barrie Action

[9] Subsequent to the commencement of the London Action, the appellant commenced the Barrie Action in December 2007 against nine named defendants. The chronology of events was aptly set out by the status hearing judge in her reasons and, for convenience, I reproduce it below:

The action was commenced on December 12, 2007 by way of notice of action, and the claim issued on or about January 11, 2008.

Within the six month time period permitted for service of that pleading, the plaintiff had served only four of the nine defendants.

On the last day on which service could be effected without an order extending the time for service, the plaintiff’s lawyer wrote to the firm of Miller Thomson, who represented Magee in a 2005 action with respect to the 2003 transaction, to ask that they accept service on Magee’s behalf. Miller Thomson declined as they were not in a position to accept service on his behalf.

In separate correspondence delivered in June and July, 2008, McLarens Canada, the independent adjuster appointed by Re/Max and Carriage South’s insurer, confirmed that they had been given an open indulgence by the plaintiff’s solicitor in order for them to carry out their investigation of the matter.

On December 9, 2008 the plaintiff obtained an order extending the time for service of the claim. With only five days left to serve Magee under the extension order, the plaintiff obtained an order for substituted service on Magee, which order was obtained on February 10, 2009.

On February 19, 2009 the plaintiff’s lawyer follows up with McLarens and requested that a statement of defence be delivered by the end of the month. On that same date, McLarens delivered correspondence indicating that their investigation had been completed and requesting that the time frame for filing the statement of defence for Carriage South be extended to the end of March 2009.

On April 12, 2009 the defendant Anthony Laskowsky died.

On May 6, 2009 Miller Thomson served its notice of intent to defend, and requested that the action be dismissed against Re/Max without costs. Having had no response from the plaintiff’s lawyer, follow up correspondence was sent on August 20 and November 24, 2009, making the same request to have Re/Max let out of the action. The plaintiff’s lawyer finally responded on April 12, 2010, at which time he acknowledged receipt of the several letters sent throughout the previous year and indicated that he would get instructions on or before the end of the month. He did not provide an answer to Re/Max’s request until after the status hearing notice had been issued [in 2011].

On July 4, 2010 the defendant Wally Magee died.

On July 23, 2010 the plaintiff obtained an order to continue against Laskowsky’s estate.

In November 2010 the plaintiff’s counsel suggested mediation. In his correspondence the plaintiff’s lawyer acknowledges that there are evidentiary difficulties because of the intervening deaths of Magee and Laskowsky. At the time that this request was made the pleadings had not been finalized, no affidavits of documents had been exchanged nor had any examinations taken place.

At some point a Demand for Particulars had been made by Carriage South, although the date on which that document was served was not in evidence.

In January 2011 counsel for the defendant Laskowsky requested that a Status Notice be issued, and such Notice was issued on April 5, 2011.

A status hearing was set for June 29, 2011. Between the time that the status notice was issued and the first attendance at the status hearing, the plaintiff took no steps to move this action forward.

On the day before the hearing, the plaintiff filed an affidavit and the hearing was adjourned to permit the defendants to file responding materials. In that affidavit the plaintiff deposed that “the defendant Carriage South Simcoe Realty Limited has been pressing us for particulars of my claims against them and we have just completed a formal response to their demand for particulars”.

The status hearing was ultimately adjourned to February 2, 2012. At the time of the hearing, pleadings had not been finalized, no documentary productions had been exchanged and no examinations for discovery had taken place. [Emphasis added.]

[10] As noted by the status hearing judge, two of the respondents, Anthony Laskowsky and Wally Magee, passed away before either of them could be examined for discovery in relation to this action.

(3) Decision of the status hearing judge below

[11] In her decision, the status hearing judge set out the two-part conjunctive test to determine whether the appellant’s action should be dismissed for delay. She quoted from Savundranayagam v. Sun Life Assurance Co. of Canada (2008), 2008 CanLII 54788 (ON SCDC), 67 C.C.L.I. (4th) 241 (Ont. Div. Ct.):

[T]he onus is on the plaintiff to show why the action should not be dismissed for delay at the status hearing.

the plaintiff must explain the delay so as to satisfy the court that the action should proceed; and

the plaintiff must satisfy the court that there would be no prejudice to the defendants.

[12] The status hearing judge set out a detailed and thorough chronology of key events and found that, from the affidavit evidence before her, there were many unexplained delays in the proceeding. She rejected the appellant’s arguments that the respondents’ conduct in any way prejudiced the manner in which the appellant prosecuted the action. She found that the appellant did not seek statements of defence, affidavits of documents or dates for examinations of the respondents.

[13] The status hearing judge noted that her findings on delay were sufficient by themselves to warrant dismissal of the appellant’s action. Nonetheless, she went on to consider whether the respondents were prejudiced by the delay in prosecuting the action. She found that the deaths of two parties who were also material fact witnesses would result in severe non-compensable prejudice to the respondents if the action were allowed to continue. The status hearing judge rejected the appellant’s argument that such prejudice would be attenuated because of evidence captured from the examination of Magee in another proceeding involving the 2003 action. In any event, no evidence had been captured or otherwise preserved from Laskowsky in relation to either action.

[14] Accordingly, the status hearing judge dismissed the appellant’s action for delay.

(4) The position of the appellant

[15] Since the record at the status hearing was comprised mainly of documentary evidence, the appellant urges this court to review the status hearing judge’s decision on a less deferential standard of review.

[16] The appellant argues that the respondents should be held to account for their fair share of the delay and prejudice that has plagued this action since its inception in 2007. In particular, the appellant points to the London Action and the default judgment that was taken out against the appellant. The appellant’s position is that the default judgment obtained in the London Action created a situation where this action could not proceed because of issues relating to issue estoppel or abuse of process.

[17] The appellant further argues that the test applied to dismiss an action for delay at a status hearing under rule 48.14(13) should be the same as that applied under the rule governing a motion brought by a defendant to have a plaintiff’s action dismissed for delay pursuant to rule 24.01(1).

[18] In addition, the appellant argues that the status hearing judge erred by referring to and applying the finality principle, set out by this court’s decision in Marché D’Alimentation Denis Thériault Ltée v. Giant Tiger Stores Ltd., 2007 ONCA 695, 87 O.R. (3d) 660.

(5) The position of the respondents

[19] The respondents state that the correctness standard of review applies to the case at bar. Therefore, absent a clear error in law or a palpable overriding error of fact, the status hearing judge’s decision is entitled to significant deference.

[20] The respondents submit that the appeal should be dismissed as the appellant largely seeks to re-argue the case that was before the status hearing judge. In essence, the respondents argue that the status hearing judge’s decision should be upheld because the appellant did nothing to advance this action, initiated in 2007, until the status hearing three and a half years later.

[21] The status hearing was set for June of 2011 but was adjourned the day before the hearing to grant the respondents time to respond to an affidavit filed last-minute by the appellant. At the status hearing in February of 2012, the respondents submit, the action was properly dismissed for delay.

C. ANALYSIS

(1) Standard of review

[22] At a status hearing, the decision to dismiss an action for delay is discretionary. Accordingly, on appeal, the decision attracts deference but may be set aside if it discloses palpable and overriding errors of fact or is made on the basis of an erroneous legal principle: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544, 112 O.R. (3d) 67, at para. 16. I cannot accept the appellant’s submission that this court owes less deference to the decision of this particular status hearing judge.

(2) Dismissal of actions for delay under the Rules of Civil Procedure

[23] The Rules of Civil Procedure provide for many different procedural mechanisms to dispose of an action without a trial. Of these, rules 24.01 and 48.14(13) enable a court to dismiss an action for delay.

[24] Rule 1.04 governs the interpretation of the rules. Rule 1.04(1) states that the “rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” On a plain reading of this rule, the competing concerns within the context of a disposition without trial are obvious. Namely, when exercising its discretion under rules 24.01 or 48.14(13) to dismiss an action for delay, a court must balance the plaintiff’s interest in having a hearing on the merits and the defendant’s interest in having the matter resolved in an expedient and time-efficient manner.

[25] This court has made it clear that the tests to be applied under rules 24.01 and 48.14(13) are distinct from one another: Bolohan v. Hull, 2012 ONCA 121, 99 C.C.E.L. (3d) 307, at para. 12.

[26] The appellant, however, made submissions in his factum to the contrary. As such, I believe it is prudent to say a brief word about the applicable tests.

(3) Rules 24.01 and 48.14(13)

[27] Rule 24.01 provides:

(1) A defendant who is not in default under these rules or an order of the court may move to have an action dismissed for delay where the plaintiff has failed,

(a) to serve the statement of claim on all the defendants within the prescribed time;

(b) to have noted in default any defendant who has failed to deliver a statement of defence, within thirty days after the default;

(c) to set the action down for trial within six months after the close of pleadings;

[Revoked.]

(e) to move for leave to restore to a trial list an action that has been struck off the trial list, within thirty days after the action was struck off.

[28] Therefore, rule 24.01 enables a defendant who has complied with the rules to take a deliberate procedural step to dismiss an action where the plaintiff has been delinquent in an enumerated manner. In Langenecker v. Sauvé, 2011 ONCA 803, 286 O.A.C. 268, Doherty J.A. described the two types of cases resolved by the exercise of a motion judge’s discretion under rule 24.01:

The first type of case … refers to those cases in which the delay is caused by the intentional conduct of the plaintiff or his counsel that demonstrates a disdain or disrespect for the court’s process. In dismissing cases which fall within this category, the court effectively declares that a continuation of the action in the face of the plaintiff's conduct would constitute an abuse of the court's process. These cases, thankfully rare, feature at least one, and usually several violations of court orders.

The second type of case that will justify an order dismissing for delay has three characteristics. The delay must be inordinate, inexcusable and such that it gives rise to a substantial risk that a fair trial of the issues in the litigation will not be possible because of the delay.

[29] Rule 48, on the other hand, provides a number of mechanisms to enable the court to control the pace of litigation. This is an important function and supports the desirable objective of resolving legal disputes in a time-efficient manner. One part of this mechanism is the registrar’s ability to serve a status notice to prompt action by a delinquent plaintiff under either rule 48.14(1) or rule 48.14(2).

[30] After the relevant status notice is served, rule 48.14(8) enables a party to request that the registrar arrange a status hearing. The disposition of a status hearing is governed by rule 48.14(13).

[31] Rule 48.14(13) provides that:

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

(a) if the presiding judge or case management master is satisfied that the action should proceed, the judge or case management master may,

(i) set time periods for the completion of the remaining steps necessary to have the action placed on or restored to a trial list and order that it be placed on or restored to a trial list within a specified time,

(ii) adjourn the status hearing to a specified date on such terms as are just, or

(iii) if the action is an action to which Rule 77 may apply under rule 77.02, assign the action for case management under that Rule, subject to the direction of the regional senior judge,

(iv) make such other order as is just; or

(b) if the presiding judge or case management master is not satisfied that the action should proceed, the judge or case management master may dismiss the action for delay. [Emphasis added.]

[32] The plain wording of rule 48.14(13) makes clear that the onus is on the plaintiff to demonstrate why the action should not be dismissed for delay. The test, as stated by the status hearing judge in the case at bar, 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: Khan v. Sun Life Assurance, 2011 ONCA 650, at para. 1.

[33] Since the purpose of Rule 48 is to enable the court to control the pace of litigation and ensure that disputes are resolved in a time-effective manner, imposing the onus on the plaintiff to show cause why the action should not be dismissed for delay is fair. This court has held that the responsibility to move the action along lies chiefly with the plaintiff. Accordingly, the plaintiff also bears the consequences of conducting its action in a dilatory manner: see Wellwood v. Ontario Provincial Police, 2010 ONCA 386, 102 O.R. (3d) 555, at para. 48.

[34] In my view, rules 24.01 and 48.14(13) each offer distinct means that may lead to the same end; the dismissal of the plaintiff’s action for delay.

[35] In the case of a motion to dismiss for delay brought by the defendant, the defendant must not be in default under the rules and the plaintiff must be delinquent by having failed to: serve the statement of claim on all defendants within the prescribed time; note in default any defendant who has failed to deliver a statement of defence within thirty days after the default; set the action down for trial within six months after the close of pleadings; or move for leave to restore an action to the trial list within thirty days after the action was struck off.

[36] These are short timelines. As P.M. Perell & J.W. Morden describe in The Law of Civil Procedure in Ontario, 1st ed. (Markham: LexisNexis Canada, 2010), at p. 418, motions to dismiss for delay are rarely brought by defendants despite the fact that many actions do not advance within the time standards prescribed by rule 24.01. The authors explain that this is because judges and masters are reluctant to deny a plaintiff his or her day in court at a point that might be quite early in the proceedings.

[37] Accordingly, a high threshold has been established to dismiss an action for delay under rule 24.01. The test has developed from a line of jurisprudence originating with the English case of Allen v. Sir Alfred McAlpine & Sons Ltd., [1968] 2 Q.B. 229 (C.A.). On a rule 24.01 motion, an action should not be dismissed unless: (a) the delay is intentional and contumelious; or (b) the plaintiff or his or her lawyers are responsible for the inexcusable delay that gives rise to a substantial risk that a fair trial might not now be possible: see Woodheath Developments Ltd. v. Goldman (2001), 2001 CanLII 28019 (ON SC), 56 O.R. (3d) 658 (Master), aff’d. (2003) 2003 CanLII 46735 (ON SCDC), 66 O.R. (3d) 731 (Div. Ct.), leave to appeal refused (2004) 44 C.P.C. (5th) 101 (C.A.).

[38] In Armstrong v. McCall (2006), 2006 CanLII 17248 (ON CA), 213 O.A.C. 229, at para. 11, this court explicitly adopted the test in Woodheath to be applied on a rule 24.01 motion.

[39] In the case of a status hearing, however, an opportunity for the court to consider dismissing an action for delay will not arise for a considerable period of time after the proceedings have been imitated. Rules 48.14(1) and 48.14(2), which trigger the requirement that the registrar issue a status notice, contemplate delinquency by plaintiffs which exceeds that under rule 24.01.

[40] Rules 48.14(1) and 48.14(2) provide that where a defended action has not been placed on a trial list within two years after the first defence is filed or restored to the trial list within 180 days of being struck out, the registrar shall serve a status notice on the parties indicating that the action will be dismissed for delay unless it is set down for trial within 90 days after service of the notice.

[41] The onus placed on the plaintiff under rule 48.14(13), therefore, is mandated not only by the plain wording of the rule but also by the greater severity of the plaintiff’s delinquency in pursuing its claim. In other words, at this juncture, the emphasis on the objectives expressed in rule 1.04(1) to “secure the just, most expeditious and least expensive determination of every civil proceeding on its merits” must necessarily shift towards ensuring that disputes be resolved expeditiously and in a time-efficient manner.

[42] Therefore, I conclude that the status hearing judge in the case at bar was correct to place the onus on the appellant and to apply a test similar in principle to one recently confirmed by this court in 1196158 Ontario Inc. At para. 32 of 1196158, the court held that a plaintiff bears the burden of demonstrating that there is an acceptable explanation for the delay in the litigation and that, if the action was allowed to proceed, the defendant would suffer no non-compensable prejudice.

(4) Assessment of delay and prejudice in the action

[43] The status hearing judge rejected the appellant’s argument that he should be excused from the delay and the associated prejudice arising from a failure to diligently pursue the claim because of the behaviour of the respondents. I agree with her assessment.

[44] To recap, two of the respondents, Eftimovski and CLE, initiated parallel proceedings in London and subsequently obtained default judgment against the appellant. The appellant argues that issues relating to res judicata arose as a result of the default judgment and created procedural hurdles associated with setting it aside. Accordingly, he should not be held responsible for this delay.

[45] Second, Laskowsky’s death occurred during a period of indulgence granted to Re/Max and Carriage South in order for them to complete their internal investigations of the allegations made in the claim. Accordingly, the appellant argues that he should not be held responsible for the obvious prejudice that flows from the lack of evidence from Laskowsky.

[46] I reject these arguments. The status hearing judge’s assessment must be considered in light of the general rule that “the party who commences the proceeding bears primary responsibility for its progress”: Wellwood, at para. 48.

[47] I acknowledge that it may be frustrating to a party when its adversary initiates a proceeding in another jurisdiction. However, I am unmoved by the facts of the case before me. Eftimovski and CLE issued their action against the appellant on February 13, 2007. They obtained default judgment in June 2007. The appellant did not initiate his action until December 12, 2007 nor did he defend or otherwise deal with the Eftimovski and CLE action until August 2010.

[48] With respect, the fact that default judgment was obtained six months before the appellant initiated his action in another jurisdiction serves only to highlight the dilatory conduct of the appellant in this action. It raises more questions about why the appellant felt it was necessary to initiate the Barrie Action in the first place. Therefore, I am not convinced that the status hearing judge somehow wrongfully held the appellant responsible for the delay in the action.

[49] With respect to the appellant’s failure to examine Laskowsky for discovery during the period of indulgence granted to Re/Max and Carriage South, it is noteworthy that Laskowsky himself did not request a period of indulgence from the appellant. Accordingly, Laskowsky was free to be examined for discovery by the appellant between the issuance of the action in December 2007 and Laskowsky’s death in April 2009.

[50] It was incumbent on the appellant to conduct his action in a proactive manner. Accordingly, in my view, it is not unfair to ascribe the prejudice caused by Laskowsky’s death to the appellant.

[51] I conclude that the status hearing judge did not err in her assessment of delay and prejudice to the appellant. Therefore, I would not give effect to this ground of appeal.

(5) The applicability of the finality principle

[52] As I read her reasons, I do not take the status hearing judge as having applied the finality principle articulated by this court in Marché D’Alimentation Denis Thériault Ltée. Rather, it appears that she was merely paraphrasing this court’s pronouncement of the policy rationale that 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.

D. DISPOSITION

[53] In my view, the decision of the status hearing judge was thorough and demonstrated a keen understanding of the factual matrix surrounding the conduct of this action. Therefore, I would dismiss the appeal.

[54] I would not interfere with the costs order fixed by the motion judge. On the appeal, costs are fixed at $10,500 to the respondents, inclusive of all applicable taxes and disbursements.

Released:

“PR” “M. Tulloch J.A.”

“JUN -4 2013” “I agree R.A. Blair”

“I agree Paul Rouleau J.A.”