MDM Plastics Limited v. Vincor International Inc.

[Indexed as: MDM Plastics Ltd. v. Vincor International Inc.]

Ontario Reports

Court of Appeal for Ontario,

Feldman, Watt and van Rensburg JJ.A.

January 21, 2015

124 O.R. (3d) 420 | 2015 ONCA 28

Case Summary

Civil procedure — Dismissal for delay — Setting aside — Defendant consenting unconditionally to setting aside first dismissal order — Defendant refusing to consent to setting aside second dismissal order several months later — Master refusing to set aside second dismissal order — Master erring in finding that plaintiff must adduce affirmative evidence to rebut presumption of prejudice which arises from passage of time and expiry of limitation period — Any presumption of prejudice rebutted by defendant's own conduct — Defendant's interest in finality not engaged as plaintiff had acted promptly to set aside second dismissal order — Dismissal order set aside on appeal.

The plaintiff commenced an action against the defendant in February 2009. In July 2011, the registrar dismissed the action for delay. The defendant consented to setting aside this dismissal order. Several months later, the registrar again ordered that the action be dismissed for delay. The defendant refused to consent to setting aside the second order, and the plaintiff promptly brought a motion to set it aside. The master dismissed the motion. The plaintiff's appeal to the Divisional Court was allowed and the dismissal order was set aside. The defendant appealed.

Held, the appeal should be dismissed.

The master erred in finding that the presumption of prejudice which arises from the passage of time and the expiry of a limitation period can only be rebutted if the plaintiff adduces affirmative evidence. In evaluating the strength of the presumption of prejudice, the master or motion judge must consider all of the circumstances, including whether the defendant's actions are consistent with a finding of prejudice. In this case, the fact that the defendant consented to set aside the first dismissal without conditions suggested that there was no actual prejudice to its ability to defend the action at that point as a result of the delay or the dismissal. Furthermore, when the defendant consented to setting aside the [page421] first dismissal order, its counsel suggested that the parties discuss settlement, and at the time of the second dismissal order, the plaintiff was awaiting the defendant's promised response to a settlement offer that the plaintiff had made about two weeks earlier. Any presumption of prejudice was rebutted by the defendant's own conduct indicating that there was no actual prejudice to its ability to defend the action as a result of the delay. The defendant's interest in finality was not engaged because the plaintiff acted promptly in seeking to set aside the dismissal order.

Reid v. Dow Corning Corp., [2002] O.J. No. 3414, 48 C.P.C. (5th) 93, 134 A.C.W.S. (3d) 751 (Div. Ct.), revg on other grounds [2001] O.J. No. 2365, [2001] O.T.C. 459, 11 C.P.C. (5th) 80, 105 A.C.W.S. (3d) 649 (S.C.J.), apld

Wellwood v. Ontario Provincial Police (2010), 102 O.R. (3d) 555, [2010] O.J. No. 2225, 2010 ONCA 386, 262 O.A.C. 349, 90 C.P.C. (6th) 101, revg 2009 CanLII 1476 (ON SCDC), [2009] O.J. No. 235, 66 C.P.C. (6th) 48, 246 O.A.C. 71 (Div. Ct.), varg 2008 CanLII 16200 (ON SC), [2008] O.J. No. 1473, 167 A.C.W.S. (3d) 62 (S.C.J.), consd

1196158 Ontario Inc. v. 6274013 Canada Ltd. (2012), 112 O.R. (3d) 67, [2012] O.J. No. 3877, 2012 ONCA 544, 295 O.A.C. 244, 353 D.L.R. (4th) 129, 220 A.C.W.S. (3d) 533, distd

Other cases referred to

806480 Ontario Ltd. v. RNG Equipment Inc., [2014] O.J. No. 2979, 2014 ONCA 488; Aguas v. Rivard Estate (2011), 107 O.R. (3d) 142, [2011] O.J. No. 3108, 2011 ONCA 494, 7 C.P.C. (7th) 16, 282 O.A.C. 39, 335 D.L.R. (4th) 365, 203 A.C.W.S. (3d) 741; Armstrong v. McCall, 2006 CanLII 17248 (ON CA), [2006] O.J. No. 2055, 213 O.A.C. 229, 28 C.P.C. (6th) 12, 148 A.C.W.S. (3d) 229 (C.A.); Finlay v. Van Paassen (2010), 101 O.R. (3d) 390, [2010] O.J. No. 1097, 2010 ONCA 204, 266 O.A.C. 239, 318 D.L.R. (4th) 686, 188 A.C.W.S. (3d) 675; Marché D'Alimentation Denis Thériault Ltée v. Giant Tiger Stores Ltd. (2007), 87 O.R. (3d) 660, [2007] O.J. No. 3872, 2007 ONCA 695, 47 C.P.C. (6th) 233, 286 D.L.R. (4th) 487, 247 O.A.C. 22; Scaini v. Prochnicki (2007), 85 O.R. (3d) 179, [2007] O.J. No. 299, 2007 ONCA 63, 219 O.A.C. 317, 39 C.P.C. (6th) 1, 154 A.C.W.S. (3d) 1075

Rules and regulations referred to

O. Reg. 170/14 (Courts of Justice Act), ss. 10, 26(1)

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04, 37.14, 48.14, (4), (10)

APPEAL from the order of Lederer J., [2013] O.J. No. 576, 2013 ONSC 710 (Div. Ct.) allowing an appeal from the order of Master Glustein, [2012] O.J. No. 2462, 2012 ONSC 3101 (S.C.J.) dismissing a motion to set aside a dismissal for delay.

Shawn Irving and Geoffrey Grove, for appellant.

Lauren Sigal, for respondent.

The judgment of the court was delivered by

VAN RENSBURG J.A.: — [page422]

Introduction

[1] The respondent, MDM Plastics Limited (the plaintiff), commenced an action against the appellant, Vincor International Inc. (the defendant), in February 2009. In July 2011, the registrar dismissed the plaintiff's action for delay pursuant to rule 48.14(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.[^1] The plaintiff promptly sought and received the defendant's consent to set aside the dismissal order.

[2] Several months later, the registrar again ordered that the plaintiff's action be dismissed for delay. This time, the defendant refused to consent to set aside the order and the plaintiff promptly brought a motion to set it aside. Master Glustein refused to set aside the dismissal order. The plaintiff appealed to the Divisional Court. Lederer J., sitting as a single judge of the Divisional Court, reversed Master Glustein's order and permitted the action to continue. The defendant appeals Lederer J.'s order with leave.

[3] For the reasons that follow, I would dismiss the appeal.

Facts

[4] I do not intend to repeat the detailed chronology set out in the decisions below. The relevant facts can be briefly stated and will be expanded upon as necessary in these reasons.

[5] The plaintiff started an action in February 2009 concerning events alleged to have taken place in 2006 and 2007. The plaintiff claims damages in excess of $11 million arising from the defendant's alleged breach of an agreement for the long-term supply of polyethylene terephthalate bottles. The agreement and breach are denied by the defendant in its statement of defence.

[6] Counsel for the parties exchanged correspondence over the course of the action. The defendant delivered a notice of intent to defend and demanded particulars. The plaintiff provided the particulars almost a year later, and the defendant then delivered its statement of defence. The defendant also wrote to the plaintiff demanding security for costs. An amount was offered, but refused. [page423]

[7] The parties received a status notice from the court on March 24, 2011, after more than two years had passed following delivery of the notice of intent to defend without the action having been placed on the trial list. The status notice advised that the action would be dismissed for delay unless within 90 days the action was set down for trial, terminated by any means, documents had been filed in accordance with rule 48.14(10) (providing for a consent timetable), or a judge or case management master ordered otherwise at a status hearing. The status notice provided that a status hearing could be arranged on request to the registrar.

[8] The plaintiff took no action in response to the status notice. The registrar dismissed the action on July 13, 2011. On July 26, 2011, the defendant consented to an order setting aside the dismissal order. That order was dated August 18, 2011, and provided that the registrar was to issue a fresh status notice "forthwith".

[9] The registrar issued the fresh status notice on September 12, 2011. After 90 days passed without the plaintiff taking any of the steps required by the status notice, on December 21, 2011 the registrar dismissed the action for a second time.

[10] Counsel for the plaintiff did not receive the second status notice. After the dismissal order came to counsel's attention, he immediately sought the defendant's consent to set it aside. This time, the defendant refused to consent. The plaintiff then brought its motion under rule 37.14 to set aside the dismissal order.

The Master's Decision

[11] The master dismissed the motion. The master considered the factors identified in Reid v. Dow Corning Corp., [2001] O.J. No. 2365, 11 C.P.C. (5th) 80 (S.C.J.), at para. 41, revd on other grounds [2002] O.J. No. 3414, 48 C.P.C. (5th) 93 (Div. Ct.), as these factors were summarized in Marché D'Alimentation Denis Thériault Ltée. v. Giant Tiger Stores Ltd. (2007), 87 O.R. (3d) 660, [2007] O.J. No. 3872, 2007 ONCA 695, at para. 12:

(1) Explanation of the Litigation Delay: The plaintiff must adequately explain the delay in the progress of the litigation from the institution of the action until the deadline for setting the action down for trial as set out in the status notice. She must satisfy the court that steps were being taken to advance the litigation toward trial, or if such steps were not taken to explain why. . . . If either the solicitor or the client made a deliberate decision not to advance the litigation toward trial then the motion to set aside the dismissal will fail.

(2) Inadvertence in Missing the Deadline: The plaintiff or her solicitor must lead satisfactory evidence to explain that they always intended to set the action down within the time limit set out in the status notice, or request [page424] a status hearing, but failed to do so through inadvertence. In other words the penultimate dismissal order was made as a result of inadvertence.

(3) The Motion is Brought Promptly: The plaintiff must demonstrate that she moved forthwith to set aside the dismissal order as soon as the order came to her attention.

(4) No Prejudice to the Defendant: The plaintiff must convince the court that the defendants have not demonstrated any significant prejudice in presenting their case at trial as a result of the plaintiff's delay or as a result of steps taken following the dismissal of the action.

[12] The master also recognized that, in accordance with this court's decision in Scaini v. Prochnicki (2007), 85 O.R. (3d) 179, [2007] O.J. No. 299, 2007 ONCA 63, at paras. 23-24, he was required to take a contextual approach, namely, to "consider and weigh all relevant factors to determine the order that is just in the circumstances" of the case.

[13] Regarding the first Reid factor, the master determined there was no adequate explanation for the delay of almost three years between the issuance of the statement of claim and the second dismissal order. After commencing the action, the plaintiff had taken almost a year to address the defendant's repeated requests for particulars, and had taken two years to address the defendant's request for security for costs. For more than a year, plaintiff's counsel had no contact with defendant's counsel. Although counsel had some communications about settlement, there were no "ongoing settlement discussions" as the plaintiff had claimed as its explanation for the delay. The master concluded that the plaintiff had not taken any procedural steps to advance the action and thus the first Reid factor was not met.

[14] The master held that the plaintiff met the second Reid factor of inadvertence because counsel for the plaintiff had not received the second status notice. However, the master described inadvertence as a weak factor given that the plaintiff filed no evidence of its efforts to determine whether a notice had been issued despite counsel's knowledge that a fresh status notice would be issued forthwith.

[15] The master accepted that the motion had been brought reasonably promptly and that the plaintiff satisfied this aspect of the Reid test.

[16] The master considered the fourth Reid factor, prejudice, at paras. 84-87 of his reasons. The master relied on this court's decision in Wellwood v. Ontario Provincial Police (2010), 102 O.R. (3d) 555, [2010] O.J. No. 2225, 2010 ONCA 386, for the proposition that the plaintiff must lead evidence to rebut the presumption of prejudice. He observed that the plaintiff filed [page425] no evidence to rebut the presumption of prejudice, and that prejudice was a key consideration for the court in exercising its discretion. The plaintiff had failed to lead evidence of documents being preserved or witnesses being available. The master noted that the events in the action were over five years old and the limitation period had expired. The master concluded that this Reid factor strongly favoured dismissing the action.

[17] The master commented that the plaintiff did not rely on any other contextual factor in support of the motion. He went on to note that the failure to meet the Reid factors was exacerbated by the plaintiff's failure to lead any evidence of steps it had taken to prevent a second dismissal order. After weighing the factors, the master refused to set aside the registrar's dismissal.

The Appeal Decision

[18] The Divisional Court judge concluded that, while the master based his decision on the factors identified in the Reid case, he failed to consider the preference expressed in rule 1.04 of the Rules of Civil Procedure in having legal disputes determined on their merits. The Divisional Court judge further held that the master had erred in emphasizing only the plaintiff's delay, without considering the extent to which the defendant's conduct may have contributed to what occurred before the second dismissal order. At the time of the second dismissal order, the defendant's counsel had received the second status notice, but had nonetheless promised a reply to the plaintiff's settlement offer. Counsel for the defendant made no inquiries about the plaintiff's intentions in light of the status notice, and did nothing before the dismissal order was made by the registrar. The master had not considered these circumstances.

[19] The Divisional Court judge also observed that the master had adhered to a strict and narrow requirement that the plaintiff must provide evidence to rebut the presumption of prejudice. Instead, when assessing prejudice, he ought to have considered the entire context, including the defendant's consent to setting aside the earlier dismissal and the defendant's communications indicating that a response to the plaintiff's settlement offer was forthcoming. The Divisional Court judge concluded there was nothing in the record to show that the defendant was any more prejudiced when the second dismissal order was made than when it consented to setting aside the first dismissal order. According to the Divisional Court judge, the master ought to have considered the nature of the action, which is between two businesses and involves documentary [page426] evidence. In this regard, it appears that the Divisional Court judge considered the pleadings in the action, which apparently had not been filed as part of the record in the original motion: see the master's reasons, at para. 12.

[20] Balancing the delay and the prejudice against the preference that the proceedings be dealt with on the merits, the Divisional Court judge determined that the appeal should be allowed and the dismissal order set aside.

The Appeal to this Court

[21] The defendant seeks to set aside the order of the Divisional Court, and to restore the master's order refusing to set aside the registrar's dismissal of the action. The defendant submits that the Divisional Court judge erred

in failing to accord deference to the discretionary decision of the master and instead reweighing the Reid factors and the evidence in this case;

in concluding that the master had ignored the principle under rule 1.04 that cases should be determined on their merits; and

-- in his approach to the question of prejudice.

[22] For the reasons that follow, I would dismiss this appeal.

Analysis

[23] I agree with the Divisional Court judge that the dismissal order should be set aside; however, I reach this conclusion for different reasons. In my view, the appeal turns on the proper application of the fourth Reid factor of prejudice.

[24] The issue of prejudice "invariably is a key consideration on a motion to set aside a dismissal order": Finlay v. Van Paassen (2010), 101 O.R. (3d) 390, [2010] O.J. No. 1097, 2010 ONCA 204, at para. 28. While an action may be dismissed even in the absence of prejudice (see 1196158 Ontario Inc. v. 6274013 Canada Ltd. (2012), 112 O.R. (3d) 67, [2012] O.J. No. 3877, 2012 ONCA 544, at para. 32), in most cases, the question of prejudice figures largely in determining whether to set aside a dismissal for delay.

[25] The prejudice that the motion judge or master must consider is to the defendant's ability to defend the action that would "[arise] from steps taken following dismissal, or which would result from restoration of the action following the registrar's [page427] dismissal": 806480 Ontario Ltd. v. RNG Equipment Inc., [2014] O.J. No. 2979, 2014 ONCA 488, at para. 4.

[26] Judges and masters must balance this prejudice to the defendant against the prejudice to the plaintiff from having the case dismissed: Armstrong v. McCall, 2006 CanLII 17248 (ON CA), [2006] O.J. No. 2055, 28 C.P.C. (6th) 12 (C.A.), at para. 12. As Sharpe J.A. noted in Giant Tiger, at para. 34:

Expeditious justice must be balanced with the public interest in having disputes determined on their merits. Where, despite the delay, the defendant would not be unfairly prejudiced should the matter proceed for resolution on the merits, according the plaintiff an indulgence is generally favoured.

[27] Sharpe J.A. went on to explain that the principle of finality is also relevant to the fourth Reid factor. When an action has been disposed of in a party's favour, even as a result of delay and not on the merits, "that party's entitlement to rely on the finality principle grows stronger as the years pass" (at para. 38). He observed that "even when the party relying on the order could still defend itself despite the delay . . . at some point the interest in finality must trump the opposite party's plea for an indulgence". Sharpe J.A. concluded that, "when viewed in the light of [a significant delay], the security of the legal position obtained by the [defendant] becomes an important factor to consider" (at para. 40).

[28] The master in the present case relied on this court's decision in Wellwood in applying the fourth Reid factor. In Wellwood, the registrar issued administrative dismissals as a result of non-compliance with a case management rule that has since been repealed, requiring a plaintiff to take certain steps after service of its claims, failing which an administrative dismissal would occur. Instead of promptly moving to set aside each of the two dismissals as required by rule 37.14, the plaintiff delayed for 27 months after the first dismissal and almost 17 months after the second before serving his motion materials. The master found that the plaintiff failed to discharge the onus to establish that this delay was inadvertent rather than intentional. The limitation period expired in January 2006, after the administrative dismissals had occurred, and when there was no action pending against the defendants.

[29] The master in Wellwood held that, in the circumstances of that case, there was deemed prejudice to the defendants [2008 CanLII 16200 (ON SC), [2008] O.J. No. 1473, 167 A.C.W.S. (3d) 62 (S.C.J.)]. The Divisional Court allowed the appeal [2009 CanLII 1476 (ON SCDC), [2009] O.J. No. 235, 66 C.P.C. (6th) 48 (Div. Ct.)], and the majority of this court restored the master's order. Writing for the majority, Cronk J.A. noted that the expiry of a limitation period "can give rise to some presumptive [page428] prejudice, the strength of which increases with the passage of time" (at para. 60). Cronk J.A. distinguished the situation in that case from one where an action was commenced within a limitation period and the progress of the action thereafter was protracted (at paras. 69-70).

[30] Cronk J.A. explained, at para. 79, that the invocation of the finality principle as described in Giant Tiger was dispositive of the central issue on the motion to set aside the dismissal orders. The plaintiff in Wellwood failed to provide a satisfactory explanation for his delay in moving to set aside the dismissal orders and, on the findings of the master, the delay caused by the plaintiff was intentional. Moreover, the plaintiff was seeking to deprive the defendants "of the security of the position gained by them from the delay-induced dismissal orders and the subsequent expiry of the limitation period" (at para. 74). Accordingly, this was a case where "finality must trump" (at para. 79).

[31] In the present case, the master referred to the passage of over five years since the occurrence of the events in issue and to the expiry of the limitation period as reasons for finding that the fourth Reid factor strongly favoured dismissing the motion. In my view, the master proceeded on erroneous legal principles in reaching this conclusion.

[32] First, in my view, the master erred in interpreting the majority's decision in Wellwood as establishing that the presumption of prejudice which arises from the passage of time and the expiry of a limitation period can only be rebutted if the plaintiff adduces affirmative evidence. I do not read Wellwood as standing for the general proposition that the plaintiff must lead affirmative evidence to rebut a presumption of prejudice that arises from the passage of time in prosecuting an action or from the expiry of a limitation period. Rather, in evaluating the strength of the presumption of prejudice, the master or motion judge must consider all of the circumstances, including the defendant's conduct in the litigation: see Aguas v. Rivard Estate (2011), 107 O.R. (3d) 142, [2011] O.J. No. 3108, 2011 ONCA 494, at paras. 18-19.

[33] As the majority noted in Aguas, at para. 19, the plaintiff bears the primary responsibility for the progress of an action under the Rules of Civil Procedure: see, also, Wellwood (C.A.), at para. 48. Nonetheless, in balancing the competing interests that are at stake on a motion to set aside a dismissal, the effect of the plaintiff's delay in prosecuting an action on the defendant's ability to defend the action is of primary importance. In this regard, the court must consider whether the defendant's actions are consistent with a finding of prejudice: see Aguas, at para. 21. [page429]

[34] In this case, the defendant consented without conditions to setting aside the first dismissal order less than six months before the second dismissal order was made. While the order that was made by the court included the term that another status notice would be issued, that was not a term of the defendant's consent. The fact that the defendant consented to set aside the first dismissal without conditions suggests that there was no actual prejudice to its ability to defend the action at that point as a result of the delay or the dismissal.

[35] Furthermore, when the defendant consented to setting aside the first dismissal order, its counsel suggested that the parties discuss settlement, and at the time of the second dismissal order, the plaintiff was awaiting the defendant's promised response to a settlement offer that the plaintiff had made about two weeks earlier. The defendant's willingness to discuss settlement notwithstanding that the action had been administratively dismissed is, without further explanation, inconsistent with a presumption of prejudice arising from the delay in prosecuting the action or from the expiry of the limitation period in this case.

[36] The master considered significant the plaintiff's delay in providing particulars and security for costs. The defendant did not pursue either issue by motion to the court. While there was no obligation on the defendant to do so, the fact that it had the ability to address these matters and chose not to do so is relevant to whether any prejudice should be presumed.

[37] Thus, I agree with the Divisional Court judge that the master erred in adhering to a "strict and narrow requirement that there must be evidence provided by the plaintiff rebutting the prejudice" (at para. 34), and in the absence of such evidence, finding that prejudice strongly favoured dismissing the motion.

[38] Second, the master erred in failing to consider that the interest in finality, which was central to the holding in Wellwood, had no application in the present case. As noted above, counsel for the plaintiff did not receive the second status notice. After receiving the second dismissal order, counsel immediately sought the defendant's consent to set aside the order. Having been advised that consent was not forthcoming, counsel for the plaintiff moved promptly to set aside the dismissal order. In these circumstances, the finality principle described in Giant Tiger and relied on by the majority in Wellwood was not engaged. The defendant could not be said to have gained any security of legal position through the dismissal order given that the plaintiff immediately made it known to the defendant that it wished to have the order set aside and promptly brought the motion to set aside the dismissal. [page430]

[39] In sum, any presumption of prejudice was rebutted by the defendant's own conduct indicating that there was no actual prejudice to its ability to defend the action as a result of the plaintiff's delay in prosecuting the action. Moreover, the defendant's interest in finality was not engaged in the circumstances of this case, because the plaintiff acted promptly in seeking to set aside the second dismissal order. Accordingly, the master's finding that the fourth Reid factor strongly favoured dismissing the motion cannot stand.

[40] I pause to note that I arrive at this conclusion without relying on any conclusions respecting the nature of the action. Surprisingly, the plaintiff did not file the pleadings in support of its original motion, and this was remarked upon by the master as part of the plaintiff's failure to provide evidence to rebut prejudice: see the master's reasons, at para. 12. The pleadings were before the Divisional Court judge who concluded that this was a commercial case in which documents would be important and that would rely less on the memories of individual witnesses. It is sufficient for the purpose of this appeal to note that the nature of the action as revealed by the pleadings may be considered as part of the overall context in the exercise of the court's discretion in motions of this type.

[41] In my view, the balancing of the Reid factors favours the order made by the Divisional Court judge setting aside the dismissal. I recognize that the power to dismiss an action can be exercised in the absence of actual prejudice to a defendant: see 1196158 Ontario Inc., at paras. 32-33. Although the plaintiff's failure to prosecute this action in a timely way is indeed troubling, this is not a case like 1196158 Ontario Inc., in which the plaintiff disregarded timelines provided for in a timetable approved at a status hearing. In my view, the absence of prejudice is an important factor favouring the result reached by the Divisional Court judge.

[42] Moreover, in this case, there was no suggestion that the master viewed the lack of evidence explaining the litigation delay as a sufficient basis in itself for refusing to set aside the dismissal order. To the contrary, the master treated the plaintiff's failure to rebut the presumption of prejudice as strongly favouring dismissal of the motion. For the reasons set out above, his analysis in this regard was flawed. Having regard to the Reid factors and the overall context of this case, the following factors support the order of the Divisional Court judge setting aside the dismissal: (1) plaintiff's counsel did not receive the second status notice; (2) plaintiff's counsel moved promptly to set aside the second [page431] dismissal order; and (3) the actions of the defendant's counsel do not support actual prejudice or reliance on finality.

Disposition

[43] For these reasons, I would dismiss the appeal. I would award costs to the respondent of the appeal, including the motion for leave to appeal, fixed at $12,386, inclusive of applicable taxes and disbursements.

Appeal dismissed.

Notes

[^1]: Effective January 1, 2015, the version of rule 48.14 applicable in this case was revoked. The relevant portion of the new version of this rule provides for dismissal by the registrar where an action has not been set down for trial or terminated following either five years after its commencement or January 1, 2017, whichever is later: see O. Reg. 170/14 (Courts of Justice Act), ss. 10 and 26(1).

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