Court of Appeal for Ontario

Date: September 27, 2018 Docket: C65135

Judges: Hourigan, Nordheimer and Harvison Young JJ.A.

Between

S.I.A.S.I. Trading Limited, Paul Jankel and Saul Kenton Plaintiffs (Appellants)

and

Martin Teplitsky and Messrs. Teplitsky Colson Defendants (Respondents)

Counsel:

• David M. Goodman for the appellants
• David Robins for the respondents

Heard: September 26, 2018

On appeal from: The order of Justice Elizabeth C. Sheard of the Superior Court of Justice, dated February 15, 2018 with reasons reported at 2018 ONSC 1107.

Reasons for Decision

Introduction

[1] There were two motions before the motion judge: the appellants' motion to restore their action to the trial list and the respondents' motion to dismiss the action for delay. The motion judge dismissed the motion to restore the action and granted the motion to dismiss for delay.

[2] The appellants submit that the motion judge made numerous legal and factual errors in her analysis. In particular, they assert that she erred in identifying and applying the correct legal tests, erred in her prejudice analysis, and made various factual errors regarding the delay in this action. For the reasons that follow, we dismiss the appeal.

Background

[3] Martin Teplitsky and his law firm, Teplitsky Colson, were retained to commence an action on behalf of S.I.A.S.I. Trading Limited ("SIASI") against Labatt Brewing Company and John Labatt Limited (the "Labatt Action"). The individual appellants, along with Jonathan Barnett, are the principals of SIASI, which at the relevant time was a startup company.

[4] The gravamen of the Labatt Action was that the defendants breached a contract with SIASI for the supply of overstocked beer to Eastern Europe. The action was commenced on May 30, 1994. Following examinations for discovery, a dispute arose among the principals of SIASI regarding the funding of the litigation. On May 24, 1996, Mr. Teplitsky was instructed by Mr. Barnett to hold off on any action in the litigation, pending further instructions. Mr. Teplitsky thereafter took the position that he would not act without unanimous instructions. He agreed not to go off the record as a courtesy to his clients in order to forestall a motion by the defendants to dismiss the action.

[5] Mr. Teplitsky gave evidence at his discovery that he advised Mr. Barnett about a court notice to attend in the Labatt Action dated June 8, 2001 and was told by Mr. Barnett that "they" were not investing any more money in the proceeding. Mr. Teplitsky did not provide a copy of the notice to the individual appellants. He took no further steps in the Labatt Action and it was eventually dismissed as abandoned on July 9, 2001.

[6] This action was commenced by the appellants on July 28, 2005 (the "Teplitsky Action"). The appellants assert that they did not learn that the Labatt Action had been dismissed until August 2003. They acknowledge that there was a temporary dispute with Mr. Barnett about funding in 1996, but say that it was resolved in 1997. Their position is that they were unable to pursue the Labatt Action until August 2003 due to financial and/or health reasons.

[7] The Teplitsky Action proceeded at a slow pace, with examinations for discovery not being completed until March 2010. In August 2010, the action was struck from the trial list for failure to conduct a pretrial. There followed a motion for security for costs, which resulted in an order dated April 5, 2012 requiring the appellants to post $25,000. In his reasons on that motion, Justice O'Neill suggested that the case should proceed to mediation and that damages were a critical issue.

[8] On March 7, 2014, the appellants proposed that the parties attend mediation, but the respondents refused that suggestion because an expert report on damages had not been served. A report prepared by forensic accountant Tom Aslin (the "Aslin Report") was delivered to the respondents on March 9, 2016. It was prepared for mediation purposes only and did not purport to be an Expert Witness Report.

[9] On July 14, 2016, Mr. Teplitsky passed away. On August 3, 2016, counsel for the respondents wrote counsel for the appellants advising that he would be opposing any motion to restore the action to the trial list because the action was stayed on Mr. Teplitsky's death and his estate had been prejudiced by the delay in the prosecution of the action.

Decision of the Motion Judge

[10] The motion judge first considered the motion to restore the Teplitsky Action to the trial list. She applied the two-part test in Nissar v. Toronto Transit Commission, 2013 ONCA 361, 115 O.R. (3d) 713, which requires the moving party to establish: (i) that there is an acceptable explanation for the delay in the litigation; and (ii) that, if the action was permitted to proceed, the defendants would suffer no non-compensable prejudice. The motion judge found that the individual appellants conducted their litigation in a dilatory manner, that they failed to explain the slow pace of the litigation, and that the respondents would suffer non-compensable prejudice if the action proceeded. Consequently, she concluded that the individual appellants had failed to meet the two-part Nissar test.

[11] The motion judge then dealt with the motion to have the Teplitsky Action dismissed for delay. She granted the motion, finding that the delays in the litigation were inordinate and inexcusable. The motion judge also found that the respondents' trial rights were impaired by reason of the loss of Mr. Teplitsky as a witness and the passage of time, which made the delivery of a proper damages report more difficult.

Analysis

[12] The appellants raise ten grounds of appeal. At their essence, they amount to assertions that the motion judge erred in identifying and applying the correct legal tests under rr. 48.11 and 24.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, erred in her prejudice analysis, and made various factual errors regarding the delay in the Teplitsky Action. We see no merit in these arguments.

[13] We start by noting that decisions regarding the restoration of an action to the trial list under r. 48.11 and the dismissal of an action for delay pursuant to r. 24.01 are discretionary and are entitled to considerable deference on appeal. They will not be interfered with unless the motion judge exercised her discretion unreasonably or acted on a wrong principle: Ticchiarelli v. Ticchiarelli, 2017 ONCA 1, at para. 14.

[14] The motion judge's r. 48.11 analysis is free of error. She applied the two-part Nissar test, which, contrary to assertion of the appellants, is the proper test in the circumstances of this case, given that there was an outstanding motion for dismissal of the action.

[15] The motion judge concluded that there was no acceptable explanation for the delay proffered by the appellants. This was a finding open to her and was well grounded in the evidence. There were lengthy periods of inaction during the course of the proceeding when the appellants took no steps to advance the litigation. The motion judge gave due consideration to the surrounding circumstances of the case, including the actions of the respondents.

[16] We are also not satisfied that the motion judge erred in her analysis of non-compensable prejudice. Contrary to the position of the appellants, there is a live issue as to liability. That issue would have been decided largely on the evidence of Mr. Teplitsky regarding his instructions, his understanding of his reporting obligations, and his explanation for his actions or inaction. That evidence is no longer available. Mr. Teplitsky's evidence on discovery is not a substitute for his viva voce evidence in these circumstances. Had the case moved forward at an acceptable pace, it would have gone to trial long before Mr. Teplitsky's death. Moreover, as conceded by Mr. Aslin in the Aslin Report, it is a very difficult task to calculate damages for a startup company for an alleged breach of contract that occurred over 24 years ago.

[17] With respect to the motion judge's r. 24.01 analysis, it is also free of error. At para. 66, she correctly relied on the test articulated in Ticchiarelli that an order dismissing an action for delay will be justified "where the delay is inordinate, inexcusable, and prejudicial to the defendants in that it gives rise to a substantial risk that a fair trial of the issues will not be possible": Ticchiarelli, at para. 12.

[18] The motion judge found, as she was entitled to do on the evidence, that the delay was inexcusable and the appellants had failed to provide an adequate explanation for their delay. In that regard, she noted the lack of evidence tendered by the appellants in support of their argument that their impecuniosity was the reason for much of the delay.

[19] We also see no error in the motion judge's conclusion that the prejudice to the respondents is such that there is a substantial risk that a fair trial is not possible. In making this finding, she correctly relied on, among other things, the prejudice caused by Mr. Teplitsky's death and the difficulty in producing an expert's report on damages so long after the events in issue.

Disposition

[20] The appeal is dismissed. The respondents are entitled to their costs of the appeal, which we fix at the agreed upon sum of $10,000, all-inclusive.

"C.W. Hourigan J.A."

"I.V.B. Nordheimer J.A."

"Harvison Young J.A."