Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20220519 DOCKET: M53389

Gillese J.A. (Motion Judge)

BETWEEN

828343 Ontario Inc. Plaintiff (Moving Party)

and

Demshe Forge Inc., Robert Muddiman and SMX International Canada Inc. Defendants (Responding Parties)

Counsel: Aaron Hershtal, for the moving party Andrew Max and Asli Eke, for the responding parties

Heard: May 10, 2022 by video conference

Reasons for Decision

[1] The moving party started an action against the responding parties in May 2011. By decision dated January 18, 2022 (the “Decision”), the Divisional Court dismissed the action for delay. The moving party intended to appeal the Decision but, due to the inadvertence of counsel, missed the deadline for filing for leave to appeal by eight days.

[2] In the motion before this court (the “Motion”), the moving party asks for an extension of time to file a notice of motion for leave to appeal. The responding parties acknowledge that this court often exercises its discretion to extend deadlines missed due to the inadvertence of counsel. However, they submit this is one of those rare cases in which the moving party’s long history of procedural misconduct and its resulting impact on the responding parties, particularly Jane Muddiman, should preclude the court’s indulgence.

[3] I accept the responding parties’ submission. In my view, the justice of the case demands that the Motion be dismissed and I do so, with costs to the responding parties.

Background

[4] The moving party issued a statement of claim in this matter on May 10, 2011, claiming for breach of an alleged oral contract with the now deceased Robert Muddiman. On May 16, 2011, counsel for the responding parties served a notice of intent to defend and a demand for particulars.

[5] On November 8, 2011, the moving party’s counsel purportedly sent a letter to the responding parties’ counsel asking how to deliver a large volume of documents for particulars. Counsel also allegedly compiled an affidavit of documents and sent it, with a letter, to the responding parties’ counsel on May 18, 2012. The responding parties’ counsel received neither letter nor the documents.

[6] On May 21, 2013, the court sent out a notice of impending administrative dismissal. The responding parties’ lawyer was instructed to do nothing because the action would be dismissed if the moving party did not take any steps.

[7] On August 16, 2013, counsel for the moving party filed a trial record to set the matter down for trial. He did not notify the responding parties’ counsel, despite being advised by the court that it was his responsibility to do so. He did not include, in the trial record, the responding parties’ notice of intent or demand for particulars. The Divisional Court described the purported setting down of the action for trial as being “riddled with irregularities and completely improper.”

[8] Nearly two more years passed during which time the only steps the moving party took were to appear in assignment court and set a date for trial, again without notice to the responding parties’ counsel.

[9] On June 16, 2015, the moving party appeared in court, without notice, and obtained an order noting the responding parties in default. On May 18, 2016, it brought a motion, without notice, for judgment. It obtained a default judgment against the responding parties for $300,000, plus costs of $1,500.

[10] On December 14, 2016, counsel for the moving party registered a writ of execution against Mr. Muddiman.

[11] On January 11, 2017, counsel for the moving party purportedly sent a letter to Mr. Muddiman at his home, requesting payment. That letter was never received. Even if sent, the correspondence is contrary to the Law Society of Ontario’s Rules of Professional Conduct, because it was sent directly to a represented party rather than his lawyer: r. 7.2-6.

[12] The Divisional Court found the moving party had taken every step to advance its case “not by using the tools provided in the Rules of Civil Procedure, but, rather, by blatantly disregarding them” – the moving party’s counsel “misled the court” and “manipulated the court’s process”.

[13] The responding parties were not made aware of the default judgment until more than three years after it was obtained.

[14] In the meantime, Mr. Muddiman died suddenly on November 14, 2019. Because the responding parties were unaware of what had transpired in this proceeding, his evidence was never preserved.

[15] On January 23, 2020, the moving party retained another law firm to collect the judgment. The new lawyer sent a letter, that same day, to the late Mr. Muddiman at his home residence, demanding payment of $334,853.86.

[16] Ms. Muddiman learned of the outstanding default judgment on February 12, 2020, when she returned from a period of travel and became aware of the letter. She immediately contacted counsel for the responding parties.

[17] By April 14, 2020, as the executor of her late husband’s estate, Ms. Muddiman brought a motion to set aside the default judgment and have the action dismissed for delay. The motion judge granted the motion to set aside but declined to dismiss the action for delay. The responding parties appealed, with leave, the denial of the motion to dismiss for delay. The moving party wished to seek leave to cross-appeal the setting aside decision but failed to seek the required leave.

[18] In the Decision, the Divisional Court granted the appeal. It held that there were no means of adequately repairing the prejudice caused by the delay or the evidence lost with Mr. Muddiman’s death. The case was based on an oral contract and, without Mr. Muddiman’s evidence, “it would be difficult if not impossible to refute” the moving party’s claim.

[19] The Divisional Court refused to grant leave to the moving party to advance the cross-appeal. However, it stated that even if leave were granted, it would dismiss the cross-appeal.

[20] Ms. Muddiman’s affidavit filed on this Motion explains the toll that this litigation has taken on her. Her legal costs now exceed $100,000, the moving party has not yet paid any portion of her legal costs despite outstanding costs awards of over $27,500, and the litigation continues almost three years after her husband’s death, when she thought it was finally over after the Decision was rendered.

The Relevant Legal Principles

[21] The test on a motion to extend time is well-settled: see, for example, Enbridge Gas Distribution Inc. v. Froese, 2013 ONCA 131, 114 O.R. (3d) 636, at para. 15. The overarching principle is whether the “justice of the case” requires that an extension be given. While each case depends on its own circumstances, in deciding whether the justice of the case warrants the extension of time, the court is to take into account all relevant considerations (the “Considerations”), including:

a) whether the moving party formed a bona fide intention to appeal within the relevant time period; b) the length of, and explanation for, the delay in filing; c) any prejudice to the responding parties caused, perpetuated, or exacerbated by the delay; and d) the merits of the proposed appeal.

[22] The Decision was rendered by the Divisional Court exercising its appellate jurisdiction. Such decisions are intended to be final and a review of them, by this court, is an exception to that general rule. Before granting leave, this court should be satisfied that the proposed appeal presents an arguable question of law, or mixed law and fact, that requires the court to consider matters of public importance, such as the interpretation of legislation or clarification of some general rule or principle of law: Sault Dock Co. Ltd. v. Sault Ste. Marie (City), [1973] 2 O.R. 479 (C.A.), at para. 8. There also may be special circumstances that make the matter sought to be brought to this court a matter of public importance or involve a clear error in the Divisional Court decision that requires correction: Sault Dock, at paras. 9-10.

Analysis

The First and Second Considerations

[23] The moving party satisfies the first and second Considerations.

[24] First, the record shows that the moving party had the requisite intention within the relevant time period: it instructed its lawyer to appeal the Decision 11 days after its release, which is within the 15-day period for moving for leave to appeal set out in r. 61.03.1(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[25] Second, the period of delay is brief and the explanation for it is satisfactory. Through inadvertence, the moving party’s solicitor failed to note that leave to appeal was required, which attracted the 15-day deadline. She discovered the error eight days after the deadline had passed and moved promptly to file the Motion.

The Third Consideration – Prejudice

[26] The moving party submits that there is no prejudice to the responding parties caused by the brief period of delay.

[27] The responding parties argue that prejudice is not limited to that which is caused by the delay. Pointing to the wording of the third Consideration, set out above, it submits that prejudice to the responding parties includes prejudice that is “perpetuated or exacerbated” by the delay. Thus, they contend, although the delay in this case is short, it will perpetuate and exacerbate the prejudice to the responding parties, particularly Ms. Muddiman.

[28] The responding parties say that the prejudice they have suffered in this proceeding, caused by the moving party’s actions, includes:

a) 11 years have passed since the claim was issued and the pleadings remain open; b) the critical witness to the purported oral contract, Robert Muddiman, died without his evidence having been preserved, through no fault of his or of the responding parties. As a result, as the Divisional Court found, a fair trial is no longer possible; and c) Mr. Muddiman’s widow has suffered from: i. the continuing emotional toll of this litigation; ii. an inability to wrap up her late husband’s affairs almost three years after his death because of the continuation of this litigation; iii. the continued need to fund this litigation; iv. a further delay in recovery of her legal costs from the moving party, as all costs orders remain unpaid; and, v. the undoing of the closure she obtained when the time period for filing for leave to appeal expired.

[29] In my view, prejudice within the meaning of the third Consideration is typically confined to prejudice caused, perpetuated, or exacerbated by the delay in the filing of the notice of motion itself. The prejudice the responding parties ask this court to consider is much broader than that. Accordingly, in my view, prejudice to the responding parties in this case is more properly considered in the analysis of the justice of the case, rather than in the context of the third Consideration.

The Fourth Consideration – the Merits of the Proposed Appeal

[30] The moving party argues that the proposed appeal has merit and is of broad importance because: (i) it would require this court to determine whether the Divisional Court misinterpreted the test for dismissing an action for delay by failing to consider whether the plaintiff or its lawyer was responsible for the delay; and (ii) the Divisional Court substituted its own findings on excusability for those of the motion judge without a finding of palpable and overriding error on the part of the latter.

[31] I do not accept this submission. In my view, the proposed appeal lacks merit and, in any event, does not raise an arguable question of the sort contemplated in Sault Dock.

[32] On the issue of merit, this court’s decision in Ticchiarelli v. Ticchiarelli, 2017 ONCA 1 – relied on by the Divisional Court – is a full answer. The motion judge fell afoul of the dictates in Ticchiarelli because he blended the concepts of inordinate delay and excusable delay when concluding that the nine-year delay between the commencement of the action and the motion to dismiss for delay was not inordinate. After the Divisional Court identified the motion judge’s error, it fell to that court to properly apply the principles in Ticchiarelli. This also disposes of the submission that the Divisional Court substituted its own findings on excusability for those of the motion judge without a finding of a palpable and overriding error. The motion judge’s error was not a factual finding, subject to the palpable and overriding error standard. The error related to a principle of law and was reviewable on a correctness standard.

[33] Further, and in any event, the questions that would be raised on the proposed appeal do not fall within the ambit of those set out in Sault Dock. As I explain above, this court is to grant leave to appeal decisions of the Divisional Court only in limited circumstances. None of those circumstances apply to the proposed appeal. The questions which would be addressed are of interest only to the parties – they are not matters of public importance. Nor, for the reasons already given, is there clearly an error in the Decision which requires correction. On the contrary, the Decision is patently correct.

The Justice of the Case Weighs Against an Extension

[34] While the moving party has satisfied its burden on the first and second Considerations, as I have explained, there is no merit to the proposed appeal. Lack of merit alone can be a sufficient basis on which to deny the extension of time, particularly when the moving party seeks an extension to file a notice of leave to appeal, rather than an extension of time to file a notice of appeal: Enbridge Gas, at para. 16.

[35] In this case, I would dismiss the Motion, not only because it lacks merit but also because of the moving party’s long history of procedural misconduct and the resulting prejudice to the responding parties. In short, the justice of the case demands that the Motion be dismissed.

[36] The Divisional Court said this, when it dismissed the action for delay: “sometimes an order dismissing an action for delay is the only order that can adequately protect the integrity of the civil justice process and prevent an adjudication on the merits that is unfair to a defendant. This is such a case.”

[37] A similar sentiment applies to the determination of this Motion. Any adjudication on the merits of this proceeding could only be unfair to the responding parties. The integrity of the civil justice process demands that this proceeding end now.

Disposition

[38] Accordingly, the Motion is dismissed with costs to the responding parties fixed at $10,000, all inclusive.

“E.E. Gillese J.A.”