Court of Appeal for Ontario

Date: 20240312 Docket: COA-23-CV-0676

Pepall, George and Dawe JJ.A.

Between

Emad Beshay Plaintiff (Appellant)

and

Amgad Labib and Hiat Labib Defendants (Respondents)

Counsel: Michael A. Katzman, for the appellant Asher G. Honickman, for the respondents

Heard: February 27, 2024

On appeal from the order of Justice M.J. Lucille Shaw of the Superior Court of Justice, dated May 15, 2023.

Dawe J.A.:

[1] The appellant, Emad Beshay, appeals from an order under r. 48.14(7)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, dismissing his action for delay after a status hearing.

[2] Following the oral hearing, the appeal was dismissed for reasons to follow. These are those reasons.

A. Background

[3] The appellant purchased a business – a preschool named Forest Grove Academy of Arts & Technology Inc. – from the respondents, Amgad and Hiat Labib, in December 2015. A year later, in December 2016, the appellant commenced an action against the respondents for breach of contract and negligent or fraudulent misrepresentation, based on his allegation that the business was not as profitable as had been represented to him by the respondents. He sought recission of the purchase agreement or, in the alternative, damages. The respondents have defended the action and deny the appellant’s claims.

[4] After exchanging pleadings, counsel for the parties exchanged occasional correspondence over the next five years, but the appellant did nothing further to move the litigation forward.

[5] Between April and November 2017, counsel exchanged correspondence with a view to arranging a settlement meeting. This led to a meeting between the parties being set for a date in December 2017, but the appellant cancelled it on the morning of the meeting. Counsel then agreed that they would arrange a telephone call to discuss the matter, but this call was repeatedly postponed because the appellant’s counsel was still waiting for documents from the appellant.

[6] In April 2018, the respondents’ former counsel wrote to counsel who was then acting for the appellant, stating that she was concerned by the delay. Counsel for the appellant responded and said the appellant needed some more time to deal with the matter because there had been three deaths in his family in the last three months. She indicated that she would provide an update after following up with the appellant the following week. However, as the motion judge noted in her reasons, “[the appellant’s] counsel did not provide an update the following week and did not contact the [respondents’] counsel for another four years”.

[7] Rule 48.14(1) directs the registrar to dismiss actions that have not been set down for trial within five years. However, in March 2020, the Superior Court of Justice suspended operations on account of the COVID-19 pandemic, which resulted in all filing deadlines being extended for six months. As a consequence, the r. 48.14(1) deadline in this case was extended from December 2021 to June 2022.

[8] In April 2022, the appellant’s counsel wrote to the respondents’ former counsel, seeking their consent to extend the time for setting the action down for trial, and proposing a litigation timetable. When the respondents’ former counsel did not respond, the appellant brought a motion for a status hearing under r. 48.14(5). This motion was originally returnable in June 2022, but it was adjourned several times. In September 2022, while his motion was still pending, the appellant served his affidavit of documents.

[9] The appellant’s motion was eventually heard in April 2023, and on May 15, 2023, the motion judge made an order under r. 48.14(7)(a) dismissing the action for delay.

B. Analysis

[10] The appellant appeals from the dismissal order, alleging that the motion judge failed to properly apply the established legal test for dismissing actions for delay.

[11] This legal test is well-settled: see 1196158 Ontario Inc. v. 6274013 Canada Limited, 2012 ONCA 544, 112 O.R. (3d) 67. The plaintiff must establish that there is “an acceptable explanation” for the delay, and must also demonstrate that the defendant will not suffer any non-compensable prejudice if the action is allowed to proceed. As Sharpe J.A. explained in 1196158 Ontario Inc., at paras. 32-33:

The test is conjunctive, not disjunctive. Even if the plaintiff can provide a satisfactory explanation for the delay, the action will be dismissed if there would be prejudice to the defendant. And if the plaintiff is not able to provide a satisfactory explanation for the delay, it is still open to the judge to dismiss the action, even if there is no proof of actual prejudice to the defendant.

As I have noted, the goal of the civil justice system is [to] ensure "the just, most expeditious and least expensive determination of every civil proceeding on its merits". Consideration of actual prejudice focuses on the just determination of the dispute on its merits. The absence of actual prejudice does not automatically or inevitably trump the values of timeliness and efficiency. At some point, a party who has failed to respect the rules designed to ensure timely and efficient justice loses the right to have its dispute decided on the merits. If that were not the case, the rules and the timelines they impose would cease to have any meaning and any hope of ensuring timely and efficient justice would be seriously jeopardized.

[12] It should be noted that the Rules previously required dilatory plaintiffs to bring a motion under r. 48 if an action had not been set down for trial within two years, but this deadline has now been extended to five years. This affects the balance between the competing policy goals of having civil actions decided on their merits and of “ensur[ing] timely and efficient justice”.

[13] The appellant acknowledges that the motion judge correctly instructed herself on the applicable legal principles, but contends that she “fail[ed] to take a contextual approach to her analysis”, and that she made palpable and overriding errors both in rejecting the appellant’s explanation for his delay in moving his action forward, and in finding that the delay had caused prejudice to the respondents.

[14] The appellant’s first complaint is that the motion judge set the bar for what constitutes an “acceptable” or “satisfactory” explanation too high. He relies on cases holding that an “acceptable” explanation need only be “adequate” or “passable”, and does not necessarily have to be “good”, let alone “perfect”: see e.g., Windebank v. Toronto East General Hospital, 2022 ONSC 6913, at para. 13; Yang v. The Christian World Korea Inc., 2019 ONSC 6131, at para. 35.

[15] I am not persuaded that the motion judge held the appellant to an overly high standard. Rather, in careful and detailed reasons, she considered and rejected his explanation for the delay.

[16] The appellant sought to explain his failure to do anything to move his action forward for more than five years on the grounds that he was distracted by a series of deaths in his family in 2018; by his wife’s and his own subsequent mental illnesses; and by the COVID-19 pandemic. He also maintained that, during these years, he faced financial problems that impeded his ability to attend to the litigation he had started.

[17] The motion judge accepted that the appellant and his wife had been distressed by the 2018 deaths in their family. However, she found that his further claim that they had both been afflicted by mental illnesses that impeded his ability to prosecute his action was undermined by his failure to provide any supporting evidence. As she explained in her reasons:

No evidence was presented regarding the nature of [his wife’s] illness or its impact on the plaintiff or his wife. It is a bald assertion in his affidavit. Furthermore, when he was cross-examined on his affidavit, he was unsure whether she had even sought medical treatment for this mental illness.

I accept that there were several deaths in the plaintiff’s family in 2018 that no doubt led to a period of distress and anxiety for the plaintiff and his wife. However, in the absence of cogent evidence of the nature of the wife’s illness or how it contributed to the plaintiff’s inability to pursue this litigation, I find this reason to be unacceptable and unreasonable. Just as his lawyer wrote to plaintiff’s counsel in April 2018 regarding the deaths in his family, he could have instructed his lawyer to request a further indulgence from the defendants if his focus was on caring for his wife as he claims. As the onus is on the plaintiff to provide a reasonable explanation for the delay, a bald assertion that his wife’s illness prevented him from pursuing the litigation is insufficient to discharge that onus.

The plaintiff also claims that his own mental hea[l]th impeded his ability to diligently pursue this action. The plaintiff alleges that the source of his anxiety was the unprofitability of the business and the impact of COVID‑19. Again, this is a bald assertion without any supporting corroboration such as a medical note from his family doctor.

[18] The motion judge also relied on evidence that during the years when the appellant claimed that he was too ill and too distracted by his wife’s illness to attend to his civil action, he had been running two businesses, and also owned and rented out multiple properties. The motion judge concluded:

Looking at this evidence cumulatively leads me to reject the plaintiff’s evidence that some of the delay was due to his focus on his wife’s health or his own mental health. Since the action was commenced in December 2016, the plaintiff has been able to run his IT business, the daycare, and act as a landlord. His ability to manage many tasks makes these particular explanations for delay ring hollow. This is particularly so in the absence of evidence, other than bald assertions, about his and his wife’s health.

[19] The motion judge also did not accept the appellant’s explanation that he had been distracted by financial concerns due to the preschool being less profitable than he had expected and its closing for a number of months during the COVID-19 pandemic. She noted that the appellant also owned a second business that provides IT services; that he owned three residential properties, two of which he rented out; and that in August 2022 a $1,000,000 mortgage registered to one of the properties had been discharged. The motion judge also observed that the appellant’s tax returns showed that his annual income was always over $100,000, and that in 2018 and 2019 he donated several thousand dollars to charity. She concluded:

[H]is explanation that his financial circumstances were a cause for delay also seems suspect. It is difficult to accept that an individual who owns three homes in Oakville and operates an IT business lacks the financial ability to pursue litigation he has commenced. I also have difficulty accepting his claims of financial strain given his inability to provide explanations for the various mortgages registered and discharged on title to these properties.

I accept that the pandemic did affect the business which had to cease operations for a period. This would have resulted in negative financial consequences to the [appellant]. However, he was able to continue to own three properties in Oakville. If his financial circumstances were so strained to the extent that he could not pursue this litigation, presumably he had the option of selling some of his real estate holdings, particularly as the real estate market gathered steam during the pandemic.

[20] The motion judge then summed up her conclusions in the following terms:

When a party asks the court to find that their explanations for delay are reasonable, I expect that the party making the request would put their best foot forward and present cogent evidence to support those explanations. Bald assertions of illness or financial strain are insufficient to discharge that onus.

[21] The appellant acknowledges that “a decision to dismiss an action for delay at a status hearing is discretionary and entitled to deference on appeal”: 1196158 Ontario Inc., at para. 16. I am not persuaded that the motion judge made any palpable and overriding errors in her assessment of the evidence that would permit this court to interfere with her fact-driven conclusions. To the contrary, her findings of fact, and the further inferences that she drew from them, were all readily available on the record before her.

[22] The appellant argues further that the motion judge erred by not assigning any weight to the respondents’ own inaction after April 2018.

[23] As stated in 1196158 Ontario Inc., at paras. 28-29, a “party who commences the proceeding bears primary responsibility for its progress”. However, a defendant’s passivity in the face of inaction by the plaintiff may be a relevant factor in the contextual analysis.

[24] In my view, the failure by the motion judge to address this factor expressly in her reasons was of no consequence, given her unambiguous rejection of the appellant’s explanation for his delay from April 2018 to April 2022. It was the appellant’s burden to provide “an acceptable explanation” for his failure to do anything for four years to move his action past the pleadings stage. Once the motion judge rejected all of the appellant’s proffered explanations, the respondents’ own inaction during this time period could not properly serve as a makeweight.

[25] I also see no error in the motion judge’s analysis of prejudice. The respondents presented unchallenged evidence from the former bookkeeper and lawyer for the preschool business, who both maintained that their memories of the details of the business’s financial affairs and its situation at the time of the sale in 2015 had faded over time. The respondents also presented evidence that banking records from before September 2015, which were important to the dispute between the parties over the business’s profitability, are no longer available.

[26] The appellant argues that the motion judge failed to address the conflict between his evidence and the respondents’ evidence over who had access to the banking records after the business was sold to the appellant in December 2015. However, the appellant does not dispute that the banking records at issue are no longer available, nor does he dispute that the respondents’ witnesses’ memories have faded. Rather, he argues that the respondents should be held responsible for failing to take better care to preserve relevant evidence once they were put on notice of his action. He also argues that the fading of the witnesses’ memories did not matter very much in this case since the matters in dispute between the parties would likely turn on an assessment of the documentary evidence.

[27] In my view, the motion judge’s finding that the respondents would be prejudiced by the delay if the action continued is entitled to significant appellate deference. Even if I were to accept that the respondents ought to have done more to preserve the missing banking records, I see no basis to interfere with the motion judge’s finding that key defence witnesses’ memories have faded over time. As Sharpe J.A. noted in 1196158 Ontario Inc., at para. 43:

The more time that passes, the more difficult it is to defend the case. Memories fade and even if documents are not lost, their significance becomes shrouded.

[28] In any event, it was the appellant’s burden to satisfy both branches of the applicable legal test. Even if the motion judge had not found that the respondents would suffer prejudice from the delay, she would still have been obliged to dismiss the action on the basis of her finding that the appellant had not provided any credible explanation for the delay, let alone an acceptable explanation.

[29] Finally, I do not agree that the motion judge failed to take a proper “contextual approach” to the test under r. 48.14.

[30] The main thrust of the appellant’s argument is that in April 2022, when he sought the respondents’ consent to extend the five-year r. 48.14 deadline, he proposed a litigation timetable in which the action would have been set down for trial in May 2023. The appellant argues in his factum:

It is an appealable error for the learned Motions Judge to determine that requiring the Defendant to endure an extension of the set down date by 17 months was a less desirable result than depriving the Plaintiff of his day in Court for a hearing on the merits.

A proper contextual approach would have recognized that, while delay should not be countenanced, an Action such as this which has not been inordinately delayed beyond its fifth anniversary should not be dismissed, but rather should have an expedited timeline imposed.

[31] The question of whether the balance of competing policy interests favoured granting the appellant an indulgence, despite his failure to comply with the time limits in the Rules, was a discretionary judgment call for the motion judge to make. Contrary to the appellant’s argument, there is no presumption that actions that have not been set down for trial by the five-year mark should be allowed to continue if there will not be “inordinate” further delay, even when the plaintiff has not provided an acceptable explanation for the delay. Rather, as this court noted in Burgess v. University Health Network, 2022 ONCA 105, at para. 11:

Rule 48.14 requires that courts balance the objective of resolving disputes on their merits with the objective of resolving disputes in a timely and efficient manner in order to maintain public confidence in the administration of justice. The role of the judge presiding over a status hearing is to ensure that justice is served for all of the litigants: 1196158 Ontario Inc., at para. 41.

[32] I am not persuaded that the motion judge erred in finding that the balance in this case tipped in favour of dismissing the action, bearing in mind that this was a discretionary decision that is entitled to deference.

[33] Indeed, in April 2022, the appellant did belatedly propose a litigation timetable under which the action would have been set down for trial by May 2023. This was 11 months after it should have been set down under rule 48.14, taking into account the extension of the deadline due to the pandemic. However, by the time of the status hearing in April 2023, it was clear that this timetable was no longer an option. Despite having proposed that the parties exchange their affidavits of documents by August 5, 2022, the appellant missed this deadline and did not serve his affidavit of documents until September 23, 2022. By April 2023, none of the remaining steps in the draft litigation timetable had been completed. Accordingly, if the motion judge had granted the appellant an extension of time in May 2023, which was already nearly six and a half years after the action was commenced, it was apparent that the action would not be ready for trial until well after the five-year deadline in the Rules.

C. Disposition

[34] For these reasons, I would dismiss the appeal, with costs to the respondents on a partial indemnity basis.

[35] The parties have agreed on costs. Pursuant to that agreement, I would order the appellant to pay the respondents $15,000 in costs, all inclusive.

Released: March 12, 2024 “S.E.P.” “J. Dawe J.A.” “I agree. S.E. Pepall J.A.” “I agree. J. George J.A.”