CITATION: Deverett Professional Corporation v. Canpages Inc., 2013 ONSC 6954
DIVISIONAL COURT FILE NO.: DC-531-12
DATE: 2013/11/12
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. Mackinnon J
BETWEEN:
Deverett Professional Corporation
Plaintiff /Appellant
– and –
Canpages Inc.
Defendant /Respondent
Michael S. Deverett and Matthew Newton for the Plaintiff/Appellant
Ron Aisenberg for the Defendant/ Respondent
HEARD in Toronto: November 5, 2013
REASONS FOR JUDGMENT
[1] This is an appeal to a single judge of the Divisional Court from the Order of Master Graham dated October 12, 2012, dismissing the action with costs at a status hearing. The claim is by the plaintiff law firm for damages arising from an alleged breach of contract dated January 22, 2009, and the defendant’s negligence in failing to publish its advertisements in local telephone directories, allegedly as retaliation for the plaintiff having acted for a former employee of the defendant.
[2] The Statement of Claim was issued on December 22, 2009. The defendant served its Statement of Defence and Counterclaim on February 12, 2010. There was no communication between the parties prior to the receipt by the plaintiff of the Status Notice from the court on January 13, 2012. Then, on March 14, 2012, the plaintiff contacted defendant’s counsel to request consent to a timetable for the further steps in the action. The defendant did not consent. The appellant requested a status hearing. The Notice of Status Hearing was received from the court on March 29, 2012. The status hearing was originally scheduled for June 13, 2012. At that time, it was adjourned for a full hearing, held on October 10, 2012.
[3] The Master dismissed the action. His core reasons for so doing are set out at paragraph 15 of his Endorsement:
In summary, the plaintiff has not provided an acceptable explanation for the litigation delay which, based on the passage from 1196158 Ontario Inc. at paragraph [7] above, is sufficient reason to dismiss the action. In addition, however, the plaintiff has only partly met its onus to demonstrate that if the action proceeded, there would be no prejudice to the defendant. Therefore, the action must be and is hereby dismissed.
Standard of Review
[4] It is common ground that the Master’s Order dismissing the action for delay is discretionary and is entitled to deference on appeal. It may be set aside if it was made on the basis of an erroneous legal principle, or if it discloses a palpable and overriding error of fact. It is not the function of a reviewing court to weigh the various factors and come to its own conclusion as to how to exercise an available discretion.
Rule 48.14
[5] Rule 48.14 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, governs the procedure of a status hearing. Sub-rules (1), (8) and (13) are relevant here:
48.14 (1) Unless the court orders otherwise, if an action in which a defence has been filed has not been placed on a trial list or terminated by any means within two years after the first defence is filed, the registrar shall serve on the parties a status notice in Form 48C.1 that the action will be dismissed for delay unless, within 90 days after service of the notice, the action is set down for trial or terminated, or documents are filed in accordance with sub rule (10). O. Reg. 438/08, s. 46; O. Reg. 394/09, s. 20 (2, 3); O. Reg. 186/10, s. 3.
(8) Where a status notice has been served, any party may request that the registrar arrange a status hearing, in which case the registrar shall mail to the parties a notice of the status hearing, and the hearing shall be held before a judge or case management master. O. Reg. 438/08, s. 46.
(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. O. Reg. 438/08, s. 46.
Was the Master required to balance the principle of having the matter determined on its merits with the principle of discouraging delay?
[6] This is the primary position taken by the appellant. The submission is that the Master erred in law by failing to balance these competing principles. The appellant relies on several masters’ decisions where a balancing approach, giving some consideration to the principle in favour of cases being determined on their merits, was taken. For the reasons that follow, I am of the view that those cases have been overtaken by recent decisions of the Court of Appeal for Ontario: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544, 112 O.R. (3d) 67, and Faris v. Eftimovski, 2013 ONCA 360, 87 E.TR. (3d) 204.
[7] The appellant also relies on two Superior Court of Justice cases, but neither accurately reflects the combined thrust of the 1196158 and Faris decisions. The first case, Tri-Peak Holdings Inc. v. Metroplex Developments, 2012 ONSC 6234, predates Faris, and the court does not appear to have been referred to 1196158. The second, Pouget v. Hynes, 2013 ONSC 487, also predates Faris and, although the court did refer to 1196158, it was distinguished by noting that the status notice in Pouget was issued only twenty months after the close of pleadings.
[8] The appellant also relies on MDM Plastics Ltd. v. Vincor International Inc., 2013 ONSC 710, 303 O.A.C. 208 (Div. Ct.). This was an appeal from a decision of a master refusing to set aside a registrar’s dismissal of the action for delay. The Court dealt with the notion of a balancing approach and held that the Master failed to account for a competing value, the preference that matters be determined on their merits:
[26] The need to consider both elements is repeated in 1196158 Ontario Inc. v. 6274013 Canada Ltd.
... On the other hand, procedural rules are the servants of justice not its master. We must allow some latitude for unexpected and unusual contingencies that make it difficult or impossible for a party to comply. We should strive to avoid a purely formalistic and mechanical application of time lines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits. As Laskin J.A. stated in Finlay v. Paassen, 2010 ONCA 204, 2010 ONCA 204, 101 O.R. (3d) 390, at para. 14: 'the Rules and procedural orders are construed in a way that advances the interests of justice, and ordinarily permits the parties to get to the real merits of their dispute.'
[27] In the same case, the need to balance these concerns is confirmed:
The challenge posed in cases involving dismissal for delay is to find the right balance between, on the one hand, the need to ensure that the rules are enforced to ensure timely and efficient justice and, on the other, the need to ensure sufficient flexibility to allow parties able to provide a reasonable explanation for failing to comply with the rules to have their disputes decided on the merits. [Emphasis added].
[9] The respondent says that MDM dealt with the “Reid Test” which is not the test applicable here. However, I believe that MDM should be distinguished on the basis that the application of 1196158 to the issue before me has been resolved by subsequent decisions not available to the court in MDM.
[10] The extract from 1196158 referred to in MDM appears as part of the Court of Appeal’s general discussion of “Delay and Fairness in Civil Litigation”. Even at this general stage of its decision, the Court was careful to qualify the desire for disputes to be decided on their merits with the caveat that this applied to “parties able to provide a reasonable explanation for failing to comply with the rules”. [Emphasis added]
[11] The Court in 1196158 then goes on to state the specific test to be applied on a Rule 48.14 status hearing at para. 32, citing Khan v. Sun Life Assurance Co. of Canada, 2011 ONCA 650:
“[T]he appellant [plaintiff] bore the burden of demonstrating that there was an acceptable explanation for the involved litigation delay and that, if the action was allowed to proceed, the respondent [defendant] would suffer no non–compensable prejudice”. 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.
[12] Moreover, the Court also explained how this test includes in it the necessary balance between the competing principles at play:
[33] 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 time lines they impose would cease to have any meaning and any hope of ensuring timely and efficient justice would be seriously jeopardized.
[34] Modern civil procedure recognizes the need to deal with unexplained delay and, through rules such as rule 48.14, provides for an active judicial role "to promote the timely resolution of disputes, to discourage delay in civil litigation and to give the courts a significant role in reducing delays": Todd Archibald, Gordon Killeen & James C. Morton, Ontario Superior Court Practice (Markham: LexisNexis Canada, 2011), at p. 1205. As judgments of this court and the Superior Court recognize, if an action could not be dismissed for delay unless there was proof of actual prejudice, time lines would become meaningless. Where a party fails to prosecute an action in a timely fashion, the court is entitled to exercise the powers conferred by the rules to dismiss actions absent an adequate explanation for the delay: Riggitano v. Standard Life Assurance Co., [2009] O.J. No. 1997 (S.C.), at para. 45, aff'd 2010 ONCA 70, [2010] O.J. No. 292. [Emphasis added].
[13] More recently, the Court of Appeal returned to the issue in Faris. The Court acknowledged that when exercising its discretion under rule 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.
[14] Part of this balance is achieved by the onus at a status hearing, described by the Court in this way:
[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.
[15] Further, it is the prolonged delinquency of the plaintiff that triggers rule 48.14:
[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. [Emphasis added].
[16] Finally, it is that “shift” which supports the test applicable at a status hearing, which is again restated at para. 42:
[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.
[17] The Superior Court has considered these two recent decisions of the Court of Appeal, in Saini v. Sun Life Assurance, 2013 ONSC 4463, at paras. 1, 2, 3 and 8:
[1] This appeal from a ruling by Master Haberman raises the question of whether, on the "first time up" at a status hearing, the court should work to get a delayed action back on track.
[2] According to the Court of Appeal in two very recent decisions, it should not. As the Court has explained it, the object of a status hearing is not to manage the case, as might previously have been thought, but rather to determine whether the relevant party has an adequate explanation for the delay. Sharpe J.A. stated the point with clarity in 1196158 Ontario Inc. v. 6274013 Canada Ltd. (2013), 2012 ONCA 544, 112 O.R. (3d) 67, at para 28, where he noted that "the focus of the inquiry on a rule 48.14 status hearing is the conduct of the plaintiff".
[3] The Court of Appeal followed up and re-emphasized this approach in Faris v. Eftimovski, 2013 ONCA 360, where it imposed an onus of proof on a plaintiff that must be met with specific evidence justifying the delay. Since a status hearing only ensues where the action has not been set down for trial within two years, it will always favour the defendant with a presumption of dismissal. Tulluch J.A. commented, at para 33 of Faris, that since the overriding purpose of the status hearing is to "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."
[8] That said, it is now necessary to approach a status hearing under Rule 48.14(8) with the attitude that "the initiating litigant generally suffers the consequences of a dilatory regard for the pace of the litigation." Wellwood v. Ontario Provincial Police (2010), 2010 ONCA 386, 102 O.R. (3d) 555 (Ont. C.A.), at para 48. The thrust of the recent case law from the Court of Appeal is that the judge or master presiding at a status hearing is not to aim at fixing a tardy action but at dismissing it, unless there is cogent evidence in the record establishing a reason not to do so.
[18] I agree. In my view Master Graham applied the correct legal test in the determination of the status hearing before him. He did not err by failing to make any specific reference to the principle in favour of determining cases on their merits. As held by the Court of Appeal, the balance between the interests of the plaintiff to proceed on the merits and the defendant to a timely disposition, are achieved by application of the test applicable under rule 48.14.
[19] The appellant also complains that the Master referred to 1196158 even though it had not been brought to his attention by either party. The appellant describes this as a denial of procedural fairness. I disagree. It was conceded in oral argument that counsel knew from the Master that he had the decision with him and was referring to it. The appellant is unable to say whether he asked for an opportunity to consider the case before proceeding with or closing his submissions to the Master and, in any event, it does not appear from the submissions made to me that the appellant would have conducted the status hearing differently had he done so.
Palpable or Overriding Error of Fact?
[20] The appellant submits as explanation for the delay that the file “fell through the cracks”. It says that neither of the two lawyers at the firm was specifically assigned carriage of the case. Since the firm is the plaintiff there was no “outside client” to monitor the progress of the case. Finally the appellant submits that there was no deliberate decision taken to not proceed with the case or to abandon it. The appellant also claims the lack of action taken by the defendant after delivering its defence and counterclaim is relevant to the question of whether the appellant’s explanation is acceptable.
[21] The Master clearly rejected the submission that the file had not been assigned to a specific lawyer. He noted that the Statement of Claim was issued naming Mr. Deverett as the individual lawyer from the firm and he drew the reasonable inference that Mr. Deverett was the lawyer responsible for the file. Although the Master did not specially refer to the portion of the affidavit of the firm’s paralegal where she deposed that neither lawyer had carriage of the file, he made specific reference to the issue of fact. He was not required to accept the assertion in the paralegal’s affidavit on this issue. It is clear from his reasons that he was aware of her assertion and was addressing it. He referred to another aspect of the paralegal’s affidavit from which he inferred that someone did have carriage of the file. The paralegal had prepared but not delivered an affidavit of documents, from which the Master inferred someone had instructed her. In my view the Master was entitled to draw the inferences he did and to conclude that a lawyer at the plaintiff firm did have carriage of the file. No direct evidence from Mr. Deverett was provided. He is the sole shareholder of the plaintiff, Deverett Professional Corporation. The Master was not required to make specific reference to all of the evidence on the issue. He made a clear finding of fact and supported it with inferences open to him on the record before him.
[22] The Master addressed the submission that the defendant’s lack of activity on the file ought to be considered in relation to whether the plaintiff’s explanation was acceptable. In my view he correctly found that the defendant had not failed to cooperate in arranging any steps in the action. There was no resistance by the defendant, rather the defendant simply did nothing. Failing some initiative by the plaintiff, a defendant is not required to spend time and money on a case: see 1196158 at paras 29 and 30. There is no merit to the appellant’s submission that the defendant’s lack of action on its counterclaim is relevant to its own explanation for delay, even aside from the facts here that the claim was for $2,000,000 and the counter claim for $2,650.
[23] The Master also addressed and rejected the submission that the lack of an outside client excused or explained the delay. He pointed out that the responsibility of the law firm is the same when the firm chooses to represent itself.
[24] The conclusion of the Master that the file had simply been ignored and that the plaintiff had abdicated its responsibility to prosecute the action diligently is one that was open to him on the record before him. It discloses no palpable or overriding error of fact. Even if he had accepted the plaintiff’s position that the case simply fell through the cracks, that has been rejected as meeting the onus on a show cause hearing: see Saini at paras 11 and 12. The omission of an affidavit from the corporate plaintiff, as opposed to from an employed paralegal, is significant.
[25] The Master went on to find that there was no prejudice to the defendant with respect to the availability of documents. He observed that the plaintiff’s deponent identified that the plaintiff intended to call two witnesses at trial; both were available to testify and had confirmed their memories were intact. The affidavit does not depose any will say information as to these two witnesses. For this reason the Master found the plaintiff’s evidence incomplete relating to the possible unavailability of viva voce evidence. Without knowing what oral testimony the plaintiffs’ witnesses would be expected to provide, the defendant was not in a position to know or to address the identity of witnesses it would need to call and whether they would be unavailable.
[26] I agree. I also note that the plaintiff’s submission that this is a document driven case is inconsistent with its pleading seeking punitive damages for alleged breach of contract motivated by retaliation. In any event the Master’s conclusion that there was no acceptable explanation for the delay is sufficient on its own to dispose of the appeal.
Disposition and Costs
[27] The appeal is dismissed. As was agreed, costs of the appeal are awarded to the successful party, the respondent, fixed in the inclusive amount of $10,000.
J. Mackinnon J
Date of Reasons for Judgement: November 12, 2013
Date of Release: November 12, 2013
CITATION: Deverett Professional Corporation v. Canpages Inc., 2013 ONSC 6954
DIVISIONAL COURT FILE NO.: DC-531-12
DATE: 2013/11/12
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. Mackinnon J.
BETWEEN:
Deverett Professional Corporation
Plaintiff /Appellant
– and –
Canpages Inc.
Defendant /Respondent
REASONS FOR JUDGMENT
J. Mackinnon J
Date of Reasons for Judgement: November 12, 2013
Date of Release: November 12, 2013