Court File and Parties

CITATION: Margaret Grace Kerr v. CIBC World Markets et al, 2013 ONSC 7685

DIVISIONAL COURT FILE NO.: 153/13

DATE: 20131216

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: MARGARET GRACE KERR Plaintiff/Appellant

AND:

CIBC WORLD MARKETS INC., MERRILL LYNCH CANADA INC., CIBC WOOD GUNDY FINANCIAL SERVICES INC., MERRILL LYNCH INSURANCE SERVICES INC., ROY RUPPERT, GORDON W. LERICHE and TRANSAMERICA LIFE INSURANCE COMPANY OF CANADA Defendants/Respondent

BEFORE: Newbould J.

COUNSEL: Andrew Faith and Jeffrey Haylock, for the plaintiff/appellant

Pat Flaherty and Rebecca Wise, for the brokerage defendants

Andrew Evangelista, for Transamerica Life Insurance Company of Canada

HEARD: December 10, 2013

Endorsement

[1] The plaintiff / appellant, Dr. Margaret Kerr, appeals from the order of Master Graham of the Ontario Superior Court of Justice dated July 5, 2012 dismissing her action.

[2] In this case, Dr. Kerr’s lawsuit was set down and then struck from the trial list for inaction of her lawyer. She then retained a new lawyer who failed to act quickly enough in moving to have the action restored to the trial list. The motion to have the case restored to the list and the action was dismissed by the Master. Dr. Kerr was not well served by her two lawyers who admit that they were to blame and the Master later ordered that the costs of the action be paid personally by them. She now brings this appeal having retained new counsel, and asks that the action be restored to the trial list.

[3] Dr. Kerr also applies to file further affidavit material dealing with the failure of her second lawyer to act properly, material that was before the Master on the costs motion. The brokerage defendants resist this, but assert if the new evidence is allowed, they should be entitled to file further affidavit evidence in reply.

[4] In 2000-2001 Dr. Kerr purchased universal life policies issued by the defendant Transamerica Life Insurance Company of Canada. She retained Diane Evans to act for her and on March 12, 2004 she commenced this action claiming investment losses of $2.5 million. The claim against all defendants except Transamerica (“brokerage defendants”) is that she was given negligent advice and unsuitable investments were recommended to her resulting in significant losses. Her claim against Transamerica is based on the theory that Transamerica is liable for the acts of the advisors and their employers who were agents of Transamerica.

[5] Following the exchange of pleadings, mediation, and the exchange of productions, oral discoveries were conducted over a period of nine days between February and July 2005.

[6] Motions for undertakings and refusals were heard by Master Graham in July and October, 2006. Success on these motions was divided. Outstanding undertakings were ultimately ordered to be answered by both sides in December, 2006. At the time of the motion before the Master in June 2012, neither side had complied with the orders, nor answered their outstanding undertakings.

[7] On December 15, 2006, after receiving a status notice dated November 7, 2006, Ms. Evans set the matter down for trial by filing a trial record. From that point on, she did very little.

[8] The court sent Ms. Evans a certification form on February 20, 2007. In the correspondence attached to that form appeared the following:

IMPORTANT NOTICE: ALL CASES THAT HAVE NOT BEEN SCHEDULED WITHIN 6 MONTHS OF THIS NOTICE WILL AUTOMATICALLY BE STRUCK OFF THE LIST BY AUGUST 23/07.

[9] Ms. Evans claims she never received this form, and that someone else in her office might have picked it up by mistake. According to Ms. Evans, she made several phone calls to the trial co-ordinator’s office “when it became apparent that something was amiss”, but she did nothing more until the summer of 2010 when she sent a process server to the court to make inquiries.

[10] On July 8, 2010, this action was struck from the trial list. Ms. Evans wrote to the defendants on August 24, 2010 to inquire whether they would consent to restoring the action. The defendants refused to consent or to not oppose the motion.

[11] Ms. Evans scheduled a motion for January 14, 2011 to reinstate the action. However, upon learning of Ms. Evans’ mishandling of her matter, Dr. Kerr terminated her relationship with Ms. Evans and retained John Ormston, who served a notice of change of lawyer dated November 15, 2010. Mr. Ormston served a motion record on the defendants on December 10, 2010, which was essentially the same record Ms. Evans had prepared for a consent or unopposed motion.

[12] On January 10, 2011, four days before the motion, Mr. Ormston, realizing the motion material filed for Dr. Kerr was insufficient, left a telephone message with Richard Conway, counsel for the brokerage defendants, indicating his intention to file a supplementary affidavit of Diane Evans. Mr. Ormston then served the affidavit of Ms. Evansand Dr. Kerr on January 13, 2011, the day before the motion. As a result, Master Graham adjourned the motion, awarding the defendants $4,000 in costs.

[13] On April 7, 2011 counsel for the brokerage defendants cross-examined Ms. Evans on her affidavit sworn in support of the motion to restore the action to the trial list. After this cross-examination, counsel for the brokerage defendants wrote to Mr. Ormston on May 18, 2011 with a list of undertakings and refusals. Mr. Ormston provided no response to counsel’s correspondence. Nor did he take steps to bring back on the motion to restore the matter to the trial list. In June, 2012 the brokerage defendants brought a motion to strike the affidavits filed in January, 2011 and to dismiss Dr. Kerr’s motion to have the matter restored to the trial list. On July 5, 2012, Master Graham dismissed Dr. Kerr’s motion and dismissed the action as a whole.

[14] On February 20, 2013, Master Graham ordered Ms. Evans and Mr. Ormston to personally pay for the brokerage defendants’ costs of the Rule 48.11 motion and of the action. Master Graham wrote that “[a]s summarized in paragraph 30 of my Reasons for Decision of July 5, 2012, I dismissed the action primarily on the basis of delay for which the plaintiff’s former lawyers now take full responsibility”.

Decision of the Master

[15] The Master applied a test that he had previously used in a case called Ruggiero v. FN Corp., namely:

1. Is the delay intentional and contumelious? If so, the action should not be restored to the trial list and should be dismissed.

2. If not, is there an inordinate and inexcusable delay in the litigation for which the plaintiff or his solicitors are responsible, such as would give rise to a presumption of prejudice?

3. If so, has the plaintiff provided evidence to rebut the presumption of prejudice arising from the delays?

4. If so, have the defendants provided evidence of actual prejudice?

[16] He considered three periods of time during which there were delays, as follows:

1. The three years between June, 2007, being the point at which plaintiff's former counsel [Ms. Evans] ought to have taken proactive steps to file the confirmation form to schedule the pre-trial conference and trial, and early July, 2010, when the action was struck from the trial list.

2. The four months between when plaintiff's former counsel [Ms. Evans] learned that the action was struck from the list and her current counsel [Mr. Ormston] served the motion record for the motion to restore the action.

3. The 14 months between the cross-examination of the plaintiff's former solicitor [Ms. Evans] and the date on which the moving defendants brought their motion.

[17] The Master held that he could infer intentional delay on the part of the plaintiff. The nub of his reasons on this point are as follows:

18. Given the total period of delay of 4.5 years commencing in June, 2007, in an action commenced in 2004 arising out of alleged conduct in 2000, the court may now reasonably infer that the delay at some point became intentional rather than merely inadvertent or neglectful.

19. Further, the plaintiff's unexplained failure to take any steps to proceed with her motion in the 14 months following the cross-examination of her former counsel on April 7, 2011, after having been granted the indulgence of the adjournment to allow her to file new material on January 14, 2011, and following a previous delay of over three years, leads to the conclusion that the further delay arising out of both the motion and the adjournment was both intentional and an abuse of the court's process.

20. Accordingly, I find that the plaintiff's delay in this matter is both intentional and abusive and accordingly, the plaintiff's motion to restore the action to the trial list is hereby dismissed as is the action as a whole.

[18] Regarding prejudice, the Master considered that as the events subject to the action occurred in 1999 and 2000, the limitation period had long expired by the date of the motion and that as a result “there is a presumption of prejudice which the plaintiff has the onus to rebut”. He held that the plaintiff had not put any evidence before the court to rebut the presumption of prejudice.

[19] The Master summarized his decision as follows:

30. To summarize, the plaintiff's motion to restore the action to the trial list and the action as a whole are dismissed for two reasons, either one of which would in itself be sufficient to warrant a dismissal. First, the plaintiff's delay has been intentional and contumelious. Second, either the plaintiff or her solicitors are responsible for an inordinate and inexcusable delay in the litigation giving rise to a presumption of prejudice which the plaintiff has failed to rebut.

Motion to adduce new evidence

[20] Dr. Kerr seeks to introduce evidence of Mr. Ormston regarding the delays caused by his inactivity, his concealing facts from Dr. Kerr and the instructions that he had from Dr. Kerr regarding her wanting to proceed with the action. It is evidence that was before the Master on the motion that Ms. Evans and Mr. Ormston personally pay the costs of the action.

[21] The brokerage defendants oppose this but in the event that Dr. Kerr is successful, seek leave to introduce two e-mails and to introduce evidence of the action by Dr. Kerr against Ms. Evans and Mr. Ormston. If they succeed in this, Dr. Kerr seeks to introduce evidence as to the lack of insurance held by Ms. Evans and Mr. Ormston to respond to her claim and the value of her claim.

[22] The well-known criteria governing the admission of further evidence were summarized by Doherty J. A. in R. v. P.S.M., [1992] O.J. No. 2410 (C.A.):

(1) Was the evidence available by the exercise of due diligence, and if so, is there a satisfactory explanation for the failure to produce the evidence at trial?

(2) Does the evidence bear upon a potentially decisive issue at trial?

(3) Is the evidence credible?

(4) Could the evidence, if believed, when taken with the rest of the evidence, reasonably be expected to have affected the verdict?

[23] The Ontario Court of Appeal generally applies the criteria in R. v. Palmer on fresh evidence motions. However, even if the test cannot be met, the Court of Appeal has always retained an overriding discretion to admit fresh evidence where the interests of justice demand it. See Vernon v. General Motors of Canada Ltd., [2002] O.J. No. 3352 (C.A.).

[24] The further evidence sought to be introduced explains why Dr. Kerr’s motion to restore the matter to the trial list failed to advance. Specifically, it demonstrates that Mr. Ormston ignored Dr. Kerr’s explicit instructions to bring the motion quickly, and concealed his actions so that Dr. Kerr could do nothing to remedy this problem. This evidence comprises four parts:

1. Affidavit of John Patrick Ormston, dated January 8, 2013: In this affidavit Mr. Ormston confesses that, after obtaining an adjournment of the originally scheduled motion to restore Dr. Kerr’s action to the trial list, and after the cross-examination of Dr. Kerr’s former counsel on her affidavit, he did nothing to reschedule the motion, and “allowed the matter to languish.” Mr. Ormston states that his immobilization was caused by a family and mental health crisis.

2. Letter from John Ormston to Margaret Kerr, dated November 13, 2012: In this letter Mr. Ormston made clear that Dr. Kerr had instructed him to act diligently in restoring her matter to the trial list, and had been diligent in following up with the matter. He confessed that he had not acted as “diligently and aggressively as I could to get your case restored to the trial list.” He also informed Dr. Kerr that she had a potential cause of action against him and her former counsel, Diane Evans.

3. Letter from John Ormston to Margaret Kerr, dated November 14, 2012: In this letter Mr. Ormston again made clear that Dr. Kerr had instructed him to act diligently in restoring her matter to the trial list. He also confessed to a delay of 14 months during which he failed to move the matter forward. There was no reasonable explanation for this delay, which, in Mr. Ormston’s words, was “inexcusable”. He further wrote that the dismissal was due to her counsel’s neglect and that “you could not have been more diligent in following up and expressing your strong desire to pursue this action to both Diane Evans and myself.” He again informed Dr. Kerr that she had a potential cause of action against him and Diane Evans.

4. Transcript from the cross-examination of John Ormston of January 14, 2013: This cross-examination was conducted in preparation for Dr. Kerr’s motion to require her former lawyers to pay back their fees, and to pay the costs awards that had been made against her. During cross-examination, Mr. Ormston admitted to allowing the matter to languish after the April 7, 2011 cross-examination of Diane Evans, and acknowledged that his email to Dr. Kerr reporting on the adjourned motion to restore the action to the trial list implied that it was the brokerage defendants that were delaying the proceedings.

[25] In my view, the first criterion has been met. Dr. Kerr could not have obtained the evidence by due diligence before the motion was heard by the Master.

[26] Dr. Kerr did not learn about Mr. Ormston’s neglectful inaction until receiving the letters from him dated November 13 and 14, 2012. Mr. Ormston concealed his neglect from her. Dr. Kerr submits, and I agree, that Mr. Ormston was in a conflict of interest in arguing the June 22, 2012 motion before Master Graham in which evidence of his neglect would have been relevant to the motion.

[27] After the adjournment of the originally scheduled hearing to restore the action on January 12, 2011, Dr. Kerr followed up with an email dated February 16, 2011. In his response on February 25, 2011, Mr. Ormston falsely implied that the brokerage defendants had delayed the proceedings.

[28] Thereafter, Dr. Kerr and her accountant George Swan sent Mr. Ormston “voluminous emails” and Dr. Kerr “could not have been more diligent in following up and expressing [her] strong desire to move this matter forward.” These statements are taken from the letter of Mr. Ormston who confirmed the substance of these letters on his cross-examination.

[29] At the June 22, 2012 hearing before Master Graham the only person who knew or reasonably could have known of Mr. Ormston’s neglect was Mr. Ormston. He self-servingly withheld information about his own failings from the court. Dr. Kerr contends, and I agree, that such conduct is something a reviewing court should not countenance. In a claim for relief from counsel’s incompetence, what matters is not what the lawyer knew, but what the client did not know. In R. v. Appleton (2001), 55 O.R. (3d) 321, Charron J.A. stated:

Where the applicant claims that the proposed evidence was not introduced at trial due to the ineffective assistance of his or her counsel, this claim is properly addressed under the first Palmer criterion of due diligence. If the applicant satisfies the court that trial counsel was incompetent (the “performance component” of the test for ineffective assistance), the due diligence criterion will have been met.

[30] The brokerage defendants contend that Mr. Ormston’s delay was clearly known to him and “should have been known to Dr. Kerr with reasonable diligence”. I disagree. How she could have known is not explained and in light of her communications with Mr. Ormston, she was led to believe it was the brokerage defendants who were causing the delay. There is no basis to say she should have known that her lawyer was misleading her.

[31] The brokerage defendants also contend that the ground now sought to be argued on behalf of Dr. Kerr that her lawyers caused the delay should not be allowed as these arguments were not made to the Master. Assuming that to be the case, although there is no evidence before me as to what was argued, it is unfortunate that Mr. Ormston did not admit, as he later did, that he was the problem. It is perhaps a negative side of human nature that some people do not want to confess before their maker, in this case the Master. However in my view it would be an injustice to prevent the new evidence from being adduced on the grounds that Mr. Ormston failed to disclose to the Master that it was he who caused the delay during the time that he was acting for Dr. Kerr.

[32] The second and third criteria are part of the broader qualitative analysis required by the fourth criteria. See R. v. P.S.M.

[33] In this case, the evidence is credible. Mr. Ormston was cross-examined on it. It was against his interest to say what he said in his affidavit as he, and his insurer, were defending a motion that he personally pay the costs of the action caused by his failure to prosecute it. Yet he said it was his fault and not that of Dr. Kerr. The evidence is relevant to the third period of delay considered by the Master. It is evidence that Mr. Ormston did not deliberately decide not to pursue the case but rather suffered from stress and psychological issues that caused him to become immobilized with respect to the action. It could reasonably be expected to have affected the decision of the Master.

[34] In the result, the evidence sought to be adduced by Dr. Kerr should be admitted on this appeal.

[35] The brokerage defendants wish to file in reply evidence of an e-mail that they say establishes that Dr. Kerr was the cause of delay. I think it fair to permit it to be introduced in reply, but I will consider its cogency. Another e-mail I will also permit on the same basis.

[36] The brokerage defendants also wish to file in reply evidence the statement of claim in the action commenced by Dr. Kerr against Ms. Evans and Mr. Ormston to argue that Dr. Kerr is not without her remedies.

[37] There are authorities in the Court of Appeal that may be conflicting as to the relevance of an action brought against lawyers for negligence. In Marché D’Alimentation Denis Thériault Ltée v. Giant Tiger Stores Limited (2007), 2007 ONCA 695, 87 O.R. (3d) 660 (C.A.) on a motion to restore an action dismissed by the Registrar, Sharpe J.A. referred to the fact that the actions of the lawyer very likely exposed the lawyer to liability. In Finlay v. van Paassen (2010), 2010 ONCA 204, 101 O.R. (3d) 390 (C.A.) on a motion to restore an action to the trial list, Laskin J.A. said a claim against the lawyer for the plaintiff was irrelevant. He stated:

A judge who refuses to set aside a dismissal order will naturally be concerned that the effect of the refusal will be to deprive an innocent party of its day in court. To protect the claim of the innocent party, the judge will often raise the possibility of a negligence action against the party's own lawyer. Although perhaps understandable, I do not find this helpful. Speculation about whether a party has a lawsuit against its own lawyer, or the potential success of that lawsuit, should not inform the court's analysis of whether the registrar's dismissal order ought to be set aside.

[38] In light of this difference, I will admit the evidence of the action by Dr. Kerr against her former lawyer but also admit the reply evidence to that sought by Dr. Kerr regarding the value of the claim and the insurance limits of Ms. Evans and Mr. Ormston. I will need to consider the cogency of this evidence.

Standard of review

[39] A decision on a Rule 48.11 motion is discretionary. A discretionary decision may be set aside if made on an erroneous legal principle or if infected by a palpable and overriding error of fact. See 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544, 112 O.R. (3d) 67 (C.A.) at para. 16.

Analysis

[40] In its recent decision in Nissar v. Toronto Transit Commission, 2013 ONCA 361, the Court of Appeal clarified that the test applicable to Rule 48.11 motions is not the test applied in Ruggiero and the cases that followed it. It is, instead, the same as that applicable to Rule 48.14(13) status hearings. In Nissar, Tulloch J.A. set out the test as follows:

[T]he applicable test is conjunctive: 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.

[41] The test under Rule 48.14(13) is applied flexibly and the court must consider above all whether, in the context of the particular case, it would be fair to dismiss the action. In Business Development Bank of Canada v. I Inc., 2013 ONSC 1749 at para. 14, Master Muir held that the court should “apply a contextual analysis and ultimately make the order that is just in the circumstances of the particular case.” In Koepcke v. Webster, 2012 ONSC 357 at para. 18 in dicta approved by the Divisional Court in Pouget v. Hynes, 2013 ONSC 487 at para. 35 and by McCarthy J. in Tri-Peak Holdings Inc. v. Metroplex Developments, 2012 ONSC 6234 at para. 12, Master Dash held that “the plaintiff need not rigidly satisfy both aspects of the test” and that

[t]here will be some cases when a plaintiff can show cause that on the whole, it would be unfair for the action to be dismissed. Determining fairness or unfairness requires a consideration of all the circumstances and a certain balancing of the respective interests of the parties.

[42] The first test in Nissar of establishing an acceptable explanation for the delay is somewhat different than the test used by the Master, being whether the delay was intentional and contumelious. However it does not matter in this case, in my view, because of errors made by the Master in considering the evidence.

[43] The Master concluded that he could infer that the delay at some point became intentional rather than merely inadvertent or neglectful. In so far as the period of time during which Ms. Evans was acting as counsel for Dr. Kerr, this inference overlooked critical evidence that the Master did not refer to. The decision also failed to consider the interests of Dr. Kerr as opposed to the actions of her lawyers and to consider her lawyers negligence and whether that should be taken into account. These were reversible errors.

[44] Dr. Kerr swore in her affidavit that was before the Master that it had always been her intention to proceed with the litigation and she believed that her former counsel Ms. Evans was moving the matter towards trial. She requested regular updates as to the status of the action and as to when they would obtain a trial date and she was advised by Ms. Evans that the matter had been set down for trial and that they were waiting for a date from the Court. She said her instructions to Ms. Evans were always to proceed with the litigation.

[45] Dr. Kerr was not cross-examined on this evidence. Unfortunately, it was not referred to by the Master. It was cogent evidence and should have been taken into account. Ms. Evans in an affidavit before the Master said that Dr. Kerr had always instructed her to pursue the action. This evidence too was not referred to by the Master.

[46] Concluding by inference that the plaintiff intentionally delayed the matter without considering this evidence of Dr. Kerr and Ms. Evans was a reversible error requiring that the matter be looked at again.

[47] There is also other evidence overlooked. In his reasons, the Master referred to a statement by Diplock L.J. that disobedience of a peremptory order would be sufficient to meet the test of whether a party’s conduct was intentional and contumelious. He then stated that “the plaintiff has failed to answer undertakings and questions refused which were the subject of an order that I made in 2006”.

[48] However, Dr. Kerr in her affidavit also said that she was never advised by Ms. Evans that there were any undertakings or refusals that were ordered to be answered and she did not believe there were any further steps that had to be taken in order to obtain a trial date. Ms. Evans in her affidavit gave an explanation for not answering the undertakings. An order had also been made that the brokerage defendants answer undertakings and refusals, and Ms. Evans said that she had made an agreement with Mr. Conway, the lawyer for the brokerage defendants, that they would produce their information coincidentally. She did not think that there was any problem as the brokerage defendants never delivered their answers to undertakings and Mr. Conway never complained of delay in answering undertakings. It is acknowledged that the brokerage defendants never delivered them. Ms. Evans said in her affidavit that any failure to deliver answers to undertakings was caused solely by her actions and that Dr. Kerr was unaware that any further steps needed to be taken.

[49] None of this evidence was referred to by the Master, which in light of his statement that the plaintiff failing to answer undertakings justifed a conclusion of intentional delay, was another reversible error.

[50] The Master also did not consider what effect, if any, negligence on the part of her solicitor Ms. Evans should play in a consideration of the rights of Dr. Kerr. This failure to consider that was also a reversible error requiring that the matter be looked at again. In Marché, supra, Sharpe J.A. stated at para. 28:

The law will not ordinarily allow an innocent client to suffer the irrevocable loss of the right to proceed by reason of the inadvertence of his or her solicitor: see, e.g., Chiarelli v. Wiens (2000), 46 O.R. (3d) 780, [2000] O.J. No. 296 (C.A.), at para. 9.

[51] See also Finlay v. van Paassen, supra, at para. 33.

[52] Regarding prejudice, in my view the Master erred in holding that because of the limitation period having been passed, there was a presumption of prejudice requiring the plaintiff to give evidence to rebut it, and that as the plaintiff had not led evidence, the presumption was not rebutted.

[53] In Nissar, Tulloch J.A. put the second part of the conjunctive test as: “a plaintiff bears the burden of demonstrating that … if the action was allowed to proceed, the defendant would suffer no non-compensable prejudice”. How a plaintiff would bear that burden he did not spell out.

[54] Regarding a presumption of prejudice by reason of the passage of a limitation period during the period of delay, there are what may be considered conflicting statements of principle in two decisions of the Court of Appeal. In Finlay, supra, decided in March 2010, Laskin J.A. stated that the passage of a limitation period was irrelevant. He stated:

34 In refusing Finlay relief, the motion judge took into account that the two years of delay occurred after "the expiration of the limitation period". I do not see how the running of the limitation period had any relevance to the motion. The action was started well within the limitation period and would be reinstated if the registrar's order were set aside. Moreover, to be relevant, any prejudice from the "expiry" of a limitation period would have to be caused by the delay. In this case, however, to the extent that it can be said the limitation period "expired", it did so in October 2005 while the action was ongoing. The delay itself had no bearing on the running of the limitation period.

[55] In Wellwood v. Ontario Provincial Police, 2010 ONCA 386, decided two months later in May, 2010, in an appeal from a Divisional Court judge on a motion dealing with an action having been dismissed by a registrar for delay, the judge had said that that the expiration of the limitation period is not sufficient to give rise to a presumption of prejudice. Cronk J.A. stated:

60 With respect, I do not agree with the entirety of this description of the governing principles concerning prejudice. In particular, as I read the applicable authorities, the expiry of a limitation period can give rise to some presumptive prejudice, the strength of which increases with the passage of time. Where the presumption arises, the plaintiff bears the burden of rebutting the presumption, on proper evidence. Where the presumption is so displaced, the onus shifts to the defendant to establish actual prejudice.

[56] While it may not matter in this case, I side with Laskin J.A. in this debate. Limitation periods can change. At one time in Ontario they were six years. Now since 2004 they are two years. Yet it is a rare action indeed that ever comes to trial within two years. That being so one may ask why a presumption of prejudice should be raised because of the passage of two years.

[57] However, whether or not there is a presumption of prejudice, it is fair to say that the longer the delay, the need to consider prejudice becomes perhaps more acute.

[58] How does a plaintiff bear the burden referred to by Tulloch J.A. in Nissar of demonstrating “that … if the action was allowed to proceed, the defendant would suffer no non-compensable prejudice?

[59] In Finlay, Laskin J.A. referred to the approval by the Court of Appeal in Marché of a four- pronged test. The fourth test involving prejudice was described as:

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.

[60] This refers to an evidentiary burden on a defendant to adduce some evidence of prejudice. In Finlay, Laskin J.A. set aside the Registrar’s order and reinstated the action. In dealing with the factual issue re prejudice, he stated:

The respondents do not point to any specific prejudice they would incur if the registrar's order was set aside. As Finlay points out, the respondents' lawyer maintained an open file on this litigation until at least December 2008 when he withdrew his offers to settle. Yet in their affidavit material the respondents can muster only the bald assertion that it will be "extremely difficult" to locate witnesses and that because of the delay witnesses memories will be "hampered". Without more, this assertion does not amount to a showing of prejudice. I agree with Finlay that it is likely respondents' counsel obtained witness statements immediately after the accident. Furthermore, I expect that if one of those witnesses was no longer available or the memory of that witness could not be refreshed by the witness' statement, the respondents' affidavit evidence on the motion would have said so. The absence of such evidence is telling. See Chiarelli v. Wiens (2000), 46 O.R. (3d) 780 (C.A.);

[61] In Chiarelli v. Wiens, Laskin J.A. referred to the inability of a plaintiff to speculate about prejudice to a defendant. He stated:

The only allegation of prejudice in the material filed by the defence on the motion is the following very general statement in the affidavit of State Farm's claims adjuster:

It is my belief that the defence of this action has been seriously prejudiced due to the passage of time and the strong possibility that pre-accident and post-accident records and witnesses may not be available or that their recollections may not be accurate.

Although the onus remains on the plaintiffs to show that the defendant will not be prejudiced by an extension, in the face of such a general allegation, the plaintiffs cannot be expected to speculate on what witnesses or records might be relevant to the defence and then attempt to show that these witnesses and records are still available or that their unavailability will not cause prejudice. It seems to me that if the defence is seriously claiming that it will be prejudiced by an extension it has at least an evidentiary obligation to provide some details. The defence did not do that in this case.

[62] In this case, unlike Finlay and Chiarelli, there was no evidence of any kind led by the defendants that they would be prejudiced. The Master failed to consider this or to consider how the defendants would be prejudiced except in the following passage:

27 It is clear from this statement that the onus is on the plaintiff to provide evidence to rebut the presumption of prejudice, rather than relying on an inference based on the status of the action. In this case, no such evidence has been provided. In any event, the evidentiary record is not complete because the plaintiff has not answered the questions that were the subject of my order in 2006. Further, there is no requirement that the defendants lead evidence of actual prejudice unless the plaintiff has rebutted the presumption.

[63] In referring to the failure to answer questions required by the order of 2006 as being prejudice, the Master erred. There was evidence, as discussed above, from the affidavit of Ms. Evans that she had an agreement with the lawyers for the brokerage defendants that the answers need be answered only when the brokerage defendants delivered what they were required to deliver pursuant to the order, and that no complaint was ever raised by the lawyers for the brokerage defendants that answers were not being provided. The Master failed to consider that evidence. Moreover, the fact that the record was not complete was no evidence of prejudice. There was no evidence before the Master that the information requested in the undertakings would not be available or be unavailable because of the delay.

[64] The Master also failed to consider at all the fact that there was no evidence that any defence witness would not be available or be unable to recall events. This is a factor that should have been considered, as was done in Finlay and Chiarelli and also in Armstrong v. McCall (2006), 28 C.P.C. (6th) 12 (C.A.).

Weighing the relevant considerations

[65] On an appeal such as this, if there has been reversible error, the matter can be sent back to the Master or dealt with by the judge hearing the appeal. No party asks that the matter be sent back to the Master. Therefor I will deal with the matter afresh and weigh the relevant considerations as Laskin J.A. did in Finlay.

(a) Acceptable explanation for the delay

[66] There is no doubt that there is a strong public interest in promoting the timely resolution of disputes, which is why a plaintiff is required to provide an acceptable explanation for the delay.

[67] In this case, the explanation given by the plaintiff is that she always wanted to proceed with the action and instructed her lawyers to do so and that she constantly enquired of her lawyers about a trial date. It was her lawyers that failed her. That in my view is an acceptable explanation for the delay in this case. It was accepted as an explanation in Farmers Oil & Gas Inc. v. Ministry of Natural Resources, 2012 ONSC 6432, a case involving a five year delay. And as Sharpe J.A. said in Chiarelli, the law will not ordinarily allow an innocent client to suffer the irrevocable loss of the right to proceed by reason of the inadvertence of his or her solicitor.

[68] There is no evidence that Dr. Kerr intentionally delayed the matter. The evidence is to the opposite. Nor is there any evidence that either Ms. Evans or Mr. Ormston intentionally delayed the matter.

[69] Ms. Evans was negligent in not dealing with the certification form of February 20, 2007, which led to the case being struck from the list. While she was negligent as well in not answering the undertakings ordered to be answered in 2006, this was affected by the delay of the brokerage defendants to deliver their undertakings also ordered to be answered and by the agreement that these would be answered simultaneously. The brokerage defendants must therefore be recognized as contributing to that delay, although as the lawyer for the plaintiff, Ms. Evans should have been pressing the matter.

[70] The Master was given no explanation for the delay caused after Mr. Ormston was retained. However it is clear now from the fresh evidence that Mr. Ormston cannot be said to have intentionally delayed matters. His affidavit makes clear that personal difficulties, including the stress of a divorce and what it was doing to him and his children and the recurrence of childhood traumatic events that required psychological help, rendered him unable to deal with the matter. In his words, he became immobilized. This cannot be said to be deliberate action.

[71] In Chiarelli, involving a failure to serve a statement of claim within six months, the lawyer filed an affidavit in which he said that that he succumbed to the pressure of work, that he became embarrassed and depressed by his negligence, and that instead of bringing a motion he "froze". Laskin J.A. held that it was wrong to say that the lawyer’s actions were deliberate. His stated: “There is no evidence to support a finding that the lawyer acted deliberately. His evidence, unchallenged by the defence, was simply that he "froze".”

[72] There is another factor that is of some importance in this case. The Master was concerned by there being no explanation for the delay after April, 2011 when Ms. Evans was cross-examined on her affidavits. That is understandable. But the answer now lies in the evidence of Mr. Ormston as to why he did not pursue the matter. He should have, but did not disclose to the Master what had caused the delay. He was in a conflict. It would be a travesty of justice if Dr. Kerr were now required to pay for the failure of Mr. Ormston to make proper disclosure to the Master.

[73] The brokerage defendants refer to an e-mail of January 11, 2011 from Ms. Evans to Mr. Ormston, one of the pieces of fresh evidence submitted by the brokerage defendants that I permitted to be introduced subject to a consideration of its cogency. In that affidavit, in answer to questions from Mr. Ormston about the possibility a further affidavit of Ms. Evans being filed, Ms. Evans stated “Confidentially, I also slowed my work at that time [when that was was not said] as I recall that Margaret was behind in her payments to me and I needed to focus on some paying clients.” It is contended that this evidence proves that the delay was intentional.

[74] There is no evidence whatsoever that Dr. Kerr was ever told by Ms. Evans that she was putting down her tools for non-payment. It is clear from the affidavit of Dr. Kerr, referred to above, that she was never told such thing. The e-mail of Ms. Evans to Mr. Ormston goes on to say that “This is not something that I would like to attest to in an affidavit of course. I don't believe I ever pressed her for payment, as I knew her finances were tight, and I knew she would pay eventually”. This e-mail from Ms. Evans to Mr. Ormston is no cogent evidence at all that any delay was knowingly caused by Dr. Kerr.

[75] The e-mail is also questionable as to its reliability. In her affidavit sworn the next day after the e-mail on January 11, 2011, Ms. Evans said nothing of slowing down work because of a lack of payment from Dr. Kerr, and her affidavit is inconsistent with her e-mail. In that affidavit Ms. Evans stated:

14. The failure to provide the answers to the undertakings has been caused solely by my actions. Kerr was unaware that any further steps needed to be taken with respect to the delivery of the undertakings.

15. I have no explanation as to why I did not follow up with providing the answers to the undertakings and refusals, why it took me so long to follow-up with the Court with respect to the trial date and why I did not respond to the defendants’ correspondence dated January 19, 2010 enclosing an offer to settle.

[76] I do not view the e-mail as fatal to my finding that there is an acceptable explanation for the delay in this case.

(b) Non-compensable prejudice

[77] In this case, the plaintiff bears the burden of demonstrating that if the action is allowed to proceed, the defendant will suffer no non-compensable prejudice.

[78] As stated above, in Finlay, Laskin J.A. referred to the approval by the Court of Appeal in Marché of a four- pronged test. The fourth test involving prejudice was described as:

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.

[79] Have the defendants demonstrated any significant prejudice? In my view they have not.

[80] This case involves a negligence case against a broker. It will involve documents and the recollection of witnesses. I recognize that over time memories fade. It is an everyday occurrence in our courts that witnesses testify about things long past. It would be nice if trials could take place within a short time after the event, but that does not occur. There are things that can be done to help alleviate the problems, and this case is no different.

[81] In this case, there has been extensive documentary production. Dr. Kerr produced 58 documents, the brokerage defendants produced 301 documents and Transamerica produced 168 documents. The documents produced included voluminous correspondence, notes, account statements, policy statements and portfolio reviews covering the period from before the impugned investment decisions were taken up until the commencement of Dr. Kerr’s action. There is no suggestion that these records are now unavailable or gone missing.

[82] Dr. Kerr was examined for discovery for 5 days and the brokerage defendants for 4 days. No doubt when the lawyers for the brokerage defendants were retained, witness statements from relevant persons were prepared long before the oral discoveries took place. There is no evidence at all from the defendants to indicate any prejudice at all.

[83] The statements by Laskin J.A. in Finlay and Chiarelli, referred to above, are apt in this case. I expect that if one of witnesses required by the defendants was no longer available or the memory of that witness could not be refreshed by the witness' statement, the defendants would have had affidavit evidence on the motion that would have said so. The absence of such evidence is telling. The plaintiff cannot be expected to speculate on what witnesses or records might be relevant to the defence and then attempt to show that these witnesses and records are still available or that their unavailability will not cause prejudice. It seems to me that if the defence is seriously claiming that it will be prejudiced by an extension it has at least an evidentiary obligation to provide some details. The defence did not do that in this case.

[84] In Armstrong v. McCall (2006), 28 C.P.C. (6th) 12 (C.A.), the Court of Appeal overturned an order dismissing an action for delay, in which the judge hearing the motion had held that the plaintiff had failed to rebut a presumption of prejudice in not calling any evidence. In doing so, Laskin J.A. made the following comments which are apt to this case:

With respect, in making this finding the motion judge overlooked very significant evidence. As in a commercial case where documents may be reviewed by a witness to refresh his or her memory, in this case the actual testimony of the physicians taken on their examinations for discovery in August, 1999 was available if they required assistance in recalling what had occurred. In addition, there is in fact a considerable body of relevant documentary evidence consisting of x-rays, CT scan reports, hospital admission records, clinical notes and records made by each physician, as well as the reports of the experts. It follows that as there are numerous documents in this case in addition to the respondents' examinations for discovery that took place at an early stage in the proceedings, the physicians could easily refresh their memories if necessary from these materials. See, e.g., Starr v. Canadian Medical Laboratories Ltd., [2003] O.J. No. 2817 (Ont. C.A.) at para. 4. Tiesmaki v. Wilson (1971), 1971 ALTASCAD 79, 23 D.L.R. (3d) 179 (Alta. S.C. (A.D.)) is an example of a want of prosecution case in which the hospital records and witness statements of the defendants were considered adequate to enable the defendants to refresh their memories.

[85] In this case it is not suggested by the brokerage defendants that defence documents have gone missing, let alone gone missing because of delay, or that memories cannot be refreshed from contemporaneous documents and the oral discoveries.

[86] The brokerage defendants raise a specter of important documents of Dr. Kerr having gone missing. This argument is taken from another e-mail I permitted to be introduced as fresh evidence by the brokerage defendants subject to a consideration of its cogency. In the e-mail, being an e-mail from Dr. Kerr to Mr. Ormston and her accountant dated July 11, 2012, Dr. Kerr said “In going through all the papers pulled from the fire by the salvagers, not much was readable. I did find …”.

[87] Counsel for Dr. Kerr advises that the fire occurred on December 25, 2010 and it destroyed Dr. Kerr’s house. There is no evidence that anything required by the brokerage defendants was destroyed. It is all speculation. Moreover, on December 5, 2013 a refusals and undertaking chart was provided to the defendants. It demonstrates that Dr. Kerr was able after the fire to produce a very large number of documents requested by the defendants. The only documentation that was requested of Dr. Kerr that she could not produce was documentation from a Quebec brokers account closed by 1996 and a TD Evergreen account transferred to Midland Walwyn in 1996. The relevance of these documents to a claim for negligent advice given in 1999 and 2000 is questionable, and the defendants have not argued that they are relevant. Also, there is no evidence that these records even existed in 2010 at the time of the fire, some 14 years after the accounts were closed, and one may consider it unlikely that they did.

[88] I do not find that the brokerage defendants have established prejudice caused by the fire in 2010.

[89] The defendants also contend that Dr. Kerr is not prejudiced because she has commenced an action against Ms. Evans and Mr. Ormston and she can be compensated in that action. Even if this is a factor that can be taken into account, which if Laskin J.A. in Finlay is right it cannot, I do not find the argument persuasive in this case. Both Ms. Evans and Mr. Ormston have insurance limits of $1 million less defence costs. There is evidence before me of an expert witness that the losses suffered by Dr. Kerr are between $7.6 million and $14.04 million, with a reasonable benchmark within that range of $10.39 million. If that evidence is accepted, it is clear that the insurance available to Ms. Evans and Mr. Ormston would not be sufficient and there is certainly no evidence from the defendants that Ms. Evans and Mr. Ormston would be good for any balance above their insurance limits.

[90] I find that the plaintiff has demonstrated that if the action is allowed to proceed, the defendant will suffer no non-compensable prejudice.

Result

[91] The appeal is allowed. The order of the Master dismissing the action is set aside and the action is to be restored to the trial list.

[92] I have heard no submissions as to costs. If costs are sought, a brief written argument along with a proper cost outline may be submitted by January 6, 2014 and a brief written argument in response may be submitted 10 days thereafter.

Newbould J.

Date: December 16, 2013