Court File and Parties

Citation: Elliott v. Sagl, 2019 ONSC 2490 Divisional Court File No.: 748/17 Date: 2019-04-23 Superior Court of Justice – Ontario Divisional Court

Re: John Darragh Maynard Elliott, Plaintiff/Appellant And: Bridgette Marie Sagl, Defendant/Respondent

Before: Kiteley J.

Counsel: Ryan Atkinson and Rachel Mester, for the Plaintiff/Appellant Ingrid Saffrey, for the Defendant/Respondent

Heard at Toronto: April 9, 2019

Endorsement

[1] This is a motion for leave to file fresh evidence in an appeal and the hearing of the appeal from the order of Master Mills dated November 15, 2017. For the reasons that follow, leave is granted to file fresh evidence and the appeal is allowed.

Background

[2] The appellant is an appraiser of fine art. In 1994 he had appraised some art owned by the Respondent. In December 1997, Ms. Sagl experienced a fire in her home and hundreds of pieces of art were destroyed. In January 1998, Ms. Sagl retained the appellant to appraise the destroyed art. In March 1999 he completed a report of the value of 2580 items. He asserts that Ms. Sagl agreed to pay him $400,000 plus HST of $28,000 for his appraisal services.

[3] The insurer denied the claim and Ms. Sagl started legal proceedings. The first trial lasted 22 days and resulted in a judgment dated September 4, 2007 in which the trial judge awarded Ms. Sagl damages in the amount of $4.5 million plus $500,000 in punitive damages as well as substantial indemnity costs.

[4] The insurer appealed and in a decision released in May 2009, the Court of Appeal ordered a new trial on two issues. After a 15 day trial, Marrocco J. granted judgment dated September 8, 2011 in the amount of $7,313,435 and substantial indemnity costs of both trials.

[5] Mr. Elliott was a witness in both trials. His report and testimony figure prominently in the trial judgments and the Court of Appeal judgment all of which were in favour of Ms. Sagl.

Proceedings by Mr. Elliott

[6] On June 18, 2012, Mr. Elliott, acting without a lawyer, filed a Statement of Claim in which he sought to recover the following:

(a) damages for breach of contract for failure to pay:

(i) the agreed upon appraisal fee in the amount of $400,000 plus HST $28,000 plus interest at 24% per year in the total amount of $1,644,000;

(ii) his fees for preparation, travel costs and attendance at the 2007 trial ($135,000) and the 2011 trial ($179,695) and costs submissions after the 2011 trial of ($9,117). Mr. Elliott alleged that, in connection with the claim against the insurer Ms. Sagl agreed to pay him, from the insurance proceeds upon receipt, at the rate of $375 per hour for instructing her counsel on art and art appraisals and providing expert evidence in the trial and to pay interest at the rate of 24% per year;

(iii) less the payment by the insurer of $234,666 on account of his expert fees leaving a balance owing of $1,733,148;

(b) damages for failure to pay rent for her occupation of 90% of Mr. Elliott’s 8500 square foot home in the amount of $1,067,480 calculated as rent of $5000 per month for 57 months ($285,000) plus utilities ($65,000) plus interest at 24% per year; all of which Mr. Elliott alleged Ms. Sagl agreed to pay from the proceeds of the insurance claim;

(c) damages for conversion of his art collection (that he valued at $1.5 million) and his house contents (that he valued in the amount of $1,250,000);

(d) punitive or exemplary damages in the amount of $2,000,000;

(e) contractual interest at the rate of 24% per year;

(f) costs on a substantial indemnity basis.

[7] On December 7, 2012, Ms. Sagl delivered a Statement of Defence in which she denied all allegations.

[8] No steps were taken in the case.

Order under Appeal

[9] On July 21, 2017, the Registrar made an order dismissing the claim for delay.[^1]

[10] Immediately after receiving that order, Mr. Elliott’s counsel brought a motion pursuant to rule 48.14 to set aside the dismissal order and pursuant to rule 37.14 because the dismissal order was made without notice.

[11] In support of his motion to set aside the dismissal order, on September 22, 2017 the affidavit of Jessica Annable was served. She is a law clerk at Mr. Atkinson’s firm. She attached a copy of the Statement of Claim, Notice of Intent to Defend, Statement of Defence, and dismissal order. Her evidence also referred to her understanding that, before dismissal orders are issued, the court sends a Status Notice and that Mr. Elliott did not receive a Status Notice. Her evidence also described the attempts to contact a lawyer who had acted for Ms. Sagl and attached correspondence including the refusal to consent to setting aside the dismissal order. Other than those exhibits, Annable’s evidence was as follows:

17. There was never any intention to abondon [sic] the claim, but rather it has always been, and remains, that the Plaintiff’s intention is to continue to move the matter forward to completion.

18. The plaintiff has a meritorious claim against the Defendant and it is vital that the dismissal Order be set aside.

19. I do verily believe that the Defendant will not suffer any prejudice by the setting aside of the Dismissal Order and has not incurred any costs related to the dismissal.

[12] In response, counsel for Ms. Sagl delivered the affidavit of a law clerk sworn November 7, 2017. In her affidavit, Ms. Hodder pointed out that the plaintiff had provided no evidence to explain his delay; no evidence for inadvertence in missing the deadline [to respond to the Status Notice]; and pointing out that the Rules of Civil Procedure had been amended to eliminate the Status Notice. Under the heading “Prejudice to the Defendant”, Ms. Hodder’s evidence was as follows:

9. I understand that many of the Plaintiff’s claims relate to matters that took place prior to the year 2000.

10. I understand that banks only retain records for the last seven (7) years.

11. I do verily believe that it would be difficult, if not impossible, for the Defendant to obtain the necessary supporting documentation to defend this claim so many years later.

[13] That affidavit was served by email on November 9. Mr. Elliott signed a reply affidavit sworn November 14, 2017. Mr. Elliott then lived in Ottawa and could not attend in Toronto in time to have the affidavit commissioned in person. Mr. Atkinson had commissioned the affidavit at Toronto. The Master found that it had not been properly commissioned and ruled that it was not admissible as proper evidence.

[14] In that affidavit, Mr. Elliott referred to the pleadings. He deposed that he had started the action on June 18, 2012 without a lawyer because he did not have sufficient funds due to the damages he had suffered. He said he had “made best efforts” to maintain communication with Ms. Sagl’s lawyer who had been appointed a judge but Ms. Sagl had not served a notice of change of lawyer. He asserted that he had made numerous attempts to contact that lawyer. Within a few days of receiving the dismissal order, Mr. Elliott retained the Atkinson Law Firm to attempt to secure consent to an order setting aside the dismissal order.

[15] Paragraphs 11, 12 and 13 of his affidavit are essentially legal submissions because he refers to the Rules of Civil Procedure and decisions in three unrelated cases on the subject of setting aside dismissal orders. His affidavit also repeated paragraphs 17, 18 and 19 of the Annable affidavit.

[16] In her endorsement dated November 15, 2017, the Master referred to the Reid Factors[^2] namely, an explanation for the litigation delay; inadvertence in missing the deadline; promptness in bringing the motion to set aside; and lack of prejudice to the defendant. The Master held that the evidence satisfied only the third factor:

There is no evidence before me to satisfy any of the other factors, in particular the lack of prejudice. The Plaintiff has failed to explain the delay, has failed to establish inadvertence and failed to rebut the presumption of prejudice. There is no evidence as to the availability of witnesses or documents. The Plaintiff has not even produced an Affidavit of Documents in this matter. There is no affirmative evidence to establish or even suggest that the presumption of prejudice in favor of the Defendant ought not apply in the case. It is in the interest of justice that this action be dismissed and that the Defendant be granted the right of finality (Dzuazah v Reg. Municipal of Peel Police Services Board, 2016 ONSC 6376, paras. 56-60). The motion is dismissed with costs payable to the Defendant fixed in the amount of $4,231.29 incl of HST and disbursements, payable forthwith.

Jurisdiction and Standard of Review

[17] Pursuant to s. 19 of the Courts of Justice Act, this court has jurisdiction to review a final order of the Master. The standard of review on a question of law is correctness whereas a discretionary order, involving a question of mixed fact and law requires a palpable and overriding error to justify intervention. The decision to dismiss the motion to set aside the dismissal order is in the latter category. The decision to refuse an adjournment to enable Mr. Elliott to file further evidence is a discretionary decision to which deference is required.

Analysis: Appeal from the order dated November 14, 2017

[18] The appeal is from the decision to refuse to grant an adjournment to permit the filing of further material to address deficiencies in the affidavit evidence filed in support of the motion and to challenge the evidence filed on behalf of Ms. Sagl on the eve of the motion. The affidavit filed in support of the motion to set aside the dismissal order and the reply affidavit did not address the criteria that the Master was considering in the motion to dismiss. On the record before the Master I see no basis to set aside the decision to refuse an adjournment.

[19] The appeal is also from the decision not to admit the reply affidavit. I see no basis to set aside that decision.

[20] In coming to that conclusion, I leave aside three issues. The first is that the reference to the Reid Factors includes an explanation for the failure to respond prior to the deadline. That factor was established before the change in the Rules that eliminated the Status Notice. That factor did not apply in this case.

[21] The second is whether the Master held that a moving party must fulfill all of the Reid Factors. The inference to be drawn is that the Master considered it a pre-requisite that the moving party satisfy the court on all four factors. However, the Court of Appeal held in Scaini v. Prochnicki[^3] that compliance with all of the factors was not required and that the more appropriate approach was, as the Court had held in Steele v. Ottawa-Carleton (Regional Municipality),[^4] that the guiding principle is that the Court exercise its discretion upon a consideration of the relevant factors and attempt to balance the interests of the parties.

[22] The third issue on which I need not rule is whether, in motions to set aside a dismissal order, the court should presume that the responding party has been prejudiced by delay or whether evidence that delay has not caused actual prejudice must be led by the moving party.

[23] I leave those aside because there is no basis to set aside the dismissal of the motion in any event. The initial affidavit was from a law clerk and, to the extent the contents were other than the Statement of Claim, Statement of Defence and the dismissal order, the affidavit contained weak evidence all of which was hearsay. The responding affidavit of Hodder also contained hearsay but the burden is on the moving party to establish that the dismissal order should be set aside, and absent evidence to meet that burden, the equally weak responding affidavit is not material. Further, the affidavit of Mr. Elliott that the Master rejected is of almost no assistance.

[24] On the record before the Master, Mr. Elliott has not demonstrated a palpable and overriding error.

Analysis: Motion for leave to file fresh evidence

[25] In this appeal, Mr. Elliott asks that the court receive fresh evidence. Counsel has filed the affidavit of Rachel Mester, a lawyer in the office of Atkinson Law. In that affidavit sworn February 26, 2019 Ms. Mester provided evidence as to the circumstances, including his location, age and health, under which Mr. Elliott had signed the November 14, 2017 affidavit including that he had signed it “in the presence of” the Commissioner because Mr. Elliott and his lawyer were connected by videoconference.

[26] Attached to Ms. Mester’s affidavit was the affidavit of Dr. Donald Smallman dated February 28, 2018 and Mr. Elliott’s affidavit sworn February 26, 2019. It appears they were attached to her affidavit to provide a comprehensive motion record for the fresh evidence request. However, the evidence consists of three affidavits, not Ms. Mester’s hearsay evidence.

[27] The affidavit of Dr. Smallman was prepared in other legal proceedings in which Mr. Elliott was a defendant. Dr. Smallman is an ophthalmologist in Kingston, Ontario and he has treated Mr. Elliott from April 2004 to the date of the affidavit. For purposes of this motion, I need not refer to the detailed medical information. Suffice it to say that since 2005, Mr. Elliott has had serious vision and vision related ailments. He had only monocular vision and his limited vision in his other eye meant he was vulnerable to blindness. His ability to read and appraise art have been severely impaired. His driver’s license was in jeopardy. Dr. Smallman described his various ailments and conditions that he said presented “significant challenges” in Mr. Elliott’s ability to function on a daily basis. Since the latter half of 2017 when Dr. Smallman introduced a new treatment regime, Mr. Elliott’s vision in both eyes has improved. Dr. Smallman attached three exhibits including the summary of Mr. Elliott’s scheduled appointments from 2004 to the date of the affidavit. In 2017, Mr. Elliott had 20 scheduled appointments. That was the year in which the dismissal order was made and the motion to set it aside was brought.

[28] The affidavit of Mr. Elliott contains a detailed explanation of his significant medical difficulties and of his attempts to retain counsel between 2011 and 2016. Mr. Elliott also provided a history of his involvement on behalf of Ms. Sagl to provide valuation evidence to support her claims including, leading up to the second trial, assisting in examination for discovery, meetings with counsel, meeting with a second art appraiser, providing a response to a critique made by the insurer’s expert and four days of testimony. In his affidavit, Mr. Elliott deposed that at the first trial, Ms. Sagl gave evidence as to Mr. Elliott’s fees for the appraisal work and the fact that the payment would come from the insurance proceeds. The second trial judge ordered the insurer to pay $234,666 to Ms. Sagl with respect to Mr. Elliott’s services which was paid and which Mr. Elliott received.

[29] Mr. Elliott’s affidavit also provides details and corroboration for his significant financial challenges that started in 2012 as a result of his involvement in a company for which no tax returns had been filed and no records could be found because the company president had passed away. The financial consequences to him were dire.

[30] In his affidavit, Mr. Elliott gave this evidence as to the impact of his appraisal services and of his evidence at the trials:

23. My expert testimony weighs heavily in all three (3) decisions for the above cited cases.

25(k) My evidence was a pivotal factor in the outcome of the trial, as was confirmed in the reasons for the decision.

[31] Mr. Elliott’s affidavit also contains this evidence about his circumstances:

26. Upon receipt of payment for my services in the Chubb Action, I had planned on retaining counsel to pursue my second claim. Instead, my payment was delayed and the amount was less than expected, and I descended into further financial ruin.

27. Before and since the commencement of this action, I have suffered physically, mentally, and financially.

28. As demonstrated within this Affidavit, I have made demonstrated and persistent efforts to retain counsel to move this matter forward. It was only in 2017 that I was successful in doing so.

29. I never had any intention to abandon this claim, but rather it has always been, and remains, my intention to continue to move the matter forward to completion.

30. The dismissal of this Claim would cause me great unsurmountable [sic] prejudice, as I have a meritorious claim against the Defendants [sic]. Thus it is vital that the Dismissal Order be set aside.

[32] At the hearing of the motion for leave to file fresh evidence, Mr. Atkinson provided a copy of the reasons for decision by the Court of Appeal returning some of the issues to a new trial[^5] and the reasons for decision of Marrocco J.[^6]

[33] In response to the motion for fresh evidence, counsel for Ms. Sagl filed an affidavit sworn March 4, 2019 by her law clerk, Carolyn Hodder. In that affidavit, Ms. Hodder made reference to the issue of Ms. Sagl’s prior counsel. Ms. Hodder also detailed the events in late February 2019 in which the motion record for leave to file fresh evidence was delivered. In two paragraphs Ms. Hodder said the following:

12. It is my understanding based on conversations with Ms. Ingrid Saffrey, counsel for the Respondent Ms. Bridgette Sagl and Ms. Felecia Watson, employee of Dale Streiman Law, who have been in direct contact with Ms. Bridgette Sagl, that Ms. Sagl has various health issues including but not limited to a diagnosis for cancer, recent hospitalization for life threatening arrhythmia, and upcoming open-heart surgery.

13. It is my belief and I verily believe to be true that requiring Ms. Sagl to participate in litigating a claim over 10 years old, would be highly prejudicial to her given her health issues and the increased difficulty involved in procuring evidence more than a decade old.

[34] Those are the only two paragraphs of the affidavit that might be relevant to the motion for leave to file fresh evidence. However, the evidence in paragraph 12 is double hearsay without confirming belief. The evidence in paragraph 13 asserts belief but not the source.[^7] It appears that the motion for leave to file fresh evidence was returnable March 11 and then adjourned to the hearing of the appeal on April 9, 2019. Between March 4 and April 9, Ms. Sagl had almost five weeks within which to provide reliable, corroborated evidence and I have been given no explanation for that omission. I indicated to counsel that if I allowed the fresh evidence on behalf of Mr. Elliott, I would not take into consideration paragraphs 12 and 13 of Ms. Hodder’s affidavit for those reasons.

[35] It is notable that in the responding evidence, Ms. Sagl made no effort to challenge or contradict any of the evidence referred to in paragraphs 30 and 31 above.

[36] Counsel provided submissions as to the admission of fresh evidence. The usual criteria are as follows:[^8] the evidence should generally not be admitted if, by due diligence, it could have been adduced at trial; the evidence must be relevant in the sense that it bears upon a decisive or potentially decisive issue; the evidence must be credible in the sense that it is reasonably capable of belief; and it must be such that if believed it could reasonably, when taken with the other evidence adduced, be expected to have affected the result.

[37] In R. v. 1275729 Ontario Inc.[^9] the Ontario Court of Appeal added this qualification:

The due diligence criterion is context sensitive and, as acknowledged in Palmer itself, must be applied with regard to the nature of the proceedings in which the appeal arises. For example, if an appellant was self-represented at trial. . ., an appeal court would be entitled to take that fact into consideration in deciding whether due diligence had been exercised at trial and, if not, the weight that should be attributed to that failure in determining whether to admit fresh evidence proffered on appeal. Under the Palmer approach to due diligence, that factor gets the weight that the “interests of justice” demand that it should get in any given circumstance. Self representation could in some circumstances diminish the impact of the failure to exercise due diligence on the admissibility of the evidence.

[38] As the Court of Appeal held, that contextual approach should be taken in civil cases. Furthermore, the contextual approach requires recognition that this was a motion to set aside a Registrar’s dismissal order. It was not a trial on the merits of the case.

[39] All of the evidence existed at the time of the hearing on November 15, 2017 and in that sense is not “fresh”. The question becomes whether, by due diligence, Mr. Elliott could have obtained such evidence in time for the November 15, 2017 motion. In the context of this motion, it is clear that Mr. Elliott had experienced enormous medical challenges and catastrophic financial challenges. Furthermore, it was because of those challenges that Mr. Elliott was unable to assist the lawyer he was finally able to retain to investigate and to marshal the evidence in support of the motion to set aside the dismissal order. The evidence in the affidavits of Dr. Smallman and Mr. Elliott indicates the serious personal circumstances[^10] with which Mr. Elliott had been confronted, the existence of which was not challenged on the motion for leave to file fresh evidence. The test for admitting fresh evidence is less onerous when the judgment under appeal did not result from a hearing on the merits,[^11] as was the case here.

[40] The evidence is relevant and credible. Had it been before the Master it could have been expected to have affected the result of the motion to set aside the dismissal order.

[41] In my view, the evidence is compelling and the interests of justice require that it be admitted.

Analysis: Disposition of the appeal based on the fresh evidence

[42] The order by the Registrar was made without a hearing. Accordingly, rule 37.14 (2) applies and the court may set aside or vary the order on such terms as are just. Furthermore, as Sharpe J.A. in a concurring judgment held in T.D. Bank v. Hylton[^12] the appeal should be decided on the basis of the fresh evidence.

[43] The factors that are relevant are these. Mr. Elliott has explained the years of delay. He has indicated that he always intended to pursue the substantial claims but was unable to do so because of his medical and financial challenges and his inability to retain counsel. He acted within days of receiving the order dismissing the claim and has persisted in his efforts to be given the opportunity to pursue the claim on its merits. Counsel for Ms. Sagl agreed that Mr. Elliott had brought the motion properly. Counsel for Ms. Sagl also agreed that there is no evidence of actual prejudice as a result of the delay. Even considering the hearsay evidence about Ms. Sagl’s own health issues, those issues did not arise as a result of Mr. Elliott’s delay in prosecuting the case.

[44] This is a case where the justice of the case demands that the order of dismissal be set aside. Mr. Elliott’s appraisal and his evidence had figured prominently in two judgments at trial and in the Court of Appeal. Indeed, having read the decision of the Court of Appeal and of Marrocco J., I infer that Ms. Sagl would not have achieved that success without his valuable and persistent efforts from 1998, when the fire occurred, to September 2011 when the judgment of Marrocco J. was released. According to Mr. Elliott, he was paid $234,666 in Ms. Sagl’s recovery of costs from the insurer. But, based on the record before me, his services which he alleged were to be compensated pursuant to the agreement with Ms. Sagl, significantly exceeded that third party recovery.

[45] In his analysis of the strengths and weaknesses of the evidence, the judgment of Marrocco J. includes the following:

56. . . . Nevertheless, Ms. Sagl has agreed to pay Mr. Elliott $400,000, which she will not be able to do if she fails in this lawsuit. In addition, Mr. Elliott is charging Ms. Sagl interest at the rate of 2% per month from the date of his invoice, which is March 31, 1999.

57. Moreover, Ms. Sagl was unable to remain at 2399 Doulton Drive because she could not pay the mortgage, so she moved into Mr. Elliott’s home, where she lived with her son and Mr. Elliott for fifty-seven months from August 1, 1998 to February 28, 2003. Ms. Sagl owes Mr. Elliott $285,000 in rent and $65,000 for utilities. Interest accrues at the rate of 2% per month . . .

[46] I need not decide whether those are findings of fact that are binding on the court in this case between Mr. Elliott and Ms. Sagl. Suffice it to say that those findings indicate that evidence was heard on which Marrocco J. could reach those conclusions. There is likely a record of that evidence. Mr. Elliott’s claims for his fees plus interest and rent and utilities plus interest are two of the significant claims he asserts and there exists considerable evidence on those issues. Without agreeing that prejudice should be assumed by the passage of time, in this case there is extensive history and documentation and, for that reason, prejudice cannot be presumed. As indicated above, counsel for Ms. Sagl agreed that there is no evidence of actual prejudice. Under the circumstances of this case, it would not be just to allow Ms. Sagl to evade liability because of the context in which the delay has occurred, and because she has not challenged the evidence as to the value and impact of his services or as to his prolonged serious personal circumstances.

[47] The third substantial claim Mr. Elliott asserted is damages for conversion of his art collection and his house contents. If, as a result of the passage of time, he is unable to prove those damages, then Ms. Sagl will not be prejudiced by the delay.

[48] As indicated above in Steele, the guiding principle is that the court exercise its discretion on a consideration of the relevant factors and attempt to balance the interests of the parties. All of the relevant factors favour setting aside the dismissal order. The interest of Mr. Elliott in being able to pursue his claims outweighs the interest of Ms. Sagl in having those claims dismissed without a consideration of the merits.

Costs

[49] Counsel for Ms. Sagl had brought a costs outline. I did not receive the costs outline and heard only brief submissions. Mr. Elliott has been successful both on the admission of his evidence and in the appeal. However, It would not be fair to require Ms. Sagl to pay costs given that there is no evidence that she encouraged or caused the delay.

ORDER TO GO AS FOLLOWS:

[50] Leave is granted to file the fresh evidence consisting of the following: the affidavit of Ms. Mester sworn February 26, 2019, the affidavit of Dr. Donald Smallman sworn February 28, 2018 and the affidavit of Mr. Elliott sworn February 26, 2019.

[51] The order dated November 15, 2017 is set aside.

[52] Neither party shall pay or recover costs of the motion to file fresh evidence or of the appeal.

[53] Counsel for the appellant shall take steps to have the matter placed in Civil Practice Court for purposes of establishing a timetable to proceed to a settlement conference and trial.

[54] Counsel for the appellant may take out this order without approval from counsel for the respondent.

Kiteley J.

Date: April 23, 2019

[^1]: The former rule 48.14 required that an action be set down for trial within two years after the filing of the first statement of defence and contemplated that the Registrar would send a Status Notice. On January 1, 2015, O. Reg. 170/14, s. 10 came into force and substituted a new rule 48.14 changing the timeline for a dismissal for delay to five years from the commencement of the action and eliminating the Registrar’s Status Notice. [^2]: (2001) 11 C.P.C. (5th) 80 [^3]: 2007 ONCA 63 [^4]: [1998] O.J. No. 3154 [^5]: 2009 ONCA 388 [^6]: 2011 ONSC 5233 [^7]: see Rule 39.01(4) [^8]: R. v. Palmer 1979 8 (SCC), [1980] 1 S.C.R. 759 [^9]: (2005) 2005 47589 (ON CA), 203 C.C.C. (3d) 501 at para. 29 [^10]: Toronto-Dominion Bank v. Paul Hylton 2010 ONCA 752 at paragraph 27 [^11]: Labelle v. Canada Border Services Agency, et al 2016 ONCA 187 [^12]: FN 9 paragraph 46