CITATION: 828343 Ontario Inc. v. Demshe Forge Inc., 2022 ONSC 350

DIVISIONAL COURT FILE NO.: 486/20

DATE: 20220118

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

D. L. CORBETT, EMERY and MEW JJ.

BETWEEN:

828343 ONTARIO INC.

Plaintiff (Respondent)

– and –

DEMSHE FORGE INC., ROBERT MUDDIMAN and SMX INTERNATIONAL CANADA INC.

Defendants (Appellants)

Tali Green, for the Plaintiff (Respondent)

Andrew Max and Asli Eke, for the Defendants (Appellants)

HEARD at Hamilton (by videoconference): 27 October 2021

MEW J.

REASONS FOR DECISION

(On appeal from the decision of D. L. Edwards J. dated 19 October 2020)

[1] This appeal concerns an action which was commenced on 4 May 2011. The defendants were subsequently noted in default on 16 June 2015 and, on 18 May 2016, the plaintiff obtained a default judgment against the defendants for $300,000 plus costs of $1,500.

[2] The defendant Robert Muddiman died on 14 November 2019, apparently unaware of the judgment. It was not until 12 February 2020 that his widow, Jane Muddiman, found out about it.

[3] By 14 April 2020, the defendants had served a notice of motion seeking to set aside the default judgment and to have the action dismissed for delay.

[4] The motion judge granted a motion to aside the noting in default and the default judgment, but declined to dismiss the action for delay. The defendants appeal, with leave (reported at 2021 ONSC 1641), against the motion judge’s denial of the motion to have the action dismissed for delay. The plaintiff cross-appeals, if leave to do so is granted, the decision of the motion judge to set aside the noting in default and the default judgment.

[5] For the reasons that follow, leave to advance the cross-appeal is refused. The defendants’ appeal is allowed, and the action dismissed.

Facts

[6] Robert Muddiman was an officer and director of SMX International Canada Inc. (“SMX”) and Demshe Forge Inc. (“Demshe”).

[7] Roger Demers was the principal of the plaintiff, which operated as “Midtown Forge”.

[8] The plaintiff alleges that it entered into an agreement with the defendants whereby Demshe would acquire the assets and liabilities of the plaintiff in return for a 25% share ownership of Demshe. In order to secure the value of the shares of Demshe, it is alleged that the defendants SMX and Robert Muddiman provided a guarantee that the value of the 25% ownership of Demshe would be a minimum of $300,000.

[9] The plaintiff alleges that this agreement was broken. On 10 May 2011, the plaintiff’s then lawyer, Steven Nagy, issued a statement of claim on the plaintiff’s behalf.

[10] The statement of claim was promptly served and, on 16 May 2011, a notice of intent to defend was delivered on behalf of the defendants by Michael Valente of Scarfone Hawkins LLP. A covering letter from him requested reasonable notice of any further steps. The defendants also served a demand for particulars, seeking particulars of:

a. The verbal agreement alleged to have been entered into between the parties;

b. An email referred to in the statement of claim; and

c. The guarantee alleged to have been given by SMX and Mr. Muddiman.

[11] The motion judge found that both the notice of intent to defend and the demand for particulars were received by the plaintiff’s lawyer.

[12] On 6 October 2011, Scarfone Hawkins wrote a follow-up letter to the plaintiff’s lawyer, advising that the defendants would defer delivery of a statement of defence until a response had been received to the request for particulars.

[13] According to Mr. Nagy, on 8 November 2011, he sent the defendants’ lawyer a letter in which he asked how they would like him “to deliver the large volume of documents responding to [the] Demand for Particulars”. Mr. Valente says that he never received this letter.

[14] Mr. Nagy further deposes that he compiled an affidavit of documents on behalf of the plaintiff and that on 18 May 2012, he wrote to the defendants’ lawyers enclosing the affidavit of documents and asking how the documents referred to in the affidavit should be delivered. Mr. Valente denies having received the alleged letter of 18 May 2012 or its enclosures.

[15] On 21 May 2013, the court sent out a notice to the parties and their lawyers advising that the action would be dismissed unless it was set down for trial within 90 days.

[16] Mr. Valente’s evidence was that he was instructed to do nothing, as the matter would be dismissed if no action was taken by the plaintiff.

[17] On 16 August 2013, Mr. Nagy, on behalf of the plaintiff, purported to file a trial record to set the matter down for trial. The defendants’ lawyers were not served.

[18] The court immediately sent a notice to the plaintiff’s lawyer stating that the case would be spoken to at an assignment court on 8 October 2013. The notice provided:

“IT IS THE RESPONSIBILITY OF THE FILING PARTY TO NOTIFY ALL OTHER PARTIES AND THEIR COUNSEL OF THE ASSIGNMENT COURT DATE AND TIME.”

[19] Mr. Nagy did not inform the defendants’ lawyers of the assignment court. However, he attended court, and had the matter put over to another assignment court on 19 September 2014, which he also attended. At that time, a trial was set for the week of 15 June 2015.

[20] Mr. Nagy did not advise the defendants’ lawyers of either the September 2014 assignment court date or the trial date.

[21] On 16 June 2015, Mr. Nagy appeared before Madam Justice Braid and obtained from her an order noting the defendants in default.

[22] On 18 May 2016, the plaintiff brought a motion, without notice, for judgment. The grounds for the motion stated that no statement of defence had been filed. An affidavit of Mr. Demers, sworn 10 February 2016, which made no reference to the procedural history of the matter, was filed in support of the motion for judgment. Mr. Justice Skarica granted default judgment against the defendants in the amount of $300,000 plus costs of $1,500.

[23] On 14 December 2016, a writ of execution was registered against Mr. Muddiman.

[24] Mr. Nagy says that on 11 January 2017, he mailed a letter to Mr. Muddiman at his home residence requesting payment of the default judgment. He did not send a copy of this letter to Scarfone Hawkins.

[25] Jane Muddiman says that she has no recollection of her husband having received that letter or of him advising her about the letter. She deposed that her husband always shared with her significant developments relating to him or his businesses, and that he would have mentioned the existence of a judgment against him. She searched through her husband’s records, including his email account, and was unable to find a copy of the 11 January 2017 letter enclosing the default judgment, or any other reference to it.

[26] On 23 January 2020, the plaintiff retained another law firm, Wolfson Law, to collect the judgment. That same day, Kenneth Wolfson of Wolfson Law sent a letter to Mr. Muddiman at his home residence demanding payment of $334,853.86.

[27] On 4 February 2020, Wolfson Law attempted to have a notice of examination in aid of execution served on Mr. Muddiman. A copy of the notice was left with Mr. Muddiman’s son.

[28] On 12 February 2020, Jane Muddiman returned from a period of travel and became aware of the January 2020 letter from Wolfson Law, and of the attempted service of the notice of examination in aid of execution. After accessing her late husband’s email account to try and determine what had occurred, Ms. Muddiman contacted Scarfone Hawkins.

Decision of the Motion Judge

[29] Applying the factors set out in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, the motion court judge concluded that he should exercise his discretion, pursuant to Rule 19.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to set aside a default judgment, in favour of the defendants. In doing so, he found that:

a. Ms. Muddiman’s evidence that the 11 January 2017 letter had not been received by Mr. Muddiman was plausible and, consequently, the defendants had not become aware of the default judgment until February 2020. The motion to set aside that judgment was commenced within two months and, accordingly, was brought promptly.

b. Mr. Valente of Scarfone Hawkins did not receive the letters of 8 November 2011 or 18 May 2012 which Mr. Nagy’s file indicated were sent to him.

c. It was not unreasonable for Mr. Valente, as the defendants’ lawyer, to let the matter be dismissed administratively. Accordingly, there was a plausible explanation for the defendants’ failure to actively defend the action.

d. It was not necessary to determine whether there was an arguable defence on the merits, given the other findings. In that regard, it was questionable whether the plaintiff’s lawyer had been actively engaged with the defendants’ lawyer, who had said that he would not be actively defending the case.

e. The size of the judgment was of sufficient magnitude that there would be prejudice to the defendants if the judgment was not set aside, which would outweigh any prejudice to the plaintiff occasioned by setting aside the judgment.

f. Because of the finding that the defendants’ lawyer had not received the letters from the plaintiffs’ lawyer, the administration of justice would be enhanced by granting the motion to set aside the full judgment. In that regard, the motion court judge noted that if principles of civility had been adhered to, the plaintiff’s lawyer would have advised the defendants’ lawyer that he was planning to obtain default judgment. Because this had not occurred, the failure to set aside the default judgment would negatively impact upon the integrity of the administration of justice.

[30] Although the motion judge found that neither Mr. Valente or Mr. Muddiman had received the letters found in Mr. Nagy’s file, he nevertheless found that Mr. Nagy’s conduct was reasonable. Specifically, it was reasonable for Mr. Nagy to have assumed that the defendants were not pursuing the matter. However, when Mr. Nagy received notice of the impending administrative dismissal, he should have corresponded with the defendants’ lawyers as directed by the notice. Further, once he had obtained judgment, he should have sent a copy to the defendants’ lawyer of record, rather than directly to Mr. Muddiman.

[31] On the issue of whether the action should be dismissed for delay, the motion judge found that Mr. Nagy had a reasonable and cogent explanation for not moving the matter forward: he was awaiting word from the defendants’ lawyer. The delay after setting the action down for trial related to obtaining a date for, and having, a default hearing. Finally, notwithstanding the finding that Mr. Muddiman had not received the 11 January 2017 letter enclosing the judgment, it was logical and reasonable for the plaintiff to conclude that, after having filed a writ of execution and giving notice to the defendants, there was no reason to take any further steps to enforce the judgment “until he wished”.

[32] Although the motion judge acknowledged that it was possible that there could be circumstances where the delay between setting the matter down for trial, obtaining a default judgment, and the time when the defendants were advised of the default judgment, might be so long that it would be inordinate, and thus create a substantial risk that a fair trial was not possible, that was not the case in relation to this matter. Accordingly, the delay attributed to the plaintiff – essentially the time between the commencement of the action and obtaining default judgment – was not inordinate. Although Mr. Muddiman had died, which would make a trial more difficult, there was documentary evidence, including emails, draft documents and a third party’s testimony, that would enable a fair trial to occur.

Issues

[33] The appeal and proposed cross-appeal raise two principal issues, namely whether the motion judge erred by:

a. Setting aside the default judgment obtained by the plaintiff; and

b. Refusing to dismiss the action for delay by:

i. Misapplying the dismissal for delay test established in Ticchiarelli v. Ticchiarelli, 2017 ONCA 1;

ii. Misapprehending the burden of proof for demonstrating actual prejudice;

iii. Failing to provide adequate reasons;

iv. Failing to consider relevant factors in finding the delay excusable; or

v. Misapprehending the evidence.

[34] The parties agree that the standard of review is correctness on any question of law for both the appeal and cross-appeal; however, most errors related to a misapprehension of evidence would not be regarded as involving a question of law and, hence, are entitled to deference, absent palpable and overriding errors: McMaster-Pereira v. Pereira, 2021 ONCA 547, at para. 20.

[35] The plaintiff did not bring a motion for leave to appeal the decision of the motion court judge to set aside default judgment. Accordingly, having delivered a cross-appeal in response to the defendants’ appeal against the refusal of the motion judge to dismiss the action for delay, for which leave was granted, the plaintiff now seeks leave from this panel, pursuant to Rule 61.07(1.2) of the Rules of Civil Procedure.

Setting Aside Noting in Default and Default Judgment

[36] The panel deferred its decision on the issue of whether leave to appeal should be granted and directed the parties to proceed on the basis of leave having been granted.

[37] The main thrust of the plaintiff’s argument on the cross-appeal is that the motion judge erred by setting aside the default judgment despite the lack of evidence of an arguable defence.

[38] There is no dispute that, in exercising his discretion to set aside a default judgment under Rule 19.08 of the Rules of Civil Procedure, the motion judge correctly articulated the guiding principles set out in Mountain View Farms Ltd., which require the court to consider:

a. Whether the motion was brought promptly after the defendant learned of the default judgment;

b. Whether the defendant had a plausible explanation for the failure to defend the claim;

c. Whether the defendant had an arguable defence on the merits;

d. The prejudice that may be caused to each party should the motion be granted or refused, as the case may be; and

e. The effect that an order granted may have on the administration of justice.

[39] As the motion judge noted, at para. 32 of his reasons, these are not rigid rules, all of which must be satisfied.

[40] I find no fault with the motion judge’s conclusion that the defendants had moved promptly to set aside the noting in default and the default judgment once they became aware that these steps had been taken. His findings of fact that the letters allegedly sent by Mr. Nagy delivered in response to the demand for particulars, and enclosing an affidavit of documents, had never been received by the defendants’ solicitors were open to him to make on the record before him.

[41] Nor do I find any error with the motion judge’s finding that the defendants’ decision not to take any proactive steps once notified of the court’s intention to dismiss the matter administratively for delay was reasonable. As the motion judge observed, it was not incumbent on the defendants’ lawyers to take any action. Rather, it was for the plaintiff to prosecute its claim.

[42] On the issue of prejudice, the motion judge found that Mr. Muddiman’s death posed a difficult situation for both parties, but concluded that, on balance, the prejudice to the defendants if the judgment was not set aside outweighed any prejudice to the plaintiff occasioned by the judgment being set aside.

[43] The contentious aspect of the motion judge’s decision is his failure to reach a conclusion on whether the defendants had an arguable defence on the merits.

[44] The plaintiff asserts that the defendants were required to show that their defence had an air of reality, relying on the pronouncement by the Court of Appeal in Mountain View Farms Ltd., at para. 51, that the presence of an arguable defence on the merits may justify the court exercising its discretion to set aside a default judgment even if the other factors are unsatisfied in whole or in part. The plaintiff also finds support for its position from the decision of Master Short in Maplecrete Group Ltd. v. Canning, 2009 30137 (ON SC), where, in the absence of evidence of “even the barest bones of the facts supporting a defence”, it was deemed not appropriate to set aside a default judgment.

[45] The defendants are, of course, hampered in their ability to adduce evidence of an arguable defence, given the death of Mr. Muddiman. Furthermore, as submitted by the defendants and accepted by the motion judge, in some circumstances it will not be necessary to show an arguable case where the plaintiff has taken actions without notice to the defendants.

[46] The Court of Appeal’s decision in Male v. Business Solutions Group (2013), 2013 ONCA 382, 115 O.R. (3d) 359 (C.A.) is on point. In that case, a dispute had arisen between partners. The plaintiff claimed that he had been expelled from the premises of the partnership of which he was a member in violation of s. 25 of the Partnerships Act, R.S.O. 1990, c. P.5. In an action which he commenced on 22 November 2011, he claimed continuing payment of his share of the partnership profits. He sought an interim injunction obliging the partnership to continue paying him. On 14 December 2011, both the plaintiff’s motion for an injunction, and a motion brought by the other partners to transfer the action to the Small Claims Court, to stay the action under the Arbitration Act, and to move the action to Toronto, were dismissed. Mere hours after that decision had been handed down, the plaintiff noted the defendants in default. The plaintiff’s lawyer advised the defendants’ lawyer that he had done so two days later. On 21 December 2011, the defendants moved for leave to appeal from the decision refusing to stay the action and transfer it to Toronto. However, on 10 January 2012, the plaintiff obtained default judgment. The lawyer for the plaintiff did not notify the defendants’ lawyer that default judgment was being sought, despite the defendants having served their motion for leave to appeal. On 13 January 2012, the defendants moved to set aside the default judgment.

[47] A motion judge refused to set aside the default judgment on the basis that:

a. The defendants’ lawyer had maintained that he would not be filing a statement of defence; and

b. The defendants appeared to be content to repeat their mantra of the applicability of the arbitration clause without doing anything to advance or address the resolution between the partners, an approach which the motion judge referred to as “an example of technical approach without substance”.

[48] The Court of Appeal concluded that the default judgment ought to have been set aside as a matter of justice, without an inquiry into the merits of the defence, finding, first, that the motion judge had erred in principle by failing to take into account the fact that the defendants were actively defending the case at the time the noting in default occurred and at the time the default judgment was taken out. Second, in the circumstances, it was unreasonable for the lawyer for the plaintiff to have noted the defendants in default and to have pursued default judgment without notice to the defendants’ lawyer, with whom he was actively engaged, when he knew that the defendants were defending.

[49] The Court of Appeal referred, with approval, to the Advocates’ Society’s publication The Principles of Civility for Advocates (Toronto: Advocates’ Society, 2019), s. 19 of which provides:

Subject to the Rules of Practice, advocates should not cause any default or dismissal to be entered without first notifying opposing counsel, assuming the identity of opposing counsel is known.

[50] In the present case, the record discloses multiple events, each of which might be considered contrary to The Principles of Civility for Advocates, and some of which would also be regarded as sharp practice.

[51] The mysterious non-receipt of correspondence from the plaintiff’s lawyer raises the first flags of concern. The request which the plaintiff’s lawyer says he made by way of his letter of 8 November 2011 is nonsensical. He asked how the defendants’ lawyers would like him to deliver the large volume of documents responding to the defendants’ demand for particulars. Yet only three sets of straightforward particulars were demanded. It is hard to imagine how any response would require delivery of a “large volume of documents”.

[52] Equally nonsensical would be the purported delivery by the plaintiff’s lawyer of an affidavit of documents “still without having received a Statement of Defence or having heard from Mr. Valente regarding delivery of the documents he had requested” (to quote from Mr. Nagy’s affidavit). Why, if he had yet to receive a statement of defence or, indeed, any response from the defendants’ lawyers, would he have been delivering an affidavit of documents?

[53] Nothing happened then for another year, until 21 May 2013, when the court sent both parties a notice advising that the action would be dismissed within 90 days unless it was set down for trial.

[54] Mr. Nagy deposes that to avoid the matter being dismissed, he filed a trial record on 16 August 2013. How he was able to do this is not explained. The defendants had delivered a notice of intent to defend. A demand for particulars had been served by the defendants. Those particulars had not been provided. There had been no statement of defence. Nor had the defendants been noted in default at that time. As a result, the pleadings were not closed: see Rule 25.05. Notwithstanding that, the plaintiff’s lawyer purported to deliver a trial record, which he filed on 16 August 2013.

[55] In his affidavit on the motion, Mr. Nagy included an unsigned copy of the certificate required by Rule 48.03(1)(h) which he provided to the court, stating that the trial record contained the documents required by Rule 48.03(1) (which would include a copy of the pleadings, a copy of any demand or order for particulars of a pleading, and the particulars delivered in response). Yet the record contained neither the notice of intent to defend nor the demand for particulars. Mr. Nagy also certified that the time for delivery of pleadings had expired, but gave no explanation for the absence of any other pleadings (such as the noting in default of a defendant who had failed to deliver a statement of defence, the obtaining of judgment, or the discontinuance or dismissal of the action against a defendant).

[56] There is no evidence that the defendants’ lawyers were served with the trial record, as required by the Rules.

[57] In short, the purported setting of the action down for trial was riddled with irregularities and completely improper.

[58] These events are then followed by a number of serious acts or omissions on the part of the plaintiff’s then lawyer.

[59] As already noted, Mr. Nagy failed to notify the defendants’ lawyers of the first assignment court date on 8 October 2013. He then had the matter put over for nearly another year, but failed to notify the defendants’ lawyers that he had done so. When he appeared at the assignment court on 19 September 2014, he set a trial for the week of 15 June 2015. Once again, however, he failed to notify the defendants’ lawyers that he had done this.

[60] When, on 16 June 2015, Mr. Nagy appeared before Justice Braid, he asked her to note the defendants in default. Justice Braid’s endorsement noted that no one had appeared on behalf of the defendants and that the matter would proceed for default judgment on a date to be set by the trial coordinator.

[61] The plaintiff’s lawyer did not notify the defendants’ lawyer that the defendants had been noted in default. Nor was the defendants’ lawyer notified of the motion for default judgment, which was heard by Justice Skarica on 18 May 2016.

[62] Aside and apart from what The Principles of Civility for Advocates recommends, it is always prudent for a lawyer representing a party intending to move for default judgment to notify a represented defendant before the motion is heard. If doing so prompts a response which obviates the need for the motion to be heard, thereby avoiding the wasting of time and resources, all parties benefit. If, on the other hand, the defendant, although notified, does nothing in response, the task of the defaulting party subsequently obtaining an order setting aside the default judgment will be made that much harder.

[63] Indeed, Rule 19.02 provides that although a defendant who has been noted in default is not entitled to notice of any step in the action, including a motion for judgment, this is subject to the proviso, in subrule 3, that the court may order otherwise. As D. M. Brown J. stated in Elekta Ltd. v. Rodkin, 2012 ONSC 2062, at para. 10, by far the better practice is to serve the default judgment motion materials on the defendant in any event. This allows the judge hearing an undefended trial, or a motion for judgment, to be satisfied that the defaulting defendant was provided with proper notice of the claim and of the pending motion or hearing for judgment. A number of other authorities to similar effect were conveniently summarised by Sanfilippo J. in Casa Manila Inc. v. Iannuccilli, 2018 ONSC 7083, at para. 12.

[64] In assessing the effect of setting aside the default judgment on the administration of justice, the motion judge was significantly, and in my view correctly, influenced by the conduct of the plaintiff’s lawyer. As the motion judge noted, the integrity of the administration of justice depends greatly upon the civil interaction between lawyers. The defendants were legally represented. The plaintiff’s lawyer knew that. Prior to noting the defendants in default and obtaining default judgment, the defendants’ lawyers should have been advised.

[65] If anything, the motion judge’s conclusion that failing to set aside the default judgment would negatively impact upon the integrity of the administration of justice understates the position.

[66] As set out in the foregoing paragraphs, there are also many other things which the plaintiff’s lawyer should have, but failed, to do. He not only failed to adhere to the principles of civility. He misled the court. He manipulated the court’s process. He obtained for his client a judgment that his client would simply not have been entitled to obtain, had the Rules of Civil Procedure been properly followed.

[67] The motion court judge came to the right conclusion. The noting in default and the default judgment were correctly set aside.

[68] Given the foregoing, leave to appeal the motion court judge’s decision should not be granted and, even if granted, the cross-appeal would be dismissed.

Dismissal for Delay

[69] As the motion judge noted, the court has jurisdiction, both under Rule 24 and through its inherent jurisdiction, to dismiss an action for delay.

[70] The leading case is Ticchiarelli, in which it was held that an order dismissing an action for delay will be justified where the delay is:

a. Inordinate;

b. Inexcusable; and

c. Prejudicial to the defendants, in that it gives rise to a substantial risk that a fair trial of the issues will not be possible.

[71] The defendants argue that the motion judge was in error because he conflated the first two of these factors, concluding that the nine year delay between the commencement of the action and the motion to dismiss for delay was not inordinate because it was excusable.

[72] In Ticchiarelli, in considering whether there had been inordinate delay, the Court of Appeal considered the entire eleven year period of delay in that case. Having determined that the period of time was inordinate, the court then went on to consider whether the delay was excusable, and considered the explanations offered for the delay. A similar approach was taken by Justice Doyle in the recent case of Lawrynowicz v. Halliday, 2021 ONSC 3340.

[73] It is apparent from a review of the reasons of the motion judge that he did, indeed, blend the concepts of inordinate delay and excusable delay. In finding that there had not been inordinate delay, he concluded as follows:

a. The fact that “a significant portion of the delay can be attributed to the fact that Mr. Nagy was operating on the basis that…he was awaiting word from the defendants’ counsel”;

b. The delay after setting the trial record down relates to obtaining a date for, and having, a default hearing;

c. The absence of authority to support the proposition that the time between obtaining a default judgment and filing a writ of execution, and the taking of further enforcement steps, should be included in determining whether there had been a delay which had been prejudicial to the defendants; and

d. Although Mr. Nagy’s 11 January 2017 letter to Mr. Muddiman had not been received by Mr. Muddiman, it was logical and reasonable for the plaintiff to conclude that after having filed the writ of execution and given notice to the defendants, there was no need to take any further steps to enforce the judgment until the plaintiff wished to do so.

[74] In my view, the motion judge fell into error when he failed to give separate consideration to the elements of inordinate delay and inexcusable delay. As a result, in concluding that the delay had not been inordinate, the motion judge excluded from his calculation of the total delay those portions of the delay that he regarded as excusable. The significance of this error is that inordinate delay generates a presumption of prejudice.

[75] It follows that if the court concludes that the delay has not been inordinate, it is not necessary to consider the elements of inexcusability or prejudice.

[76] Because the motion judge misapplied the test for dismissal for delay set out in Ticchiarelli, it is appropriate for this court to consider the factors of inordinate delay and excusability separately, having regard to the facts as found by the motion judge .

[77] Before doing so, although not strictly necessary in the circumstances, I wish to comment briefly on the plaintiff’s assertion that the motion judge failed to provide adequate reasons for his decision to exclude the year long interval between when the defendants were noted in default and when the plaintiff obtained a default judgment, and the subsequent delay in enforcing that judgment.

[78] I do not accept that criticism. It is neither reasonable nor practical to expect that busy motion court judges should produce detailed reasons for judgment in every case, or comprehensively address all possible issues and arguments in their reasons. Rather, as the Supreme Court of Canada has observed in Cojocaru v. British Columbia Women’s Hospital and Health Centre, 2013 SCC 30, [2013] 2 S.C.R. 357, at para. 13:

To determine whether a defect relating to reasons for judgment is evidence of procedural error negating a fair process, the alleged deficiency must be viewed objectively, through the eyes of a reasonable observer, having regard to all relevant matters: see e.g. R. v. Teskey, 2007 SCC 25, [2007] 2 S.C.R. 267. Reasons need not be extensive or cover every aspect of the judge’s reasoning; in some cases, the basis of the reasons may be found in the record. The question is whether a reasonable person would conclude that the alleged deficiency, taking into account all relevant circumstances, is evidence that the decision-making process was fundamentally unfair, in the sense that the judge did not put her mind to the facts, the arguments and the issues, and decide them impartially and independently.

[79] Although the judge’s reasons on the issue of delay as a whole were brief, it is clear from his reasons that, in the absence of authority to support the position taken by the defendants, he was not persuaded to make the finding that was asked for.

[80] I would therefore reject the criticism of the adequacy of the reasons provided by the motion judge.

[81] Turning to the application of the Ticchiarelli factors, I consider that the delay in this case has been inordinate.

[82] In Langenecker v. Sauvé, 2011 ONCA 803, at para. 8, the Court of Appeal stated that the relevant delay is measured from the commencement of the action until the motion to dismiss.

[83] In Ticchiarelli itself, an eleven year delay had, at least at the motion court level, been conceded by the respondents as being inordinate. Although the respondents attempted to resile from that position on appeal, the Court of Appeal found no reason to interfere with the motion court judge’s finding that the delay had, indeed, been unreasonable.

[84] In Lawrynowicz, Doyle J. had under consideration a period of eight years between the institution of the proceedings and a status hearing. She concluded, at para. 71, that viewed objectively, this was an inordinate amount of time to proceed with a fairly straightforward debt claim of liquidated damages. This was without taking into account a further two years which elapsed from the status hearing date until the motion for delay was brought.

[85] There are examples of other cases in which periods of delay comparable to the eleven years between the commencement of this action and the bringing of the motion to dismiss for delay have been found to be inordinate:

a. 2259964 Ontario Inc. v. Wilkinson, 2021 ONSC 4006: a span of over nine years in a construction lien action was found to be inordinate.

b. Langenecker: the period of delay was fifteen years from the commencement of the action to the motion to dismiss. Doherty J.A. concluded that even accepting that litigation customarily moves at a somewhat stately pace, and that certain types of litigation – Langenecker involved a medical malpractice claim – can move even more slowly than most, there can be no doubt that fifteen years from the commencement of the action to the motion to dismiss constituted inordinate delay.

c. Ali v. Fruci (2014), 2014 ONCA 596, 122 O.R. (3d) 517 (C.A.): the delay between the commencement of the action and the bringing of the motion to dismiss for delay was over five years. Noting that the motion judge’s order was a discretionary one, and therefore entitled to “the usual deference”, the Court of Appeal found that although, perhaps, a “close call in the context of this litigation”, it would defer to the motion judge’s finding that the delay had been inordinate.

d. Ball v. Ball, 2013 ONSC 1927: the delay between commencement of the action and the defendant’s bringing a motion to dismiss for delay was approximately five and a half years. Heeney R.S.J. found the delay, which arose in an action involving a claim by the plaintiff for an interest in a farm property, or damages in lieu thereof, based on an alleged oral agreement, to be inordinate.

[86] I suspect that had the motion judge considered the period of eleven years between the commencement of the action and the defendants’ bringing their motion for delay, without regard to what he saw as mitigating factors, he would have concluded, as do I, that the period of delay in this case was inordinate.

[87] Was the delay inexcusable?

[88] In a word, yes.

[89] In my view, the delay was entirely the responsibility of the plaintiff (or its lawyer).

[90] The plaintiff’s attempt to move the action forward, not by using the tools provided in the Rules of Civil Procedure, but, rather, by blatantly disregarding them, with the inevitable result that a default judgment was eventually obtained which was bound to be set aside, cannot be regarded as excusing the delay. In my discussion of the basis for setting aside the default judgment, I have already dealt with the acts and omissions of the plaintiff which validated the decision of the motion court judge to set the default judgment aside. But it did not end when the judgment was obtained. Seven months then elapsed until a writ of execution was registered. A month later, a letter was allegedly sent requesting payment, which was found not to have been received. Another three years then went by until the plaintiff retained a different lawyer to collect the default judgment.

[91] I would agree with the motion court judge that – strictly speaking – once a writ of execution has been filed and notice of that given to the defendants, a plaintiff is under no compulsion to do anything further. In the present case, however, as the motion court judge found, the defendants were not made aware of the filing of the writ of execution until over three years later. Furthermore, as a matter of common sense, the longer a plaintiff delays in enforcing a judgment which a judgment debtor is not aware of, the greater the probability of prejudice resulting.

[92] Turning, then, to the issue of prejudice, the starting point is the recognition, acknowledged by the Court of Appeal in Langenecker, at para. 11, that the longer the delay, the stronger the inference of prejudice to the defence case flowing from that delay.

[93] In Langenecker, at para. 12, Doherty J.A. observed that in addition to the prejudice inherent in lengthy delays, a long delay can cause case-specific prejudice. In that case, an expert witness retained by the defendants had died, and the defendants had been unable to find a replacement (later on, at para. 25, Doherty J.A. noted that, in the circumstances, it had not been necessary for the motion judge to make any finding of actual prejudice based on the death of the expert because he had been satisfied that the presumption of prejudice flowing from the inordinate delay had not been rebutted and was sufficiently strong to give rise to a substantial risk that the respondents could not fairly present their case so long after the relevant events).

[94] The obvious prejudice in the present case arises from the death of Mr. Muddiman. I disagree with the conclusion of the motion judge that on the record before him, it was not possible to weigh that factor and determine who is the more prejudiced.

[95] The case is one involving an oral contract. To be sure, there were exchanges of emails and draft agreements. But ultimately, no written agreement had been entered into. The negotiations on the part of the defendants were conducted by Mr. Muddiman. Paragraph 11 of the statement of claim alleges that “negotiations continued and the parties reached a verbal agreement regarding the terms of the Asset sale, and the employment contract and left it to the lawyers to draft the agreements”.

[96] When she searched through her late husband’s email account, Ms. Muddiman found a draft statement of defence and a draft affidavit of Curtis Link, who was the accountant for Mr. Muddiman and SMX, which addressed certain allegations made in the statement of claim, and, in the case of the draft affidavit, refuted the allegation made by the plaintiff that it was entitled to a percentage share interest in Demshe.

[97] Commenting on this evidence, Mr. Demers’ affidavit:

a. Asserts that all of the statements in Mr. Link’s affidavit (which are based on what Mr. Link had been informed of by Mr. Muddiman) “are completely false”;

b. Alleges that if Mr. Muddiman actually thought that Mr. Demers had disclaimed the plaintiff’s interest in Demshe, he would not have felt the need to send an email trying to convince Mr. Demers that he should agree to disclaim that interest; and

c. Recounts a telephone conversation between himself and Mr. Muddiman in which Mr. Demers claims that he told Mr. Muddiman that he would not engage in any renegotiations regarding the plaintiff’s alleged 25% interest in Demshe.

[98] Without the ability to adduce evidence from Mr. Muddiman, it would be difficult if not impossible to refute Mr. Demers’ claims. Mr. Demers goes as far as discussing Mr. Muddiman’s state of mind, and the culmination of the exchanges of emails and documents that were exchanged in April 2010 was an unwitnessed telephone conversation between Mr. Demers and Mr. Muddiman.

[99] Even if the action, prosecuted with reasonable dispatch, had not reached the trial stage by the time of Mr. Muddiman’s death in November 2019, which was apparently sudden and unexpected, it is reasonable to suppose that his evidence would have been memorialised in some format by then – for example, an examination for discovery transcript – which would have mitigated the obvious prejudice resulting from his demise.

[100] In short, there is no means of adequately repairing or mitigating the prejudice caused by Mr. Muddiman’s death. The result is a substantial risk that the defendants will be unable to fairly present their case.

[101] I would therefore allow the appeal against the refusal of the motion court judge to dismiss the action for delay. As Doherty J.A. observed in Langenecker, at para. 3, sometimes an order dismissing an action for delay is the only order that can adequately protect the integrity of the civil justice process and prevent an adjudication on the merits that is unfair to a defendant. This is such a case.

Costs

[102] The leave panel ordered costs of the motion for leave to appeal in the amount of $5,000, in the discretion of this panel. Accordingly, I would award the successful appellants (defendants) their costs of the motion for leave to appeal in that amount.

[103] For the appeal itself, the appellants asked for costs in the amount of $25,000. The respondent (plaintiff) seeks costs of $5,000. Neither side has addressed any costs issues arising from the motion before Justice Edwards.

[104] I would fix the costs of the appeal, payable to the appellants, in the amount of $15,000. I am presumptively of the view that the appellants should also have their costs of the motion before Edwards J. In the event that the parties are unable to agree on the amount of those costs, they should advise the Divisional Court office and this panel will provide directions on receiving submissions on that issue.

Mew J.

I agree _______________________________

D. L. Corbett J.

I agree _______________________________

Emery J.

Released: 18 January 2022