COURT FILE NO.: CV-08-00059053-0000

DATE: 2012/05/18

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 625041 ONTARIO INC.. (Plaintiff)

• and-

FORD MOTOR COMPANY OF CANADA, LIMITED and OAKRIDGE FORD SALES (1981) LIMITED (Defendants)

BEFORE: JUSTICE A. J. GOODMAN

COUNSEL:
John H. McNair, for the Plaintiff
Linda M. Smits, for the Defendants

HEARD: May 14, 2012

ENDORSEMENT

INTRODUCTION

[ 1 ] This motion raises a question involving an unusual circumstance wherein a prior judicial order staying the action is intertwined with the Registrar’s duties in issuing a notice of dismissal for delay under Rule 48.14.

[ 2 ] The plaintiff seeks an order setting aside the administrative order of the Registrar dismissing this action on August 2, 2011, with costs. The plaintiff also seeks to vacate the Certificate of Assessment of Costs issued on October 3, 2011.

[ 3 ] For the reasons that follow, I find that the Registrar’s order dismissing this action is a nullity and must be set aside.

PART II - SUMMARY OF FACTS

[ 4 ] The plaintiff commenced an action against the defendants on July 29, 2008 for damages incurred as a result of the defendants’ alleged failure to repair premises leased by the plaintiff to the defendants as tenant and sub-tenant, respectively.

[ 5 ] After serving a Notice of Intent to Defend but before preparing a Statement of Defence, counsel for the defendants, brought an alternative dispute resolution provision to the attention of the plaintiff’s then solicitors of record. Defendants’ counsel suggested that the action ought to be stayed and that the dispute proceed by way of arbitration. The defendants referred plaintiff’s counsel to an arbitration clause in the lease which provided, in part, as follows:

“In the event that the Landlord and the Tenant shall be unable or unwilling to mutually agree on the resolution of any dispute arising from the terms of the Lease, the determination of the issue shall be referred to arbitration.”

[ 6 ] The defendants prepared and filed a motion to stay the action. The plaintiff consented to the proposed motion to stay the action in favour of proceeding to arbitration. On July 22, 2009, Templeton J. made the following order:

“THIS COURT ORDERS that this action shall be stayed, without costs, pursuant to Section 7 (1) of the Arbitration Act , 1991, S.O. 1991, c. 17.”

[ 7 ] On July 29, 2009, the defendants’ counsel wrote to plaintiff’s counsel enclosing a copy of the order of Justice Templeton, and suggested that the two lawyers have a conversation about “how we should be proceeding with the arbitration.” Neither side took any steps to appoint the arbitrator.

[ 8 ] On February 18, 2010, plaintiff’s counsel obtained an order removing the firm from the record in the action. Notwithstanding the direction in the order, the plaintiff did not appoint new counsel of record in the action.

[ 9 ] For some unexplained reason, the plaintiff did not receive the Status Notice from the Registrar indicating that the action would be dismissed unless set down for trial. On August 2, 2011, an order was issued by the Registrar dismissing the stayed action for delay with costs, in Form 48D.

[ 10 ] The defendants responded to the dismissal order by taking out an appointment for assessment of costs of the dismissed action. The Notice of Appointment and draft Bill of Costs were forwarded to the plaintiff on September 12, 2011. The plaintiff engaged an agent who informed the defendants that the plaintiff would be out of the country on the scheduled date of the assessment hearing.

[ 11 ] Notwithstanding the unavailability of the plaintiff, the assessment hearing proceeded on October 3, 2011. No one appeared for the plaintiff. The Assessment Officer was advised that the “Motion to stay the action had been on a without costs basis and, therefore no costs of the motion were assessed”. Costs of the action were allowed in favour of the defendants in the amount of $13,062.58.

[ 12 ] On December 19, 2011, the plaintiff’s new counsel wrote to counsel for the defendant to request consent to an order setting aside the administrative dismissal and the related costs award. The defendants responded by letter dated December 21, 2011 declining to give such consent.

Position of the Parties

[ 13 ] The plaintiff submits that the Registrar’s order to dismiss the action, with costs, was issued in the face of a previous order of the court which stayed the action, without costs.

[ 14 ] The plaintiff submits that, the action having been stayed by order of this Court, the Local Registrar had no jurisdiction to make such order.

[ 15 ] The defendants submit that the dismissal of the action was proper in the exercise of the Registrar’s discretion under Rule 48.14. The defendants submit that there is no exception for a stay under Rule 48.14 and the Registrar exercised the required steps to engage compliance with the rules. The defendants argue that the plaintiff has delayed in prosecuting this action or taking any steps to proceed to arbitration. Further, the defendants submit that there is a lack of any evidence demonstrating the plaintiff’s intention to continue with the action, the missed deadline was not caused by inadvertence, the lack of merit in this forum, and the lack of any evidence that the plaintiff will be prejudiced as a result of the Registrar’s Order. The defendants ask that this motion be dismissed.

ANALYSIS

[ 16 ] An order of the Registrar dated August 2, 2011 was generated automatically when, despite delivery of a Status Notice the action had not been set down for trial within the period prescribed by Rule 48.14.

[ 17 ] Rule 48.14(1) provides for the delivery of a status notice:

Where an action in which a statement of defence has been filed has not been placed on a trial list or terminated by any means within two years after the filing of a statement of defence, the Registrar shall serve on the parties a status notice (Form 48C) that the action will be dismissed for delay unless it is set down for trial or terminated within ninety days after service of the notice.

[ 18 ] Rule 48.14(3) stipulates that the Registrar shall dismiss the action for delay unless the action has been set down for trial within 90 days of the delivery of the status notice or unless a judge has ordered otherwise:

The Registrar shall dismiss the action for delay, with costs, ninety days after service of the status notice, unless,

(a) the action has been set down for trial;

(a.1) in an action under Rule 78, documents have been filed in accordance with Rule 78.08;

(b) the action has been terminated by any means; or

(c) a judge presiding at a status hearing has ordered otherwise.

[ 19 ] It is clear that the Registrar’s use of Form 48D mirrors the language in Rule 48.14 (5) which states:

If an action is not set down for trial, restored to a trial list or terminated by any means within the time specified in an order made at a status hearing, the Registrar shall dismiss the action for delay, with costs. [Emphasis added.]

[ 20 ] In this case, the Registrar served the order on plaintiff’s former counsel pursuant to Rule 48.14(6). While this court does not have any information about compliance with Rule 48.14(7), there is no dispute that the impugned notice was not received by the plaintiff. There is no issue that this motion was served promptly after notification of the dismissal order and the resulting assessment of costs.

[ 21 ] Similar to the adjudication of a status hearing before a judicial officer, in this motion to set aside the dismissal order of the Registrar, the onus to show cause is on the plaintiff. I reiterate that defendant does not bear any onus. The court will look at a variety of factors in its determination as outlined in the jurisprudence, and which I will discuss momentarily. I take this opportunity to correct any misunderstanding as to the onus in the nature of these types of motions flowing from my decision in Kostruba and Sons Inc. v. Pervez reported at [2011] O.J. No. 2088 . [1]

[ 22 ] It is clear that the administrative dismissal scheme found in the Rules of Civil Procedure does not address matters that have been stayed. Although the fact that a matter was stayed at the time that it was dismissed may be a factor that the court will consider when deciding whether to set the dismissal order aside, the question here is whether the Registrar lacks the jurisdiction to send out the status notice and dismiss the action under Rule 48.14?

[ 23 ] The parties were challenged to find authorities with respect to the issue at bar. However, one such case mentioned by both parties in Micallef v. Dodig, [2009] O.J. No. 5564 , the Divisional Court considered an appeal of Master Dash’s order refusing to set aside a Registrar’s dismissal due to delay, where the action had been stayed automatically by virtue of the defendant’s bankruptcy. The Master concluded that, because it was open to the plaintiff to seek an order lifting the stay of proceedings under the Bankruptcy and Insolvency Act “( BIA ”), the plaintiff remained subject to the deadlines imposed by the rules for moving the action forward.

[ 24 ] In the Divisional Court, Dambrot J. allowed the appeal on the ground that a Registrar’s dismissal order in the face of a stay imposed by law is a nullity:

“It seems to me that justice is more reliably achieved by treating an order by the Registrar pursuant to Rule 77.08 (1) dismissing an action where a stay pursuant to s. 69.4 of the Bankruptcy and Insolvency Act as a nullity, and setting it aside as of right. The small cost to the efficiency of the court’s processing of claims occasioned by this approach is tolerable.”

[ 25 ] While the Divisional Court did not specifically address the rationale for overturning the master’s decision, it appears to me that the court exercised its discretion based on a holistic view of the nature of the action and the effect of the stay provided by the bankruptcy regime on the administrative actions of the Registrar.

[ 26 ] In my opinion, in Micallef , Master Dash took too restrictive a view of the administrative deadlines imposed by the rules when juxtaposed with a stay of an action engaged by virtue of a statute, such as the BIA . While the rules are silent with respect to the impact or effect of a stay of a civil action and what obligations of the Registrar flow under the rules, it seems counter intuitive to me to suggest that the administrative nature of Rule 48.14 goes on unimpeded and unbounded in the face of a stay imposed by a judge.

[ 27 ] Similarly, in my opinion, it matters not whether the stay of the action is statute driven, founded in a contract, arises from an arbitration clause or whether the court exercises its discretion by ordering a stay under its powers to control its proceedings or by virtue of the common law. Should a party be granted such relief, the direct effect of a stay is to place the action in suspended animation. Neither the plaintiff nor the defendant make take a further step, close pleadings, conduct examinations for discoveries, raise interlocutory motions or set the matter down for trial. [2] For all intents and purposes, the proceeding remains in limbo and the administrative clock stops. Given that time is frozen and a party is constrained from taking a further step absent the lifting of the stay, how can a litigant comply with any of the requirements as out in Rule 48? Compelling or inviting a party to seek an order to lift a stay, or the likelihood that it is open to a plaintiff to move to set aside a stay, in order that a party may be called upon to address an administrative action is counter-productive and defeats the intention of the court in granting the stay.

[ 28 ] While a stay of an action is not a frequent occurrence in civil actions, it does arise in appropriate circumstances. For example, in Koepcke v. Webster, 2012 ONSC 357 , [2012] O.J. No. 230, Master Dash presided over a contested Status Hearing where the plaintiff was required under Rule 48.14(13) to show cause why the action should not be dismissed for delay. The plaintiff had commenced a “precautionary” solicitor’s negligence action, but held it in abeyance for two years and the issue was whether the plaintiff’s claim in a separate proceeding was statute-barred. Master Dash observed that the better course of action would have been to seek a stay of the solicitor’s negligence action, thereby holding it in abeyance, and perhaps avoiding facing dismissal for delay:

“I agree that it was reasonable for the plaintiffs to commence a precautionary action and to avoid, if possible, costly and potentially unnecessary steps to advance the litigation until final determination of the Second Underlying Action and an assessment then made whether the Lawyer’s Negligence Action would proceed. I do not however agree that it was reasonable to do nothing over those two years. The plaintiff, if it wished the action to be held in abeyance, should have sought a stay of the action from the court under section 106 of the Courts of Justice Act , R.S.O. 1990 c. C.43.”

[ 29 ] While adherence to the rules is essential for the orderly conduct of cases, there must be a holistic approach to the assessment of the rules in the circumstances of each case.

[ 30 ] The stay order granted by Templeton J. was made pursuant to s. 7(1) of the Arbitration Act, 1991. In my view, that order was sought so that the parties could arbitrate their dispute in accordance with the arbitration clause contained in the lease, in lieu of pursuing the action. I agree with the plaintiff that once stayed, the action could not be prosecuted by the plaintiff, absent an order lifting the stay.

[ 31 ] For the aforementioned reasons, I am persuaded that the Registrar had no jurisdiction to make the dismissal order in the circumstances of this case.

[ 32 ] If I am in error as to the Registrar’s lack of jurisdiction to act in this case in the face of a stay, I am persuaded that the dismissal notice ought to be set aside based on the principles as found in the jurisprudence with respect to this issue.

[ 33 ] Subject to the requirement for a broad contextual analysis, the courts have continued to address the four factors identified by Master Dash in Reid v. Dow Corning Corp . [2001] O.J. No. 2365 as relevant for the exercise of the discretion, namely:

(a) explanation of the litigation delay which led to the dismissal notice and order in the first place;

(b) inadvertence in missing the deadline set out in the notice;

(c) promptly moving to set aside the order once it comes to the attention of the moving party; and,

(d) prejudice or lack of prejudice to the defendant.

[ 34 ] The jurisprudence suggests that the aforementioned list of factors set out above is not exhaustive. Two other factors not listed in the test are crucial to deciding whether it is just in the circumstances to deny the plaintiff’s motion. They include the merits of the action and the potential of prejudice to the plaintiff if the Registrar’s Order is upheld.

[ 35 ] Further, in Scaini v. Prochnicki, 2007 ONCA 63 , [2007] O.J. No. 299, the Court of Appeal rejected as too "rigid" the notion that to set aside a Registrar's dismissal order, a moving party must satisfy each factor. Instead the court favoured a "contextual" approach in which the court weighs all relevant considerations to determine the result that is just. As Goudge J.A. held:

More importantly, I do not agree that the case law reviewed in Reid , supra , yields the proposition that an appellant must satisfy each relevant criterion in order to have the Registrar's order set aside. None of the cases referred to say so expressly and several proceed on a more contextual basis. For example, in Steele v. Ottawa-Carleton (Regional Municipality) , [1998] O.J. No. 3154 (Gen. Div.) Master Beaudoin, at para. 17, described the guiding principle in deciding whether to set aside a Rule 48.14 dismissal by the Registrar as follows:

Ultimately, the Court will exercise its discretion upon a consideration of the relevant factors and will attempt to balance the interests of the parties. I agree with Master Beaudoin.

In my view, a contextual approach to this question is to be preferred to a rigid test requiring an appellant to satisfy each one of a fixed set of criteria. The latter approach is not mandated by the jurisprudence. On the other hand, the applicable rules clearly point to the former. In particular, the motion to set aside the Registrar's order dismissing the action for delay engages Rule 37.14(1)(c) and (2). The latter invites the court to make the order that is just in the circumstances. A fixed formula like that applied by the motion judge is simply too inflexible to allow the court in each case to reach the just result contemplated by the rules.

[ 36 ] In Scaini , the Court of Appeal held that there is no definitive test to apply when considering a motion to set aside an Order of the Registrar made under Rule 48.14. The Court of Appeal directs that a Judge or Master consider and weigh all relevant factors contextually, in order to determine whether setting aside the dismissal is just in the circumstances.

[ 37 ] The viability of an action is a factor that can be considered on motions to set aside an administrative dismissal order. While the merits of the action may not be an appropriate consideration in all cases involving administrative dismissal orders, it may be an appropriate consideration where the evidence is clear and unchallenged. [3]

[ 38 ] I am also cognizant that Rule 2.01 reflects the general principle found in Rule 1.04(1), which guides the interpretation of all the rules: "These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits."

[ 39 ] The argument as to merits in the present case relates to the proposition that the action was clearly initiated in the wrong forum. The defendants submit that there is a binding arbitration agreement between the parties requiring the dispute to be referred to private arbitration. In that regard, the plaintiff has indicated an intention to proceed with its claim through arbitration. The defendants submit that in the event that the Registrar’s Order is set aside, the action will not proceed to trial, but rather will still be stayed as a consequence of the arbitration agreement between the parties.

[ 40 ] The defendants argue that a key evidentiary requirement underlying at least three of the Reid factors is evidence demonstrating a continued intention of the plaintiff to pursue the action through to trial. The defendants submit that setting aside the Registrar’s Order will not advance the goal of having this case decided on its merits. If it will be decided on its merits, it will be done so only in arbitration proceedings. In the normal course the settled intention to proceed to trial is an important component, however, the effect of a stay is to permit the parties to proceed in the civil courts in the event that becomes necessary.

[ 41 ] It must be recalled that the defendants’ counsel sought consent to an order staying the action pursuant to s. 7(1) of the Arbitration Act which reads as follows.

If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

[ 42 ] Clearly, one intent of this clause in specifying a stay of an action rather than a dismissal was to facilitate a potential remedy into the civil courts should the need arise. It is trite law that the question of jurisdiction over a particular issue in the arbitration is left to the arbitrator. If the arbitrator found that he or she lacked jurisdiction over any of the claims in the agreement the parties ought to be able to apply to the court for a further determination. [4]

[ 43 ] In this case, matters that are unknown at this juncture but may arise during the course of the arbitration may be determined not to be arbitrable or within the arbitrator’s jurisdiction. In the unique and unusual circumstances of this case, and notwithstanding that the plaintiff cannot set the matter down for trial in the face of the stay, my view is that the plaintiff is still entitled to its day in court should the arbitration, once completed, fail to address all of the issues between the parties.

[ 44 ] With respect to the issue of prejudice, the Ontario Court of Appeal has opined that an important consideration is that the plaintiff will not be left without a remedy. As well, the court noted that a consideration underlying the Reid factors is the goal of having disputes resolved on their merits. [5]

[ 45 ] The fact that the action was stayed because the proper forum for this matter is private arbitration does not mean that there will be no prejudice to the plaintiff as a result of the Registrar’s Order even though the plaintiff will have an opportunity to pursue a remedy elsewhere. In my opinion, there is no need for the plaintiff to articulate or explain potential issues not subject to arbitration. As mentioned, issues may arise during the course of arbitration, and the stay preserves the rights of the parties to return to court.

[ 46 ] During the course of submissions, the defendant could not articulate any prejudice. The more potent consideration is that I am satisfied that the plaintiff has met its onus in demonstrating the absence of non-compensable prejudice to the defendant.

[ 47 ] I cannot leave my decision without mentioning the undisputed fact that the dismissal notice was not received by the plaintiff. As the Court of Appeal held in Finlay v. Van Paassen , [2010] ONCA 204, the Registrar's failure to serve a status notice on Finlay's counsel was an irregularity. The lack of service did not mean that the Registrar was without jurisdiction to dismiss the action, or, in the words of Rule 2.01, that the dismissal order was a nullity. The court went on to state that “the lack of service, however, would be an important consideration in deciding whether to set aside the dismissal order.”

[ 48 ] In this case, the plaintiff moved promptly after learning about the dismissal order. Plaintiff’s counsel wrote letters to the defendants’ counsel addressing the issue. A motion was brought in a reasonable time frame. There is no issue with respect to the lack of service of the notice on the plaintiff. If required, I would exercise my discretion to set aside the dismissal order on this basis.

[ 49 ] During the course of argument, the defendants submit that the plaintiff has not provided an adequate explanation for the delay in the litigation. Indeed, the delay here is a challenge for the plaintiff. While counsel effectively and succinctly outlined the chronology leading to a potential delay argument her submissions may be better placed before the arbitrator should the matter eventually proceed to arbitration. However, given my findings and conclusions in this case, that issue is not for my consideration and is best left for the arbitration.

Other Comments

[ 50 ] An argument was raised about whether the Registrar had jurisdiction to issue the notice of dismissal of the action with costs. I need not address this issue as I have found that the notice of dismissal was a nullity and the dismissal notice ought not to have been issued. However, I note that the prescribed form used by the Registrar mirrors the language in rule 48.14(5). In the proper case, the Registrar has no discretion other than issue the notice to dismiss the action with costs given the language of the rule.

[ 51 ] I need not discuss to any great extent the second ground raised by the plaintiff, namely the assessment of costs, as I have found that the notice is a nullity. Despite the very able arguments of defendant’s counsel, I am not persuaded that the plaintiff brought this motion under the guise of a collateral attack on the assessment of costs. In any event, I question the approach taken by defendant’s counsel in seeking an assessment of costs for the dismissed action in the face of the language contained in the consent order dated July 13, 2009 drafted by the defendant, and the specific language of Templeton J.’s order of July 22, 2009.

[ 52 ] If rule 48.14 is not applicable to actions subject to judicial stay orders, it is conceivable that some of these cases may languish in the civil justice system. While finality is preferred and some may argue that it is not palatable for cases to just linger in the court system, that is the unintended effect of a stay of an action in those few and infrequent situations. If there is a concern, an affected party always has a remedy to move to lift the stay and address the action.

Conclusion

[ 53 ] As a result of the prior court ordered stay of the action, I find that the Registrar did not have jurisdiction to issue the dismissal order. I have also considered and applied the principles in the jurisprudence and the contextual analysis as directed in Scaini .

[ 54 ] The plaintiff’s motion is granted. The Registrar’s administrative order of August 2, 2011, dismissing the action with costs pursuant to Rule 48.14 is set aside. As a result, the certificate of assessment of costs dated October 3, 2011 also falls.

[ 55 ] The action remains stayed pursuant to the order of Templeton J. until either party obtains an order to set aside the stay. Whether or not this matter proceeds to arbitration as contemplated by the contract is in the control of the parties. Any issue of delay or other impugned conduct of either party is best left for the arbitrator’s determination.

[ 56 ] If the parties cannot agree on the issue of costs, I will consider brief written submissions. These cost memoranda shall not exceed three pages in length, (not including any bill of costs or offers to settle). The plaintiff shall file its costs submissions within 10 days of the date of this order. The defendants may file their costs submissions within 10 days of the receipt of the plaintiff’s materials. The plaintiff may file a reply within five days thereafter.

“Justice A. J. Goodman”

Justice A. J. Goodman

Date: May 18, 2012

[^1]: See also Khan v. Sun Life Assurance of Canada , 2011 ONCA 650 , [2011] O.J. No. 4590 (C.A.) , affirming 2011 ONSC 455 , [2011] O.J. No. 510 (SCJ) .

[^2]: One exception, of course, is the right of a party to bring a motion to set aside the stay.

[^3]: See 744142 Ontario Ltd. v. Ticknor Estate , 2012 ONSC 1640 , [2012] O.J. No. 1119 (Master) at para. 59 .

[^4]: See D.G. Jewelry Inc. V. Cyberdiam Canada Ltd., [2002] O.J. No. 1465 (Sup. Ct.) at para.50. See also Microcell Solutions Inc. V. ASP Wirelessnet Inc., [2005] O.J. No. 1037 (Master) .

[^5]: Marché D’Alimentation Denis Thériault Ltée v. Giant Tiger Stores Ltd. , 2007 ONCA 695 , [2007] O.J. No. 3872 (C.A.) .