SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 08-CV-364699
MOTION HEARD: SEPTEMBER 13, 2012

RE: Hampton Securities Incorporated, Hampton Securities Limited, Hampton Capital Corporation, Hampton Securities (USA) Inc. and Deeb & Company Limited

v.

Manni Buttar and Manjit Singh

BEFORE: MASTER R.A. MUIR

COUNSEL:
Ian P. Katchin for the plaintiffs/defendants by counterclaim
Michael A. Winterstein for the defendants/plaintiffs by counterclaim

REASONS FOR DECISION

[ 1 ] The plaintiffs bring this motion pursuant to Rule 37.14 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 (the “Rules”) for an order setting aside the order of the registrar dated March 6, 2012 dismissing this action for delay. This action was dismissed by the registrar due to the failure on the part of the plaintiffs to have the action set down for trial within the time limits prescribed by the status hearing order of Master Brott of February 23, 2011. The plaintiffs also seek an order amending Master Brott’s timetable order and a further extension of the date by which this action must be set down for trial. The defendants oppose the granting of the relief requested on this motion.

NATURE AND PROGRESS OF THE ACTION

[ 2 ] This action was commenced on October 22, 2008. The defendant Manni Buttar (“Buttar”) is a former senior executive, officer and director of the plaintiff corporations. His involvement with the plaintiffs ended when he resigned, or was constructively dismissed, from his positions on November 30, 2007. The plaintiffs seek from Buttar, among other things, damages for breach of fiduciary duty and the repayment of certain shareholder loans. The defendant Manjit Singh is Buttar’s spouse. The plaintiffs seek damages from her for an alleged misappropriation of funds belonging to the plaintiffs. Buttar has counterclaimed against the plaintiffs and the defendant by counterclaim, Peter Deeb (“Peter”) for, among other things, damages for constructive dismissal and for an order that the plaintiffs purchase his shares of the plaintiff corporations for fair market value.

[ 3 ] From October 22, 2008 to February 23, 2011, the parties exchanged pleadings and initial productions. In addition, the defendants brought a motion for an order that the plaintiffs serve a further and better affidavit of documents. This was a substantial motion argued over a period of three days and resulted in the plaintiff delivering a significant number of additional documents. In addition, the plaintiffs brought a motion for an order granting them leave to amend their statement of claim, which was opposed by the defendants.

[ 4 ] For the purposes of this motion, the defendants do not allege any unexplained or inordinate delay on the part of the plaintiffs during this period of time.

[ 5 ] A status hearing was held before Master Brott on February 23, 2011, at which the defendants sought an order dismissing this action. Master Brott declined to make such an order. In fact, she made a finding that the plaintiffs had “clearly always showed an intent to proceed with the action” and there was “no delay by the plaintiffs to speak of”. However, Master Brott did make a timetable order. That order provided, in part, as follows:

● the plaintiffs were to serve a supplementary affidavit of documents within 30 days of amending their statement of claim (which was to be amended pursuant to the leave granted following the contested motion argued shortly before the status hearing); and,

● the plaintiffs were to set the action down for trial by March 1, 2012.

[ 6 ] The statement of claim was amended on April 7, 2011. The supplementary affidavit of documents was therefore due on May 7, 2011. On April 18, 2011, the plaintiffs changed lawyers and retained their current lawyers, Fogler, Rubinoff LLP. This was the second time they had changed counsel.

[ 7 ] On May 4, 2011 Mr. Katchin wrote to the defendants’ lawyer, Kimberley Boara Alexander, requesting a two week indulgence with respect to the time for the service of the supplementary affidavit of documents as ordered by Master Brott. It appears that Ms. Alexander agreed to this two week extension of time. However, a supplementary affidavit of documents was not served until July 4, 2011. The defendants take issue with this two month period of delay.

[ 8 ] During the summer of 2011, the parties exchanged various communications concerning a discovery plan and dates on which the examinations for discovery would take place. Eventually, the parties agreed that examinations would be held in late October, 2011.

[ 9 ] Unfortunately, those October dates had to be cancelled because Peter was suffering from a serious illness. After some further back and forth, the parties eventually agreed to reschedule the discoveries for the middle of January, 2012. The defendants do not take issue with this period of delay from October, 2011 to January, 2012.

[ 10 ] The discovery of the defendants began on January 16, 2012. It continued on January 17 and 19. The plaintiffs were unable to complete their examinations within the allotted time. A dispute arose over how much additional time would be required. The plaintiffs refused to allow the defendants to commence their examination of the plaintiffs until after the plaintiffs had completed their examinations of the defendants. The parties were eventually able to resolve this issue and the examinations resumed on February 28, 2012 and continued until March 2. The defendants also take issue with this six week period of delay.

[ 11 ] This action was dismissed by the registrar on March 6, 2012, as it had not been set down for trial by March 1, 2012 in accordance with Master Brott’s timetable order of February 23, 2011. The plaintiffs’ lawyer received a copy of the dismissal order on March 12, 2012 and immediately contacted the defendants’ counsel, seeking her clients’ consent to an order setting aside the dismissal. When that consent was not immediately forthcoming, the plaintiffs’ counsel booked this motion with an initial return date of April 26, 2012. This motion was then adjourned to July 12, 2012 on consent to allow for cross examinations to take place. The cross examinations took place in June, 2012. However, the motion had to be adjourned once more to September 13, 2012, due to a lack of court time on July 12.

APPLICABLE LAW AND ANALYSIS

[ 12 ] The law relating to motions of this nature is summarized in my decision in 744142 Ontario Ltd. v. Ticknor Estate , 2012 ONSC 1640 (S.C.J. – Master). At paragraph 32 of that decision I set out the applicable principles as follows:

32. In the last five years, the law relating to setting aside registrar’s dismissal orders has been the subject of seven decisions of the Court of Appeal for Ontario. Although each of those decisions brings a slightly different approach to the decision making process, the general approach first set out by the Court of Appeal in Scaini has been followed consistently. The principles that emerge from those decisions can be summarized as follows:

● the court must consider and weigh all relevant factors, including the four Reid factors which are likely to be of central importance in most cases;

● the Reid factors, as cited by the Court of Appeal in Giant Tiger , are as follows:

(1) Explanation of the Litigation Delay : The plaintiff must adequately explain the delay in the progress of the litigation from the institution of the action until the deadline for setting the action down for trial as set out in the status notice. She must satisfy the court that steps were being taken to advance the litigation toward trial, or if such steps were not taken to explain why.... If either the solicitor or the client made a deliberate decision not to advance the litigation toward trial then the motion to set aside the dismissal will fail.

(2) Inadvertence in Missing the Deadline : The plaintiff or her solicitor must lead satisfactory evidence to explain that they always intended to set the action down within the time limit set out in the status notice, or request a status hearing, but failed to do so through inadvertence. In other words the penultimate dismissal order was made as a result of inadvertence.

(3) The Motion is Brought Promptly : The plaintiff must demonstrate that she moved forthwith to set aside the dismissal order as soon as the order came to her attention.

(4) No Prejudice to the Defendant : The plaintiff must convince the court that the defendants have not demonstrated any significant prejudice in presenting their case at trial as a result of the plaintiff’s delay or as a result of steps taken following the dismissal of the action;

● a plaintiff need not satisfy all four of the Reid factors but rather a contextual approach is required;

● the key point is that the court is to consider and weigh all relevant factors to determine the order that is just in the circumstances of each particular case;

● all factors are important but prejudice is the key consideration;

● prejudice to a defendant may be presumed, particularly if a lengthy period of time has passed since the order was made or a limitation period has expired, in which case the plaintiff must lead evidence to rebut the presumption;

● once a plaintiff has rebutted the presumption of prejudice, the onus shifts to the defendant to establish actual prejudice;

● prejudice to a defendant is not prejudice inherent in facing an action in the first place but prejudice in reviving the action after it has been dismissed as a result of the plaintiff’s delay or as a result of steps taken following the dismissal of the action;

● the party who commences the litigation bears the primary responsibility under the Rules for the progress of the action;

● in weighing the relevant factors, the court should not ordinarily engage in speculation concerning the rights of action a plaintiff may have against his or her lawyer but it may be a factor in certain circumstances, particularly where a lawyer’s conduct has been deliberate. The primary focus should be on the rights of the litigants and not with the conduct of their counsel.

[Footnotes Omitted]

[ 13 ] These are the factors and principles I have considered and applied in determining the issues on this motion. My analysis in this regard leads me to the conclusion that it is in the interest of justice that the order of the registrar be set aside.

MOTION BROUGHT PROMPTLY

[ 14 ] The defendants, quite properly, do not take issue with the plaintiffs’ submission that this motion has been brought promptly, having regard to the nature of the motion and the availability of counsel and the court.

[ 15 ] The plaintiffs have therefore satisfied this element of the Reid test.

INADVERTENCE

[ 16 ] I am also satisfied that the plaintiffs have established that their failure to set this action down for trial in a timely manner, and in compliance with the order of Master Brott, was a result of their lawyer’s inadvertence. It is true that the plaintiffs’ current lawyers knew about the set-down deadline shortly after being retained in April, 2011. In fact, the deadline is specifically mentioned in a letter Mr. Katchin sent to Ms. Alexander on May 30, 2011. However, I am also satisfied that the plaintiffs’ lawyers had forgotten about the deadline by the time of the discoveries in January, February and March, 2012. No other explanation makes sense. No plaintiff would prepare for and attend on six days of discovery, including dates before and after the set-down deadline, unless it had a firm intention to proceed with its claim. The evidence before the court reveals a nearly uninterrupted period of activity from the time of Master Brott’s order up to and including the dismissal date. There is simply no evidence from which the court could infer an intention on the part of the plaintiffs to abandon their claim. The failure to meet the set-down deadline had to have been inadvertent.

[ 17 ] I am therefore satisfied, on balance, that the failure to comply with the set down date in Master Brott’s order was inadvertent and that this element of the Reid test has been met.

LITIGATION DELAY

[ 18 ] I am also satisfied that the plaintiffs have provided a satisfactory explanation for all of the alleged delay the defendants take issue with. As a starting point, none of the contested delay is particularly significant in duration having regard to the nature and overall progress of this litigation. The first period of delay, from May to July, 2011 is two months (or only six weeks if one takes into account the agreed upon two week extension to serve the supplementary affidavit of documents). The second period of contested delay, late January to early March, 2012, is about six weeks.

[ 19 ] The two month delay between May and July, 2011 was occasioned by the fact that the plaintiffs’ lawyers were new to the file and the task of preparing the supplementary affidavit of documents was somewhat more time consuming than the plaintiffs had initially anticipated. The defendants argue that had this delay not occurred, the examinations for discovery may have been completed in August, 2011 and a potentially important witness, Michael Deeb (Peter’s father) would have been alive and available to provide evidence. While this argument may have some superficial attraction, in my view the submission is based mostly on speculation. There is no evidence before the court as to whether discoveries could have been held in August, 2011. There is no evidence with respect to the schedules and availability of the parties and their respective counsel during that time period. In addition, there is no evidence of whether Michael Deeb would have been in any condition to provide evidence in August, 2011, even if asked. He died on September 18, 2011, after a “brief battle with cancer”. There is simply no evidence that addresses Michael Deeb’s condition in August, 2011 and his ability to answer questions and provide meaningful answers. In my view, the two month period of delay between May and July, 2011 has been adequately explained.

[ 20 ] The six week delay between January and March, 2012 was a result of a dispute between counsel over the length of Buttar’s examination. I have reviewed the evidence and the excerpts from the discovery transcripts that were filed on this motion. I do not view the conduct of either counsel as particularly unreasonable. The plaintiffs’ lawyer at the discovery, Nina Perfetto, wanted sufficient time to complete her examination, which took longer than she initially anticipated. Ms. Alexander did not want to agree to an open-ended examination of her client and wanted a firm time limit. It is regrettable that this disagreement could not have been resolved at the time of the discoveries. However, the parties were eventually able to resolve their differences and reschedule the examinations in short order, without the necessity of a motion. Again, I emphasize the fact that the length of this delay was not very long. In my view, this period of contested delay has also been adequately explained.

[ 21 ] I have therefore concluded that the plaintiffs have also satisfied this element of the Reid test.

PREJUDICE

[ 22 ] I am satisfied that the plaintiffs have met the onus placed upon them to rebut the presumption of prejudice. Where a limitation period has passed, as it has here under the Limitations Act, 2002 , S.O. 2002, c. 24, Schedule B, a presumption of prejudice arises and the onus rests with the plaintiffs to rebut that presumption. The strength of this presumptive prejudice increases with the passage of time. See Wellwood v. Ontario (Provincial Police) , 2010 ONCA 386 at paragraph 60 .

[ 23 ] Plaintiffs can overcome the presumption of prejudice by leading evidence that all relevant documents have been preserved, that key witnesses are available or that certain aspects of the claim are not in issue. See Wellwood at paragraph 62 . In my view, the plaintiffs have done so.

[ 24 ] I do not view the strength of the presumptive prejudice to be very strong on the facts of this action. The events giving rise to this claim and the counterclaim took place only a few years ago. The defendants had early notice of the claim and have been represented by capable counsel throughout. Most relevant documents appear to have been preserved and exchanged. The productions to date number in the thousands. The parties have been fully examined over a period of six days. While Peter’s examination reveals that he may have had some difficulty remembering every detail, the evidence that is before the court shows that he did provide a significant amount of evidence without a great deal of difficulty and has undertaken to provide even more.

[ 25 ] The defendants have, however, alleged actual prejudice. First, they point to the death of Michael Deeb in September, 2011. Buttar’s statement of defence and counterclaim alleges that Buttar had conversations with Michael Deeb confirming his entitlement to certain management bonuses. The plaintiffs have confirmed that they did not obtain Michael Deeb’s evidence before he passed away. Peter’s evidence is that he is not in a position to know what was discussed between Buttar and his father.

[ 26 ] I agree that in certain circumstances, Michael Deeb’s death may constitute actual prejudice. However, I do not view his death to be significantly prejudicial to the defendants in the circumstances of this action. None of the alleged conversations between Buttar and Michael Deeb were reduced to writing. There is no documentary evidence to confirm or dispute what Buttar alleges. The plaintiffs knew of these allegations long before Michael Deeb passed away but apparently took no steps to collect and preserve his evidence. These facts lead me to conclude that the death of Michael Deeb may give rise to evidentiary challenges for the plaintiffs at trial. However, I do not see how his death will cause significant prejudice to the defendants. In fact, it probably makes their position stronger.

[ 27 ] Second, the defendants point to the death of another potential witness, Robert Cundill. However, it appears that Mr. Cundill died before this action was commenced. Any prejudice to the defendants arising from his passing cannot be attributed to any delay on the part of the plaintiffs in pursuing this action.

[ 28 ] Third, the defendants argue that an important witness, Douglas Glover, is no longer employed by the plaintiffs. However, there is no indication that he is otherwise unavailable to give evidence. In fact, he may be more accessible to the defendants than he was before.

[ 29 ] Finally, the defendants submit that they will be prejudiced by the fact that the plaintiffs have lost certain documents. It is alleged by the plaintiffs that Buttar may have removed documents belonging to the plaintiffs when his affiliation with the plaintiff corporations came to an end. Those documents apparently contained personal and proprietary information belonging to Peter and the plaintiffs. At some point an agreement was arrived at whereby Buttar agreed to return those documents to the plaintiffs without making a copy. The documents were returned but the plaintiffs are now unable to find them. I find the loss of those documents to be troubling. However, I am unable to determine from the evidence whether those documents are important, or even relevant, to any of the issues in the litigation. Ms. Perfetto’s evidence is that the missing documents are not relevant. In any event, I have no specifics of what they might contain and how they might be relevant and important to the issues in this action. I cannot, therefore, conclude that the defendants will suffer significant prejudice as a result of the loss of those documents.

[ 30 ] As a result, it is my view that the plaintiffs have, on balance, satisfied this element of the Reid test.

CONCLUSION

[ 31 ] When deciding motions of this nature the court is to apply a contextual approach in which the court weighs all relevant factors to determine the result that is just in the circumstances. The court must, of course, balance the strong public and private interest in promoting the timely resolution of disputes with the entitlement of a plaintiff to have a claim determined on its merits.

[ 32 ] When applying the test set out above, it is not necessary for the moving party to rigidly satisfy all of the Reid factors and any other relevant factors. Of the factors the court is to consider on motions such as this, prejudice is the key consideration. In my view, the plaintiffs have satisfied all of the relevant factors, including the key factor of prejudice. The delay to date has been satisfactorily explained and cannot be described as excessive. The deadline was missed due to inadvertence and this motion was brought promptly. I am therefore satisfied that it is just that the order of the registrar of March 6, 2012, be set aside.

COSTS

[ 33 ] The plaintiffs have been completely successful on this motion. Ordinarily they would be entitled to their costs. However, they have also received an indulgence from the court. They failed to comply with the set-down date in Master Brott’s order, despite being fully aware of the deadline as early as May, 2011. In addition, I do not view the defendants’ opposition to this motion as unreasonable in the circumstances. Although the plaintiffs’ delay has not been significant, the defendants reasonably pointed to the passing of Michael Deeb and the missing documents as potentially prejudicing their ability to defend this claim. It was appropriate for the defendants to have done so. For these reasons, it is fair and reasonable that there be no order with respect to the costs of this motion.

ORDER

[ 34 ] I therefore order as follows:

(a) the dismissal order of the registrar dated March 6, 2012 is hereby set aside;

(b) any discovery motions shall be heard by January 31, 2013;

(c) mediation shall take place by February 28, 2013;

(d) this action shall be set down for trial by no later than March 15, 2013, failing which it shall be dismissed by the registrar without further notice; and,

(e) there shall be no order with respect to the costs of this motion.

Master R.A. Muir

DATE: September 17, 2012