COURT FILE NO.: CV-08-91578

DATE: 20121102

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Tri-Peak Holdings Inc., Crown Modular Manufacturing Inc., and EMD Construction Ltd., Plaintiffs

AND:

Metroplex Developments Inc., Westin Homes Ltd., Michael Orsi, James Craig, and Vito Cipponeri, Defendants

BEFORE: Justice J.R. McCarthy

COUNSEL:
Stephen Schwartz, for the Plaintiffs

Craig Losell, for the Defendants

HEARD: October 29, 2012

ENDORSEMENT

mccarthy j.

Overview

[ 1 ] This is a status hearing under rule 48.14 (8) and (13). At a status hearing, the plaintiff is required to show cause why the action should not be dismissed for delay.

[ 2 ] In order to avail itself of the discretion of the court not to dismiss the action for delay, the onus is on the plaintiff to demonstrate both that there is an explanation for the delay that justifies continuation of the action, and that there is no non-compensable prejudice to the defendant (see Oberding v. Sun Life Financial Assurance Co. of Canada , 2010 ONSC 3303 , [2010] O.J. No. 3122, at para. 14 (Div. Ct.)).

[ 3 ] The Ontario Court of Appeal has confirmed that the plaintiff bears the burden of demonstrating that the explanation is “acceptable” (see Khan v. Sun Life Assurance Co. of Canada , 2011 ONCA 650 , [2011] O.J. No. 4590, at para. 2 ). It follows that not any explanation will suffice. It must be acceptable to the motions judge at the hearing.

The Facts

[ 4 ] The present action was commenced by statement of claim issued on October 6, 2008. That claim was subsequently amended on February 27, 2009. The defendants were served with the amended claim in early March 2009. The defendants delivered a defence and counterclaim on April 29, 2009. The plaintiff delivered a reply and counterclaim on June 1, 2009. The matter did not progress beyond that. A status notice was issued on May 6, 2011. The plaintiffs requested a status hearing but did not have counsel in place to deal with the matter until December 2011. The matter was spoken to and returned to court again on January 11, 2012. Ultimately, this date was set for a show cause hearing under rule 48.14. Along the way, the plaintiff was obliged to pay costs thrown away and to post security for costs to the credit of the action. Neither party has served an Affidavit of Documents. Neither party is presently in default of any court order.

The Plaintiff’s Position

[ 5 ] The plaintiff has filed extensive materials in an effort to demonstrate that there is an acceptable explanation for the delay. It argues that the key witness and player in the case for the corporate plaintiff is Luigi (Lou) Gabriele. The Statement of Claim sets out the basis of the claim. The plaintiff describes Mr. Gabriele as the lynchpin of his claim even though he is neither an officer nor a shareholder of the corporation. During the time period of the delay that requires explanation, Gabriele was embroiled in criminal proceedings on charges initiated by the defendant Orsi. That investigation began in October 2009 and required Gabriele’s attention. Charges were stayed in June 2010 but the Crown retained the right to lay charges against him for a one year period. In April of 2011, Gabriele’s trustee in bankruptcy commenced an action against Gabriele and members of his family. In the context of the bankruptcy matter, Gabriele was subject to a number of examinations under s. 163 of the Bankruptcy and Insolvency Act , R.S.C. 1985 c. B-3. The plaintiff contends that between 2008 and 2011 Gabriele spent a significant amount of time attending at examinations and responding to undertakings.

[ 6 ] Because Gabriele was the driving force behind the present litigation, his attention was deflected from these present proceedings and the matter did not move forward.

[ 7 ] The plaintiff submits that the relevant period of delay that requires explanation is June 1, 2009 to October 5, 2011 (the “litigation delay”). The time period since the Status Notice was issued has seen a number of court attendances leading up to today’s date. During this time, the plaintiff has demonstrated an unwavering intention to proceed with this matter: It has retained and instructed counsel, prepared materials for the Status hearing, paid the costs ordered by the court and posted the security for costs to the credit of the action as ordered.

[ 8 ] The plaintiff asserts that there can be no non-compensable prejudice to the defendants. There are no documents that have gone missing since the onset of the litigation delay. Any documents that the defendants say are unavailable would have been unavailable without regard to the delay. Any witnesses that are unavailable or incompetent to give evidence would have been equally so at the beginning of the litigation delay.

[ 9 ] The Plaintiff urged the court to adopt the guidance provided by Master Haberman in Saini v. Sun Life , 2012 ONSC 4671 , [2012] O.J. No. 3834, at paras. 104 – 106 :

These Rules (48.14 and 48.15) were never intended to operate as a hatchet, to weed cases out of the system without reference to their merits because a two-year time limit was missed.....these Rules are simply management tools in the court’s arsenal bag to help the court manage its inventory and to ensure that the parties do not wait endlessly for resolution of their litigation disputes.

The Defendant’s Position

[ 10 ] The defendant argues that the plaintiff cannot satisfy the two part test as set out in Oberding . The affiant Mr. Gabriele has no legal relationship with the plaintiff corporation. The plaintiff corporation itself has offered no explanation for the delay. No person having standing to represent or bind it has come forward with an affidavit. Moreover, there is non-compensable prejudice to the defendant because one of the key witnesses is likely incompetent to give evidence and because documents relevant to the issues in this case are now unavailable.

Analysis

(a) An Acceptable Explanation

[ 11 ] The plaintiff clearly bears the burden of demonstrating that there is an acceptable explanation for the litigation delay and that there would be no non-compensable prejudice to the defendants (see Khan , at para. 2 ).

[ 12 ] However, the plaintiff need not rigidly satisfy both aspects of the test. The two factors must be considered, together with any other factors, on a contextual basis to arrive at a just result (see Koepcke v. Webster , 2012 ONSC 357 , at para. 18 ).

[ 13 ] In the present case, while it is true that the driving force behind the corporate plaintiff is not a shareholder, officer or director, I accept that Mr. Gabriele has taken ownership of the litigation. The corporate plaintiff has complied with rule 15.01(2) in having a lawyer represent it. The plaintiff corporation has complied with the order to post security for costs. It has complied with a payment of costs order made during the status attendances. It is not in default under the Rules of Procedure . The fact that the person responsible for driving the litigation might not have the legal ability to bring a claim in his own right because of his status as a non-discharged bankrupt might be the basis for a motion to be brought under some other rule or legal principle. I am not satisfied that it should serve as an impediment to this plaintiff in a show cause hearing.

[ 14 ] I am satisfied that the plaintiff has a reasonable explanation for the delay in question. I find that the “key man” in the litigation for the plaintiff, Mr Gabriele, was at times preoccupied with other pressing matters arising out of related business dealings. I find that he always maintained an intention to prosecute the action. I am satisfied that documentary production and examinations for discovery were understandably delayed during the criminal and bankruptcy proceedings. The explanation may be subject to scrutiny and criticism, but I find it to be credible and adequate to satisfy the first prong of the test in Oberding .

(b) Non-Compensable Prejudice

[ 15 ] I am not persuaded that the defendants will suffer any non-compensable prejudice should the action be allowed to proceed. It appears that one witness, Carlo Gabriele, suffers from a deficiency in memory and might therefore be incompetent to give evidence at trial. However, it is clear that the mental status of the witness was at issue as early as 2009. This would have been the earliest period of time when the defendant would have had any rights to exam this non-party as a witness in this proceeding. The defendant is in no worse position today than it would have been in 2009. The inability of this witness to give evidence is not prejudice for which the plaintiff is accountable.

[ 16 ] Nor I am persuaded that there is any documentation that went missing, or became unavailable, during the litigation delay or as a result of the litigation delay. Counsel for the defendants candidly admitted that he was unable to identify any documents that would have been available to the parties at the commencement of the litigation that would not be available today.

Disposition

[ 17 ] I am satisfied that the plaintiff has met the onus of demonstrating both an acceptable explanation for the delay and that there would be no non-compensable prejudice to the defendants if the action was allowed to proceed.

[ 18 ] In arriving at my decision, I have taken into account the balance that must be struck between fairness to a plaintiff in having an action determined on the merits, and the interest of litigants and the public in discouraging delay.

[ 19 ] The action shall therefore be permitted to proceed. Counsel for the parties were confident that, in the event that the court permitted the matter to proceed, that they could agree on a timetable for that to unfold. They were also inclined to work out the issue of costs between themselves.

[ 20 ] In the event that the parties are unable to either establish a timetable or agree on costs, then the parties shall arrange for an appointment to have those issues argued before me by contacting the trial co-ordinator at Newmarket.

Justice J.R. McCarthy

Date: November 2, 2012