SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: 10-47315
DATE HEARD: November 06, 2012
RE: KULAR v. ECOSOL SOLAR TECHNOLOGIES INC. et al
BEFORE: MASTER ROGER
COUNSEL:
Philip Hunt for the Plaintiff
email: phunt@shields-hunt.com
Ph: (613) 230-3232 Fax: (613) 230-1664
Keith MacLaren for the Original Defendants
email: kmaclaren@perlaw.ca
Ph: (613) 566-2271 Fax: (613) 238-8775
James MacGillivray for the added Defendant, Ecosol Technology Inc.
email: jlm@rsrlaw.ca
E N D O R S E M E N T (at Status Hearing)
1 . This was to be a contested status hearing.
2 . It first came before me on August 28, 2012. The Defendants then insisted that the Plaintiff be put to his onus of showing cause. The court had booked minimal time on the expectation that the status hearing would likely concern a dispute over a timetable, as is often the case. I adjourned the contested status hearing to today, on a set timetable allowing the parties who wished to do so to deliver affidavits and conduct required cross-examination.
3 . In compliance with my endorsement of August 28, the Plaintiff served an affidavit sworn by the Plaintiff, Andrew Kular on September 13, 2012. On October 29, 2012, the Defendants represented by Mr. MacLaren (“the Original Defendants”) served an affidavit sworn by Mr. MacLaren. The latter affidavit is limited to the issue of a litigation timetable acceptable to the Defendants. The other Defendant did not file an affidavit. There has been no cross-examination. The affidavit delivered by the Original Defendants was delivered late, outside the ordered deadline of September 21. The Plaintiff delivered a factum, in compliance with my endorsement, and the Defendants did not deliver a factum. The Defendants attempted to reach an agreement with the Plaintiff on a litigation timetable. However, an agreement was not reached before the return date of the status hearing as the parties disagreed over certain aspects of the timeline requested by the Defendants. The Plaintiff indicated that the Defendants never confirmed before the status hearing of November 6 that they no longer wished to put the Plaintiff to his onus. The Plaintiff indicated that from his perspective, until an agreement acceptable to the Defendants was reached on a litigation timetable, he understood that he was at risk and had to be in a position to show that he had met his onus.
4 . Although at the status hearing of November 6, 2012, the Defendants indicated that their focus was now directed towards reaching an acceptable litigation timetable, I proceeded with the status hearing, as originally requested by the Defendants, to decide whether or not the Plaintiff had met his onus of showing cause why the action should not be dismissed for delay independently of whether or not the parties might agree to a litigation timetable.
5 . The Defendants made no submission on whether or not the Plaintiff had met his onus.
6 . The Plaintiff is a founder, director and shareholder of the Defendant, Ecosol Solar Technologies Inc. (“Ecosol Solar”). This action is essentially an oppression remedy action, under the provisions of the Ontario Business Corporations Act, based on events that occurred about November 2009, when the Plaintiff alleges that he was ousted from the executive management of Ecosol Solar.
7 . In response to the Defendants putting him to his onus, the Plaintiff delivered a fairly detailed affidavit addressing factors relevant at a status hearing. In his affidavit, the Plaintiff indicates, amongst others [my comments are in brackets]:
a. The Statement of Claim was issued on January 5, 2010, and the Statement of Claim was amended on February 17, 2010 and March 25, 2010.
b. A motion for interim costs was brought by the Plaintiff in late June 2010. It was originally returnable on October 7, 2010, but was heard on February 15, 2011. Affidavits of documents were exchanged in advance of the cross-examinations scheduled for the motion. The Plaintiff’s affidavit of documents was sworn on September 8, 2010. The Plaintiff was cross-examined for the motion on September 15, 2010. A mediation session was conducted on November 22, 2010.
c. An endorsement on the interim costs motion was released on May 9, 2011. [I dismissed that motion and ordered the Defendants to make available to the Plaintiff the financial statements of Ecosol Solar, subject to a confidentiality agreement.]
d. Much of the balance of 2011 was occupied with attempting to secure the delivery of the financial statements of Ecosol Solar, attempting to secure approval for an Order confirming the May 9 endorsement and attempting to secure dates for the completion of examinations for discovery.
e. In 2011 he discovered that a new corporation had been incorporated, Ecosol Technologies Inc. (“ETI”). He gave instructions to add ETI as a defendant and a motion was brought in that regard, as well as to settle the terms of an order for the May endorsement and for production of the financial statements. The motion was served about December 23, 2011, and was returnable April 5, 2012. The Honorable Justice Beaudoin heard that motion with reasons delivered that same day. Amongst others, leave was granted to amend the Statement of Claim to add ETI as a defendant. A Fresh as Amended Statement of Claim was delivered and a Statement of Defence delivered by ETI about July 19, 2012.
f. On August 23, 2012, the Plaintiff swore a supplementary affidavit of documents for documents relating to the claims made against ETI, which was forwarded to opposing counsel.
g. [The Plaintiff also describes various issues with the Defendants which I need not reproduce here. Suffice to indicate that this appears to have been a fairly aggressively fought action by all parties with issues over additional examinations for discovery, over answers to undertakings, production of a confidentiality agreement and over financial disclosure, ongoing in 2011 up to the motion of April 5, 2012, with some still ongoing. For example, the parties have still not finalized the terms of an order to confirm the May 2011 endorsement and have not yet agreed on what financial disclosure was ordered to be produced by the Defendants.]
h. On March 15, 2012, the registrar issued a status notice under rule 48.14(1). Counsel for the Plaintiff circulated a draft timetable to opposing counsel in August 2012, with little substantive reply. [I accept that the discussions before the first appearance on August 28 were about an acceptable litigation timetable as is apparent from correspondence provided by the Defendants at the November 6, 2012, status hearing.] It was only at the initial appearance of August 28, 2012, that the Defendants informed the Plaintiff that they required the Plaintiff to meet his onus of showing cause under rule 48.14(13).
i. On the issue of prejudice, the Plaintiff indicates that it is for him difficult to conceive of any prejudice to the Defendants as key persons are still active and involved with the corporate Defendants.
8 . I note, from a brief review of the court’s Case History Report, that in his endorsement of April 5, 2012, Justice Beaudoin adjourned the issue of the settlement of an order for the May 2011 endorsement and request to set the action down for trial to a date to be set before me, which has not yet been scheduled by the Plaintiff. I note as well, as is also apparent from the Plaintiff’s affidavit, that there have been numerous entries in the Case History Report and court appearances in this matter in each of 2010, 2011 and 2012. I note also that Plaintiff’s counsel of record should have attended the August status hearing as required by rule 48.14(12) and that sending a replacement might have contributed to some extent on how events unfolded.
9 . In his affidavit, sworn October 29, 2012, Mr. MacLaren indicates that the Defendants are prepared to resolve the status hearing if the Plaintiff agrees to a litigation timetable, which they provided to counsel for the Plaintiff on September 18, 2012. The parties could not agree over the Defendants’ request that the Plaintiff serve his expert reports before the matter is set down for trial and over the Defendants’ request for disclosure of the expert’s name to consider whether or not that expert is appropriate to receive confidential information.
10 . Counsel for the Plaintiff argued that he was not aware that the Defendants were no longer wishing to put his client to his onus until the Defendants so informed the court at the November 6 status hearing, as he understood that the Defendants’ offer was conditional on the Plaintiff agreeing to conditions imposed by the Defendants in their proposed timetable. The Defendants argued that it should have been clear to the Plaintiff, from correspondence exchanged starting on September 18, 2012, and from the content of the affidavit of Mr. MacLaren, that they were no longer putting him to his onus.
11 . It is unfortunate that the parties did not meet or have further discussions to avoid the status hearing. Both parties appear to bare some blame for this as none appears to have communicated frankly with the other in an effort to resolve issues over the litigation timeline prior to today but the bulk of any blame rests with the Defendants. They had clearly requested a contested status hearing at the August appearance and should have clearly communicated any change in position. It was reasonable for the Plaintiff to believe, from the correspondence, that unless he agreed to the Defendants’ timetable he had to meet his onus.
12 . The bulk of status hearings are expected to be dealt with in writing, on consent of the parties, with status hearings in person to be the exception. This is obvious from rules 48.14 and 48.14(10). The latter provides:
Unless the presiding judge or case management master orders otherwise, the status hearing shall be held in writing and without the attendance of the parties if a party files the following documents at least seven days before the date of the status hearing:
A timetable, signed by all parties, containing the information set out in subrule (11).
A draft order establishing the timetable.
13 . This creates a presumption that status hearings will primarily be dealt with on consent, in writing and without any attendance by filing a consent timetable and draft order.
14 . It goes without saying that plaintiffs should take reasonable steps to ensure that their action can be placed on a trial list or terminated within two years of the first defence being filed. Placing the action on a trial list or settling the action within this limit usually is the best practice.
15 . For those actions that require more time, plaintiffs should actively be taking steps to move the action to resolution or trial. When the two year mark is fast approaching and it becomes apparent that the action will not be ready, plaintiff’s counsel should seriously consider the risks associated with rule 48.14 and, consequently, should take preventive steps to minimize these risks.
16 . When a plaintiff receives a status notice, he or she will usually attempt to negotiate an acceptable timetable with opposing counsel and proceed with a status hearing in writing. As indicated, this is the procedure contemplated by rule 48.14. Rule 48.14(10) presumes that status hearings will generally be held in writing and therefore on consent. However, if consent is not forthcoming, then one of the parties should request that the registrar arrange a status hearing. A status hearing can be requested by any party under rule 48.14(8).
17 . Unless one of the parties gives notice to the court that a status hearing will be contested, the practice to date has been for the court to set aside a minimal amount of time for a status hearing in person on the expectation that most status hearings in person will proceed, as most have proceeded to date, either by way of a consent timetable or by way of brief submissions over a disagreement on the timetable, to be adjudicated by the court.
18 . However, if at a status hearing the defendant puts the plaintiff to the onus of showing cause, the practice has been to consider whether the status hearing should be adjourned to a more convenient date to allow for the exchange of affidavits, for possible cross-examination and for sufficient time to be scheduled when the matter returns for the court to deal with a contested status hearing [1] . Alternatively, if the relevant facts are not in dispute then affidavits are not necessarily required, particularly when the parties raise no objection to the facts being provided to the court orally by the lawyers, and if sufficient time has been scheduled for the status hearing, it is quite acceptable for the lawyers to outline the facts by way of oral submissions and for the court to assess whether the plaintiff has met his or her onus. [2]
19 . Rule 48.14(13) provides that at a status hearing the plaintiff shall show cause why the action should not be dismissed for delay. It is clear from this rule and from the jurisprudence that once a status notice has been issued and a status hearing convened, the onus is on the plaintiff to persuade the court that the action ought to be permitted to proceed. [3]
20 . The applicable test of when is it just to allow the action to continue is not specifically provided for by the rules but is now well established [4] . To satisfy its onus, the plaintiff must meet a two part test. The plaintiff must: (1) provide an acceptable explanation for the delay; and, (2) establish that there is no non-compensable prejudice to the defendant if the action is allowed to proceed by a further extension [5] .
21 . The presiding judge or master, if satisfied that the action should proceed, may set time periods for the completion of remaining steps or make such order as is just. [6] Conversely, if not satisfied that the action should proceed, the presiding judge or master may dismiss the action for delay. [7]
22 . There is no rule that a dismissal order cannot be made at a first status hearing. [8] Each case is to be decided on its facts, on the application of the previously described two pronged test and clear and extraordinary circumstances are not required for a dismissal order to be made at a first status hearing. Dicta to that effect, contained in an earlier decision, [9] has been implicitly rejected by the Court of Appeal in Khan and has been explicitly rejected by the Divisional Court in Malik . [10]
23 . In its recent decision, the Court of Appeal provides guidance on a number of issues relevant to status hearings. [11]
24 . The Court of Appeal notes that status hearings require the court to balance two fundamental principles of our civil justice system and Rules of Civil Procedure . On the one hand, civil actions should be decided on their merits when possible. On the other, procedural rules designed to achieve the efficient resolution of civil actions can only achieve their goal if they are respected and enforced. [12] Strong emphasis is put on the importance of enforcing timelines and reducing unexplained delays to ensure a credible and efficient civil justice system. The court notes that plaintiffs must prosecute their action diligently in accordance with the rules and failure to do so might tip the balance in favour of timely procedure and dismissal. [13]
25 . The court confirms that the focus of the inquiry at a status hearing is on the conduct of the plaintiff. The plaintiff is primarily responsible for the progress of his or her action and therefore should generally suffer “the consequences of a dilatory regard for the pace of litigation”. [14] However, it notes that the conduct of the defendants may be relevant especially where a plaintiff tries to move an action along but is faced with resistance or tactics by the defendants designed to impede the plaintiff. [15] In the decision before the Court of Appeal, the defendants had done nothing to resist efforts by the plaintiff to advance the action and could not be accused of “lying in the weeds”. [16]
26 . For plaintiffs’ counsel there are many lessons to be drawn from the decision in 1196158 Ontario Inc . The timelines imposed by the rules should be respected. A satisfactory explanation is otherwise required. Even if a satisfactory explanation is provided, the action can be dismissed if there is evidence of prejudice to the defendant as the test is conjunctive. In the absence of a satisfactory explanation, the action can be dismissed at a status hearing even in the absence of actual prejudice to the defendant.
27 . For defence counsel, the recent Court of Appeal’s decision offers an excellent example of when a defendant should put a plaintiff to his or her onus of showing cause. The facts in that case are quite specific and need to be carefully reviewed. Similarly, defence counsel should carefully assess in what circumstances they will recommend to their defendant clients that a plaintiff be put to his or her onus to show cause under rule 48.14(13) rather than recommending that they consent to a litigation timetable under rule 48.14(10). If a defendant has knowledge, from its involvement in the matter, that the plaintiff will be able to provide a sufficient explanation for the delay and sufficiently address the issue of prejudice, then why, in such circumstances, might counsel recommend to his or her defendant client to proceed with a contested status hearing rather than on consent with a status hearing in writing, unless of course the defendant could show prejudice. To act otherwise will only add to the existing delays and costs and might in some circumstances be contrary to basic principles of advocacy which include for lawyers to promote the efficient and effective operation of the judicial system and to cooperate with opposing counsel in achieving the most expeditious and least costly resolution of proceedings. [17]
28 . Contested status hearings should not become an automatic additional step in every civil action that receives a status notice. Contested status hearings should of course occur but in appropriate cases. We must remember that one of the purposes of status hearings is the effective disposition of inactive files.
29 . It would be unfortunate if, for no valid reason, some defendants were to systematically add a contested status hearing to the existing delays and costs of a civil action. This would be contrary to the intention of the rules, considering the clear presumption at rule 48.14(10) that unless ordered otherwise status hearings are to be held in writing. Defendants should limit their opposition to a status hearing in writing to appropriate cases. Otherwise, defendants insisting on a contested status hearing will not only incur the added time and cost associated with this additional step but could also, in the right circumstances, be exposed to the costs of the status hearing.
30 . In this case, as indicated above, this has been a relatively hard fought action with very little going on consent and a number of motions to date. The Plaintiff has fairly actively attempted to move this matter forward and, in fact, had just added a new defendant by the time the status hearing first returned on August 28, 2012.
31 . Considering the evidence outlined in the Plaintiff’s affidavit, this is not the kind of case where a contested status hearing should have been requested. This status hearing should have been dealt with in writing and if consent to a litigation timetable was not forthcoming then the August 28 status hearing should have been about the disagreements over the timetable, not a request that the Plaintiff show cause why the action not be dismissed for delay.
32 . I am satisfied that the Plaintiff has set forth a sufficient explanation for the fact that this action was not set down for trial within two years of the first defence. On the materials before the Court, there does not appear to be any non-compensable prejudice to the Defendants if the action is allowed to proceed. I note that the Defendants have provided no evidence nor made any submission on the issue of delay and prejudice.
33 . Although there is no onus on a defendant at a status hearing and although a defendant is not required to file an affidavit to address any issue, including prejudice, a defendant may choose to do so and may lead evidence of prejudice. [18] This might be useful to establish prejudice, as was done successfully by the defendant in Khan.
34 . As I informed counsel at the conclusion of the status hearing, this action is allowed to proceed and the following timetable is ordered:
a. If the Plaintiff intends to amend the Fresh as Amended Statement of Claim then the Plaintiff shall serve a draft of any such amended fresh as amended statement of claim by December 15, 2012. (on consent of the parties)
b. Should the Defendants refuse to consent to the proposed amendments then the Plaintiff shall serve a motion to seek these amendments no later than January 15, 2013. (on consent of the parties)
c. Once the amended claim has been issued and served, any motion to strike or motion for summary judgment by the Defendants shall be served within 30 days following the service of this claim. If no amended claim is issued, as per the above, then any such motion shall be served by the Defendants by January 31, 2013. (on consent of the parties)
d. The parties shall agree to hold examinations for discovery within 90 days following issuance and service of the amended claim. If no motion to strike or motion for summary judgment is brought by any of the Defendants, as per the above, then any such examinations shall occur at the latest by April 30, 2013. However, if a motion to strike and/or a motion for summary judgment is brought by any of the Defendants then any such examinations for discovery shall, depending on the outcome of the motion, occur within 90 days from the date that a decision is rendered on the motion. (on consent of the parties)
e. The Plaintiff shall deliver his expert report (s) on the issue of damages or valuation of his shares, if any, no later than when this action is set down for trial. If the Plaintiff does not intend to serve an expert report on these issues then this shall be confirmed in writing to opposing counsel at the latest by the time that this action is set down for trial. (on consent of the parties)
f. Undertakings are to be answered within 60 days of the party’s examination for discovery.
g. Any motion to compel undertakings, advisements or objections shall be brought within 90 days from the date of the party’s examination for discovery.
h. This action shall be set down for trial by December 31, 2013. (on consent of the parties)
i. This action is to be case managed and a case conference is scheduled for November 6, 2013, at 14:00 for one hour to address outstanding issues should the action not be ready to be set down by December 31, 2013.
j. The parties may schedule case conferences as required by the parties.
k. On the issue of settling the terms of an order for the endorsement of May 19, 2011, the parties shall provide to me (to the attention of my registrar) brief written submissions on the following schedule: the Plaintiff by November 23, 2012 and the Defendants by November 30, 2012, with any reply by December 4, 2012.
35 . The parties have raised issues relating to possible disclosure to valuation experts by the Plaintiff of confidential financial information. Considering the confidentiality agreement in place between the parties and considering my endorsement, this does not need to be addressed other than to indicate that the Defendants may obviously bring a motion to enforce the confidentiality agreement should this be required.
36 . The Plaintiff has argued that the affidavit filed by the Defendants is late and therefore should not be considered by the Court and that it is in breach of rule 49.06 as it contains offers in the form of draft timetables exchanged by the parties in an effort to attempt to settle all issues related to the status hearing. While I do not have to decide these issues considering my endorsement, I will say a few words about providing to the court correspondence outlining litigation timetables at status hearings.
37 . One of the purposes of rule 49.06 is to ensure that offers might not impact the court’s resolution of the issues to be decided.
38 . At a status hearing the issues to be decided are: (1) whether the plaintiff has met his or her onus of showing cause; and (2) if the plaintiff has met the onus, then to decide on an appropriate litigation timetable for the completion of outstanding steps, including the date by which the action should be set down for trial.
39 . As indicated, the rules have created a presumption that status hearings will generally proceed in writing, such that the court usually expects to see litigation timetables at a status hearing. At a status hearing dealing with a debate over certain aspects of a proposed litigation timetable, the court will invariably be informed about proposed timetables and litigation timelines.
40 . To avoid any confusion over whether or not a letter containing a suggested timetable is an offer that should not be provided to the court until a determination of the issues, the following practice is suggested. If at a status hearing the parties disagree over proposed litigation timetables or, alternatively, if the plaintiff is put to his or her onus, then correspondence exchanged between the parties to resolve any of the issues before the court should not be put before the court until the court has resolved that issue and then only if one of the parties intends to seek costs. For example, if the dispute is over a litigation timetable, the court should obviously be informed of which timetable is proposed by which party and why in order to resolve that issue, however, to do so the court does not need to be provided with a copy of the exchanged correspondence. Once the court has determined the issues before it then the exchanged correspondence might be relevant to the issue of costs, if any costs are sought. This simple practice should avoid any confusion over whether or not such a letter is also an offer that should not be disclosed under rule 49.06. In any event, it would be in rare circumstances when the court would need to review correspondence over suggested timetables to decide any related issue. The court needs to be informed of what and why any timetable is suggested or resisted but this can be done without providing the correspondence. In fact, it is rarely an efficient use of time for the court to review correspondence to decipher what a party’s position is and it is usually much more effective advocacy for a party to state clearly what his or her position is without attaching the correspondence.
41 . Costs are sought by the Plaintiff. Although the usual approach where an action is allowed to proceed at a status hearing is to make no order as to costs, in appropriate circumstance the court may make an order as to costs. [19] Having considered the circumstances of this case, the parties’ submissions, the purpose of rule 48.14 and the factors to be considered in the exercise of our discretion over costs outlined at rule 57, I have come to the conclusion that this case is such a case where a costs order may be made.
42 . The Defendants put the Plaintiff to his onus at the August 28, 2012, status hearing in circumstances where the Defendants knew or ought to have known that the Plaintiff had been relatively active in taking steps in the litigation of this action. This is not a case of a Plaintiff being inactive for some time until the status notice is issued by the court. This is a case where the Plaintiff was active, as outlined in his affidavit, with a Defendant added just prior to the August status hearing. This was all known to the Defendants when they requested a contested status hearing. As a result of the Defendants’ request, the court adjourned the August 28 status hearing and the Plaintiff prepared an affidavit, a factum and attended ready to show cause at the November 6, 2012, status hearing where the Defendants confirmed that they no longer so insisted but rather wished to discuss the terms of the litigation timetable.
43 . I appreciate the Defendants’ letter of September 18, 2012, and subsequent correspondence but note that the parties had not reached an agreement over the timetable and the Defendants had not made it clear before the status hearing of November 6, 2012, that they would not put the Plaintiff to his onus whether or not the parties reached an agreement on a litigation timetable. Rather, the Defendants were to some extent using the status hearing as leverage with the Plaintiff in their negotiations over an acceptable timetable. I will nonetheless discount costs to account for this letter, for the fact that Plaintiff’s counsel of record did not attend the initial status hearing (a replacement was sent in breach of rule 48.14(12)) and for the fact that the timetable ordered above went essentially on consent such that with some added efforts the Plaintiff might possibly have avoided this status hearing.
44 . Costs are sought on a substantial indemnity basis in the amount of $8,312.07.
45 . Considering the above, costs are allowed on a partial indemnity basis in the all inclusive amount for fees, disbursements and HST of $2,500.00, payable by the Original Defendants to the Plaintiff within the next 30 days.
Master Pierre E. Roger
Date: November 16, 2012