COURT FILE NO.: CV-01-CV219653-0000
DATE: 20121123
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FARMERS OIL & GAS INC.
Respondent/Plaintiff
– and –
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO represented by the MINISTRY OF NATURAL RESOURCES and TALISMAN ENERGY INC.
Appellant/Defendant
A.Winton, for the Respondent/Plaintiff
J. D’Angelo & V. Glasser, for the Appellant/Defendant
HEARD: September 19, 2012
DUCHARME J:
REASONS FOR JUDGMENT
[1] Expeditious justice is an ideal that our civil justice system strives to attain. This is reflected in rule 1.04(1) which provides that the Rules of Civil Procedure are to be "liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” Rule 1.04 also explicitly recognizes the strong public interest in having legal disputes resolved on their merits. Indeed, that is central to the just determination of a dispute. On the other hand, the objective of an expeditious determination also mentioned in rule 1.04(1) reflects the compelling interest, shared by litigants as well as the public at large, in the efficient, timely and affordable resolution of legal disputes. When litigation is delayed, the courts are confronted with a tension between these two cardinal values of justice and expeditiousness. Too great a focus on determination of disputes on their merits will eviscerate those rules of civil procedure meant to facilitate the efficient determination of legal disputes. In other cases, justice will demand that some delay be excused to permit the resolution of a dispute on its merits.
[2] It is precisely this problem that confronted Master Graham in this case. After a contested status hearing on May 28, 2012, held pursuant to Rule 48.14(8) of the Rules of Civil Procedure, Master Graham concluded that, despite some five years of delay, the action should be permitted to proceed in accordance with the timetable submitted at the status hearing by counsel for the plaintiff, Farmers Oil & Gas Inc. [Farmers]. The defendant in the action, Her Majesty the Queen in right of Ontario as represented by the Ministry of Natural Resources [MNR] appeals that decision.
I. ISSUES
[3] The appeal raises three issues:
(1) What is the standard of review of a Master’s decision at a status hearing held pursuant to rule 48.14(8);
(2) Did Master Graham err in finding that the plaintiff had demonstrated that there was an acceptable reason for the delay?
(3) Did Master Graham err in that the plaintiff had demonstrated that, if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice;
II. THE NATURE OF THE ACTION
[4] MNR regulates oil production in Ontario. It controls where an oil company can drill wells and how many wells an oil company can drill in a given area. At its core, this action is about alleged oral representations made by Mr. Palonen and Mrs. Helen Wright, former MNR employees, between 1991 and 1993, regarding the granting of petroleum and natural gas leasing rights in Crown land which the Farmers alleges it relied upon to its detriment. Farmers alleges that, as a result of these conversations, it and not its competitor, Talisman Energy Inc. (then Pembina Oil), should have been granted petroleum rights for the near shore area in Lot 10, Concession 1 of Romney Township.
[5] Farmers seeks damages from MNR arising from its granting of the lease of near-shore rights to Pembina, its refusals to amend spacing on Lot 10, and the Ministry’s renewal of the near-shore rights lease. Farmers alleges that the Ministry’s conduct, if unintentional, was negligent; if intentional, then the Ministry is vicariously liable for its employees’ misfeasance. Farmers claims that MNR’s conduct has prevented Farmers from producing oil from its oil wells while its neighbours drained the common oil reservoir. Farmers’ damages are based on the income it would have received had it been allowed to produce and market the oil reserves within Lot 10 since 1996.
III. THE CHRONOLOGY OF THE ACTION
[6] The plaintiff commenced its action on October 30, 2001. On January 24, 2002, MNR filed its Statement of Defence. In 2002, the parties participated in mediation before the Hon. George Adams, Q.C. In 2003, the parties exchanged documentary productions. In 2003 and 2004, the parties attempted to schedule examinations for discovery but, despite several attempts to do so, oral examinations have not yet taken place.
[7] In 2003, Farmers applied to the Mining and Lands Commissioner (the “Commissioner”) for an order to unitize the centre portion of Lot 10. If the application had succeeded, it would have resolved most, or all, of the dispute between the parties. In September 2004, the parties agreed, at the plaintiff’s request, not to incur further costs in the litigation until the Commissioner delivered her decision. MNR requested that Farmers advise them within 30 days of the receipt of the decision whether it was abandoning its civil claim in whole or in part. On March 11, 2005, the Mining and Lands Commissioner released its decision denying the plaintiff’s request for “unitization” of Part of Lot 10. The plaintiff did not seek to judicially review the decision.
[8] In January 2005, Sandra Di Ciano, MNR’s then-counsel, went on maternity leave. Following the Commissioner’s decision, and in response to Farmers’ efforts to schedule examinations, MNR took the position that it would not proceed with examinations for discovery until after Ms. Di Ciano returned from her maternity leave in February 2006.
[9] In 2006, Farmers’ counsel left his law firm. Farmers had to find new counsel. Farmers retained Ross & McBride LLP in November 2006 and they became counsel of record as of January 2007. The next month, Crystal O’Donnell, a lawyer who replaced Ms. Di Ciano as counsel for MNR, called Barry Yellin at Ross & McBride to ask if Farmers intended to proceed with the action. In March 2007, Mr. Yellin informed Farmers that he had tried to telephone Ms. O’Donnell but that she was away until April.
[10] Ms. O’Donnell was then replaced by William MacLarkey. According to an email from Mr. Yellin to his colleague Mark Abradjian, sent in July 2007, Mr. MacLarkey and Mr. Yellin discussed the file. Following this call, there was no further discussion between litigation counsel until December 2010. During this time the parties disagree as to whether Ross & McBride took any action to advance the litigation. Farmers’ position is that Ross & McBride’s contact in 2008 with MNR employees could be considered steps taken to advance the litigation. MNR’s position is that this activity did not constitute activity to advance the litigation.
[11] Farmers claims that in the fall of 2007, it began to encounter difficulties in its communications with its then-lawyers, and in particular with Mr. Abradjian. Mr. Abradjian was supposed to contact Stuart Thatcher, the Ministry’s Acting Manager, Petroleum Resources Centre to discuss the litigation, but did not do so until January 2008.
[12] On January 10, 2008, Mr. Thatcher and Mr. Abradjian discussed spacing on Lot 10. Mr. Abradjian raised the issue of the litigation. According to an email Mr. Abradjian sent to Farmers, Mr. Thatcher had agreed to discuss the litigation further in the near future. This message is contradicted by correspondence from Mr. Thatcher which indicates that he had told Mr. Abradjian on January 10, 2008 that he would not discuss the lawsuit and Mr. Abradjian should instead contact Mr. MacLarkey. Mr. Abradjian did not contact Mr. MacLarkey.
[13] Mr. Abradjian never informed Farmers of Mr. Thatcher’s position and never mentioned Mr. MacLarkey in his reports to Farmers regarding the phone call or subsequent correspondence with Mr. Thatcher. Instead, throughout 2008, Mr. Abradjian continued to communicate with the Ministry directly regarding oil production on Lot 10.
[14] In May 2008, Mr. Abradjian told Farmers that Mr. Thatcher was leaving the Ministry. In May or June 2008, Dan Elliott was appointed as the new manager of the Petroleum Resources Centre at the Ministry. In June 2008, Mr. Elliott spoke with Mr. Abradjian, and in October 2008 he met with Mr. Abradjian; Mr. Robinson, Farmers’ President; Kim Van Deven, Mr. Robinson’s sister and Farmers’ vice president; and Bill Getty, Farmers’ operations manager. Farmers had asked Mr. Abradjian to schedule the meeting with Mr. Elliott in July 2008, but it took Mr. Abradjian two months to act on this request.
[15] At the October 2008 meeting, the parties discussed spacing on Lot 10. Mr. Robinson maintains that the parties discussed ways to settle the lawsuit at this meeting. Farmers’ position is that the Ministry understood that Farmers still intended to proceed with the lawsuit and that the Ministry made no complaint about any delay in the progress of the action. In fact, Farmers claims that Mr. Elliott of the Ministry wanted to try to settle all disputes between Farmers and the Ministry, including the lawsuit. MNR’s position is that it ever engaged in substantive discussions regarding the lawsuit or potential settlement of the lawsuit.
[16] In 2009 and 2010, Farmers experienced continued problems with its lawyers. Farmers tried to push Mr. Abradjian along, but it was frustrated by his repeated conduct of giving other matters greater priority and failing to respond to Farmers’ emails and phone calls.
[17] During this time, Farmers claims that Mr. Getty was engaged in conversations with Mr. Elliott towards resolving “all matters”, including the lawsuit, and Mr. Robinson always felt that Mr. Elliott had the authority to settle the lawsuit and wanted to try to settle the lawsuit. According to Mr. Robinson, Mr. Elliott never said he could not deal with the lawsuit. MNR’s position is that no such settlement discussions took place.
[18] After Farmers received a status notice in January 2011 and learned that the lawsuit was at risk of being dismissed for delay, it retained its current counsel, Lax O’Sullivan Scott Lisus LLP, who requested a status hearing, negotiated a dismissal on consent with Talisman, and proposed a timetable to the Ministry. The Ministry refused to consent to the proposed timetable. Master Graham held a contested status hearing on May 28, 2012 pursuant to Rule 48.14(8) of the Rules of Civil Procedure, Master Graham concluded that the action should be permitted to proceed in accordance with the timetable submitted by plaintiff’s counsel at the status hearing.
IV. THE REASONS OF MASTER GRAHAM
[19] The Master first turned his mind to the test to be met on a status hearing. He considered the case of Khan v. Sun Life Assurance, 2011 ONCA 650, and held that the plaintiff bears the burden of demonstrating: (1) That there was an acceptable explanation for the litigation delay; and (2) that, if the action was allowed to proceed, the defendant would suffer no non-compensable prejudice".
[20] Master Graham summarized the parties’ submissions, and made the following findings:
(a) There is evidence in the record of Farmer’s intention to pursue the lawsuit;
(b) Farmers instructed their former counsel, Mr. Abradjian, to advance the lawsuit but he failed to do so. Specifically, there was a five year period, from February 2006 to January 2011, when Farmers previous solicitors, Ross & McBride, “failed to advance the litigation despite frequent requests from the plaintiff to do so.”;
(c) Mr. Abradjian failed to act in accordance with his retainer;
(d) Farmers acted reasonably by relying on its counsel to protect its interests;
(e) Relevant documentary evidence is available;
(f) Farmer’s principal witness is available;
(g) The Ministry had access to the last-known addresses of its former employees so that its counsel could attempt to contact them; and
(h) The Ministry did not provide any evidence of actual prejudice.
[21] On this appeal MNR only disputes (g) which I will discuss below.[^1] They do disagree somewhat with (a) but do not contend this constitutes a sufficient reason to appeal.
V. ANALYSIS
A. RULE 48.14
[22] Where an action has not been placed on the trial list within two years of the defence being filed, the registrar issues a status notice indicating that the action will be dismissed for delay unless the matter is set down for trial within 90 days of the notice [rule 48.14(1)]. A party may request a status hearing, held before a judge or case management master [rule 48.14(8)], which will be held in writing where the party files an agreed timetable for the necessary steps to be completed to ensure that the matter is set down for trial within 12 months [rule 48.14(10)]. If no such timetable is filed, a status hearing is held pursuant to rule 48.14(12).
[23] Rule 48.14(13) provides:
48.14(13) At the status hearing, the plaintiff shall show cause why the action should not be dismissed for delay and,
(a) if the presiding judge or case management master is satisfied that the action should proceed, the judge or case management master may,
(i) set time periods for the completion of the remaining steps necessary to have the action placed on or restored to a trial list and order that it be placed on or restored to a trial list within a specified time,
(ii) adjourn the status hearing to a specified date on such terms as are just, or
(iii) if the action is an action to which Rule 77 may apply under rule 77.02, assign the action for case management under that Rule, subject to the direction of the regional senior judge,
(iv) make such other order as is just; or
(b) if the presiding judge or case management master is not satisfied that the action should proceed, the judge or case management master may dismiss the action for delay. [Emphasis added.]
[24] The purpose of rule 48.14 was succinctly summarized by Sharpe J.A. in Marché D'Alimentation Denis Thériault Ltée v. Giant Tiger Stores Ltd. 2007 ONCA 695 [“Marché”] at para. 23:
Rule 48.14 is one of many rules of civil procedure designed to promote the timely resolution of disputes, to discourage delay in civil litigation, and to give the courts a significant role in reducing delays. Before the promulgation of Rule 48.14, parties had total control over when cases were placed on the trial list. Rule 48.14 "establishes a procedure which gives the court a degree of control over the speed at which litigation proceeds to a conclusion ... In essence the rule provides for a very limited form of case management." [Emphasis added.]
[25] The focus of the inquiry on a status hearing under rule 48.14 should be on the conduct of the plaintiff. However, the conduct of a defendant may be relevant where it contributes to the delay being reviewed.[^2]
B. THE STANDARD OF REVIEW
[26] The parties are agreed that the two step test set out in Khan v. Sun Life Assurance, 2011 ONCA 650, which Master Graham applied was the correct test on a contested status hearing. However, there was disagreement about the appropriate standard of review and the nature of a Master’s decision under rule 48.14. In their written materials counsel for the MNR, relying on Oberding v. Sun Life Financial Assurance Co. of Canada, 2010 ONSC 3303, [2010] O.J. No. 3122 (Div. Ct.) contended that both branches of the Khan test, i.e. the question of an acceptable explanation for the delay and the question of non-compensable prejudice to the defendant involved a question of law. This is clearly incorrect. Both branches of the Khan test involve what are quintessentially mixed questions of fact and law.[^3] Also contrary to the written submissions of the MNR, it is also obvious from the use of the word “may” in rules 48.14(13)(a) and 48.14(13)(b) that the decision of the Master at a contested status hearing is a discretionary one.[^4]
[27] The appropriate standard of review of a master's order, whether it be final or interlocutory, is that the decision will be interfered with only if the master made an error of law or exercised his or her discretion on the wrong principles or misapprehended the evidence such that there is a palpable and overriding error. In their oral submissions, the parties agreed that the standard of review is that set out in 1196158 Ontario Inc. v. 6274013 Canada Ltd. 2012 ONCA 544 by Sharpe J.A. at para. 16:
a decision not to dismiss an action for delay at a status hearing is discretionary and entitled to deference on appeal. The decision may, however, be set aside if made on an erroneous legal principle or if infected by a palpable and overriding error of fact.
C. DID MASTER GRAHAM ERR IN FINDING THAT THE PLAINTIFF HAD DEMONSTRATED THAT THERE WAS AN ACCEPTABLE REASON FOR THE DELAY?
[28] MNR does not take issue with the Master’s finding that the period of delay was five years and that this was the result of Farmers’ former counsel failure to act in accordance with his retainer.[^5] But MNR submits that Master Graham erred in law by finding that this constituted an acceptable explanation for the five year delay. MNR argues that the Master failed to apply binding authority which holds that, where delay may be wholly attributable to plaintiff’s counsel and not to the plaintiff, it is not a basis for excusing the delay. Rather the action should be dismissed and the plaintiff may have a remedy against its counsel.
[29] In response, Farmers argues that Master Graham’s findings that Farmers always intended to pursue the lawsuit as a remedy, and that the delay in the action stemmed from Mr. Abradjian’s failure to act in accordance with his retainer are supported by the evidence before him. Farmers stresses that it did not know that its lawyers had been told by MNR in January 2008 that communications regarding the lawsuit should be directed to Mr. MacLarkey. Had Farmers known of this development, it would have insisted that its lawyers contact Mr. MacLarkey, just as it pushed its then lawyers to pursue matters with Mr. Elliott between June 2008 and December 2010.
[30] Moreover, Farmers submits that Master Graham was entitled to conclude that it was reasonably entitled to rely on Ross & McBride to protect its interests, and that Farmers should not be punished for its lawyers’ failure to do so. This conclusion is consistent with other status hearing cases where the plaintiff’s lawyer’s failure to move the case forward was not held against the plaintiff to its detriment and with the well-established principle that “the sins of the lawyer should not be visited upon the client.” Farmers rejects the suggestion that Master Graham ignored binding precedent. They argue that the cases cited by MNR do not apply to status hearings and do not establish a universal rule that the Court at a status hearing cannot accept an explanation for the delay which distinguishes between the plaintiff’s intentions and its counsel’s conduct.
[31] I do not accept the Plaintiff’s submission that many of the cases cited by the MNR do not apply to status hearings. While in Bolohan v. Hull 2012 ONCA 121 Justice Sharpe made clear that rule 24 has no application to a status hearing under rule 48.14,[^6] I do not think he meant the comments of our Court of Appeal about delay in civil cases are only relevant if they originate in cases involving rule 48.14. As I will discuss below, in my view these strong expressions of concern about delay are more broadly relevant.[^7]
[32] Rather, the more serious problem for the appellant is that I do not accept its bald assertion that there is “binding authority which holds that, where delay may be wholly attributable to plaintiff’s counsel and not to the plaintiff, it is not a basis for excusing the delay.” Several of the cases cited by the appellant in this regard do not support this proposition. The other cases that do discuss delay caused by plaintiff’s counsel do not articulate such a definitive rule and can be distinguished from the case at bar. Indeed, it would be surprising if it were otherwise given the “often applied principle that the sins of the lawyer should not be visited upon the client.”[^8]
[33] The most important authorities cited in this regard by the appellant are the decisions of Justice Sharpe in Marché and 1196158 Ontario Inc.[^9] In Marché the plaintiffs sought to set aside a ruling by the Registrar dismissing their action under rule 48.14. The motion was heard almost six years after it was originally dismissed and the Master dismissed the motion. The plaintiff successfully appealed to a single Judge of the Divisional Court. Justice Sharpe allowed the appeal and restored the decision of the Master. In 1196158 Ontario Inc. the plaintiff sought to set aside the order of a Judge dismissing the action after a second status hearing under rule 48.14 held five years after the commencement of the action. Justice Sharpe dismissed the appeal and upheld the Judge’s decision to dismiss the action. I will discuss these two cases in turn.
Marché D'Alimentation Denis Thériault Ltée v. Giant Tiger Stores Ltd.
[34] The MNR argues that Marché stands for the proposition that delay caused by actions of a solicitor cannot constitute a sufficient explanation for delay under the first branch of the Khan test. However, this overstates what was said in Marché and, in any event, Marché is distinguishable from the case at bar in several important respects.
[35] In Marché the Court was considering whether to set aside the dismissal of an action and consequently dealt with the four part test outlined in Reid v. Dow Corning Corp. (2001) 11 C.P.C. (5th) 80 at para. 41 (Ont. S.C.J.), rev'd on other grounds 48 C.P.C. (5th) 93 (Ont. Div. Ct.):
(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.
[36] At the outset, it should be noted that only the first and fourth steps of the Reid analysis overlap with the Khan analysis applicable in this case. Moreover, under the first branch of the Khan test there has not been as clear recognition that if “the solicitor … made a deliberate decision not to advance the litigation toward trial” the plaintiff cannot discharge the onus of providing an acceptable explanation for the delay.
[37] The portions of Marché that MNR relies upon occur under the discussion of the first and second branches of the Reid test. Under both branches of the Reid test, Justice Sharpe made a number of case-specific observations about delay caused by the plaintiff’s solicitor as well as some more general observations about delay and the civil justice system. I will discuss each of these in turn.
[38] Under the first branch of the Reid test, Justice Sharpe’s conclusion that the plaintiff could not adequately explain the delay turned on the finding that “The solicitor ‘had put the file in abeyance’ and that his conduct indicated ‘a deliberate intention not to advance the litigation toward trial.’” This conclusion was required by Reid as this is precisely the sort of “deliberate decision not to advance the litigation toward trial” that Reid says is fatal to a motion to set aside a dismissal. But, Marché cannot be said to be authority for importing this principle into the first branch of the Khan test. Nor can this portion of Marché fairly be said to stand for the proposition that delay caused by a solicitor can never be considered as an acceptable explanation for delay under the first branch of Khan.
[39] It is true that under the second branch of the Reid test, Justice Sharpe did discuss the failure of the solicitor to move the litigation along and the fact that, while this will not justify setting aside a dismissal, it does mean that the plaintiff may have a remedy against their solicitor. But this discussion is directed towards an analysis of whether or not the solicitor’s conduct was mere inadvertence or negligence. In concluding that the solicitor’s conduct could not be classified as mere negligence, Justice Sharpe said nothing that supports the MNR’s broad reading of Marché.
[40] Marché is also distinguishable in a number of significant respects:
(a) Unlike the present case, the action had been dismissed almost six years before the motion to revive it was heard. Thus, the question of “finality”, a factor central to Justice Sharpe’s analysis, had a significance that does not exist in the current case where the action has never been dismissed.[^10]
(b) In Marché a central witness for the defendants had died. As well, as a result of the dismissal of the action and the passage of time, the defendants destroyed many of the documents relating to the litigation and their solicitors stripped their file, destroyed all their notes, and sent what was left in the file to storage. The MNR led no evidence of such actual prejudice; and
(c) In Marché, while the Master found that the failure to advance the litigation rested "on the shoulders of their solicitor”[^11] who “effectively abandon[ed] the file,”[^12] he also found that the plaintiffs, despite maintaining regular contact with their solicitor, “failed to communicate to the [defendant] any intention to move the action toward trial.”[^13] In this case, the Master found that Farmers intended to pursue the action and repeatedly instructed their counsel to advance the lawsuit and the record supports this finding.
1196158 Ontario Inc. v. 6274013 Canada Ltd.
[41] 1196158 Ontario Inc. is the most recent case from our Court of Appeal addressing rule 48.14. The plaintiffs was given a chance to continue their action on a timetable approved at a status hearing held more than three years after the action was commenced. The action was dismissed 20 months later due to the plaintiff’s failure to move the action along in accordance with that timetable. The plaintiff and his solicitor were brothers and they tried to explain the delay by pointing to a number of sympathetic personal and financial problems. The Court of Appeal rejected the attempt to revive the action having found five years of inaction on the part of the plaintiff. This is a critical distinction from the present case where the Master found that the plaintiff intended to pursue the action and took steps to move it along.
[42] As will be discussed below, 1196158 Ontario Inc. reiterates many of the points made it Marché about the need for expeditious justice and the problem of delay. However, it says nothing to support the broad proposition that delay caused by plaintiff’s counsel can never be part of a reasonable explanation for delay under the first branch of Khan.
The Significance of Delay in the Civil Justice System
[43] While I have rejected MNR’s broad submission that delay caused by a party’s lawyer cannot be used to explain delay under the first branch of the Khan test, I also recognize that Marché and its progeny constitute a clarion call to all the participants in the civil justice system that the problem of delay is serious and can no longer be tolerated. These cases emphasize the following principles all of which must be considered in a case such as this.
[44] The problem of delay is a significant one which the courts have a duty to address. Indeed in Marché Sharpe J.A. emphasizes “a dominant theme in modern civil procedure: the discouragement of delay and the enhancement of an active judicial role to ensure timely justice.” In 1196158 Ontario Inc. Sharpe J.A. noted at para. 34:
Modern civil procedure recognizes the need to deal with unexplained delay and, through rules such as rule 48.14, provides for an active judicial role "to promote the timely resolution of disputes, to discourage delay in civil litigation and to give the courts a significant role in reducing delays.”
[45] The courts are empowered to play this active role through the both rules of civil procedure as well as through their inherent jurisdiction to control their own processes. Thus, actions involving lengthy unexplained delays are an abuse of the court’s process and can properly be dismissed on this basis, even when the rules do not mandate this result.
[46] Timely access to justice is important to litigants. Litigants “are entitled to have their disputes resolved quickly so that they can get on with their lives. Delay multiplies costs and breeds frustration and unfairness.”[^14] As noted in 1196158 Ontario Inc. at para. 41:
The civil justice regime should deliver timely justice to both plaintiffs and defendants. Failure to enforce time lines frustrates the legitimate expectations of both those who claim and those who defend. Unless the basic ground rules of litigation - including time requirements - are enforced in a principled way, counsel cannot provide reliable advice and clients cannot plan their affairs in an orderly manner.
[47] Delay causes another type of harm “it leaves the litigant with the claim hanging over its head in a kind of perpetual limbo. Fairness requires allowing parties to plan their lives on the assumption that, barring exceptional or unusual circumstances, litigation time lines will be enforced.”[^15]
[48] There is also “a strong public interest in promoting the timely resolution of disputes.”[^16] Consequently, “(f)ailure to enforce rules and orders undermines public confidence in the capacity of the justice system to process disputes fairly and efficiently.”[^17] Thus, in Marché Sharpe J.A. stated:
Excusing a delay of this kind would through into question the willingness of the courts to live up to the stated goal of timely justice.
Overall, reinstating this action would excuse a five-year delay after the dismissal of an action, explained only by the fact that a lawyer formed "a deliberate intention not to advance the litigation toward trial" and "put the file in abeyance". That would risk undermining the integrity and repute of the administration of justice. [Emphasis added.]
[49] Given the importance of an efficient civil justice system, “time lines prescribed by the Rules of Civil Procedure or imposed by judicial orders should be complied with.”[^18] This is important because such rules and orders that “aim to resolve disputes in a timely and efficient manner can only achieve their goal if they are respected and enforced.”[^19] In 1196158 Ontario Inc. at para. 39 the Court noted that this is not a burdensome requirement as “(t)he time lines the rules impose are relatively generous.” Thus, “(w)here a party fails to prosecute an action in a timely fashion, the court is entitled to exercise the powers conferred by the rules to dismiss actions absent an adequate explanation for the delay.”[^20]
[50] While the dismissal of an action for unexplained delay is “a heavy price to pay”[^21] there is nothing unfair about such a result. As noted in 1196158 Ontario Inc. at para. 33 “At some point, a party who has failed to respect the rules designed to ensure timely and efficient justice loses the right to have its dispute decided on the merits.” Indeed, tolerating delay will often result in unfairness as “even if there is no actual prejudice, allowing stale claims to proceed will often be unfair to the litigants. Disputes are more likely to be resolved fairly if they are resolved in a timely fashion and accordingly, the enforcement of time lines helps achieve the ultimate goal of fair resolution of disputes.”[^22] Thus, it is not surprising that Justice Sharpe made clear the limited force a generic claim to fairness will have in delay cases, expressly adopting the language of Glithero J. in Riggitano v. Standard Life Assurance Co., [2009] O.J. No. 1997 (S.C.), at para. 45, aff'd 2010 ONCA 70:
If the common submission, as made here, to the effect that a dismissal would be unfair to the plaintiff is permitted to always trump the provision in the rules contemplating a reasonably timely procedure for the disposition of actions, then the rule would be effectively gutted.
[51] Despite the obvious importance of all the foregoing, it must also be recognized that, while timely justice is a critically important goal of the civil justice system, it will not always trump all other considerations. In both Marché and 1196158 Ontario Inc., despite the fact that the dilatory plaintiffs had their actions stayed, Justice Sharpe tempered his emphasis on the need for efficient litigation somewhat with a reiteration of the principle that “The law will not ordinarily allow an innocent client to suffer the irrevocable loss of the right to proceed by reason of the inadvertence of his or her solicitor.” [^23] Thus, in Marché at para. 34 he stated:
The Rules of Civil Procedure must be interpreted in a manner that recognizes that expeditious justice is only one value to be weighed against others and that delay may be excused where necessary to ensure complete justice. … Expeditious justice must be balanced with the public interest in having disputes determined on their merits. Where, despite the delay, the defendant would not be unfairly prejudiced should the matter proceed for resolution on the merits, according the plaintiff an indulgence is generally favoured. [Emphasis added.]
[52] In a similar vein in 1196158 Ontario Inc. at para. 19 Sharpe J.A. wrote:
On the other hand, procedural rules are the servants of justice not its master. We must allow some latitude for unexpected and unusual contingencies that make it difficult or impossible for a party to comply. We should strive to avoid a purely formalistic and mechanical application of time lines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits. As Laskin J.A. stated in Finlay v. Paassen, 2010 ONCA 204, 101 O.R. (3d) 390, at para. 14: "the Rules and procedural orders are construed in a way that advances the interests of justice, and ordinarily permits the parties to get to the real merits of their dispute." [Emphasis added.]
[53] It is precisely the need to balance these competing values, efficiency and a just resolution on the merits, which make the proper resolution of cases such as this so difficult. Sharpe J.A. described this well in 1196158 Ontario Inc. at para. 20:
The challenge posed in cases involving dismissal for delay is to find the right balance between, on the one hand, the need to ensure that the rules are enforced to ensure timely and efficient justice and, on the other, the need to ensure sufficient flexibility to allow parties able to provide a reasonable explanation for failing to comply with the rules to have their disputes decided on the merits.
Conclusion Regarding the First Step of the Khan Test
[54] The MNR’s submission that Master Graham failed to follow binding authority that precludes any reliance by a plaintiff on delay attributable to their solicitor as an explanation for delay is incorrect. There is no such binding authority. Thus, the Master did not commit the error of law alleged. Nor did the Master, in finding that the plaintiff had discharged his onus under the first branch of Khan, exercise his discretion on the wrong principles or misapprehend the evidence such that there was a palpable and overriding error. The amount of delay in this case is certainly a basis for concern. However, the Master’s finding that the plaintiff intended that the action proceed and took steps to advance the lawsuit distinguishes this case from Marché and 1196158 Ontario Inc. and justifies his exercising his discretion in favour of the plaintiff. The Master’s decision on this point is entitled to deference and this ground of appeal fails.
D. Did Master Graham err in that the plaintiff had demonstrated that, if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice?
[55] MNR does not take issue with the Master’s findings that: (1) the relevant documentary evidence is available; (2) Farmer’s principal witness, Randy Robinson, is available; and (3) MNR did not provide any evidence of actual prejudice.
[56] Rather, MNR submits that Farmers did not discharge its onus under the second branch of Khan as it did not attempt to locate the witnesses and determine whether they were available, willing and able to testify. Indeed, MNR argues that as these individuals are no longer in the employ of the MNR they cannot be considered MNR’s witnesses. They also assert that Master Graham engaged in improper speculation when he stated that MNR would have the last know addresses of these witnesses and in doing so reversed the onus and improperly put it on the defendant.
[57] Furthermore, given the passage of time in this case, MNR submits that prejudice can be easily inferred as the witnesses’ recollections would fade over the 18 or 20 years since the relevant conversations.
[58] In response, Farmers argues that, in addition to the fact that relevant documentary evidence and Farmers principal witness are available, , the record shows that Dr. Palonen swore an affidavit and was cross-examined in 1999 and that the affidavit and transcript of the cross-examination are available.
[59] It is clear that an action can be dismissed for delay at a rule 48.14 status hearing without proof of actual prejudice. As Sharpe J.A. explained in 1196158 Ontario Inc. at para. 32:
The test [in Khan] is conjunctive, not disjunctive. Even if the plaintiff can provide a satisfactory explanation for the delay, the action will be dismissed if there would be prejudice to the defendant. And if the plaintiff is not able to provide a satisfactory explanation for the delay, it is still open to the judge to dismiss the action, even if there is no proof of actual prejudice to the defendant.
[60] Thus, “(t)he absence of actual prejudice does not automatically or inevitably trump the values of timeliness and efficiency.”[^24] Indeed, if prejudice was a necessary precondition for dismissal due to delay “time lines would become meaningless.”[^25]
[61] I agree that prejudice can be inferred from the passage of time in this case. As the court reiterated in 1196158 Ontario Inc. at para. 42:
Stale claims are more difficult to defend. As this court stated in Wellwood, at para. 72: ‘as the memories of witnesses fade over time, the passage of an inordinate length of time after a cause of action arises or after an applicable limitation period expires gives rise to trial fairness concerns. In my view, this is so even when timely notice of the claim has been provided.’
[62] This is especially true here where the conversations at issue took place at least eight years before the commencement of the action. But this does not end the inquiry. Master Graham was alive to this concern and there was evidence before the Master that would support the finding that the documentary record from both sides would permit the court to reconstruct what went on between them. These documents could be used to refresh the evidence of the witnesses despite the passage of time or could possibly serve as evidence of the discussions themselves. This was sufficient to rebut the presumptive prejudice arising from the delay.
[63] I reject the suggestion that the Master reversed the onus. All the Master did, having found that the plaintiffs had rebutted the prejudice that could be inferred from the passage of time, was consider whether or not the defendants could demonstrate any actual prejudice. This is entirely appropriate. While the defendant need not lead any evidence of actual prejudice under the second branch of Khan, if it can, it would always be advisable to do so. The failure to lead such evidence may result in the action being permitted to continue where the plaintiff has otherwise rebutted whatever prejudice might be inferred from the delay.
[64] The MNR also argues that in order to discharge their onus under the second branch of Khan a plaintiff must contact the defendant’s witnesses to determine whether they are available, willing and able to testify on behalf of the defendant. Master Graham rejected this argument relying on the decision in 1001411 Ontario Ltd. (c.o.b. Cinespace Studios Management) v. City of Toronto Economic Development Corporation, 2011 ONSC 6993 at para. 36. He was right to do so. Certainly, if a Plaintiff is able to lead such evidence it will be most helpful in discharging their onus. However, the suggestion that such evidence is mandatory under the second branch of Khan is untenable for several reasons. First, it is the defendants not the plaintiffs who will know the identity of the witnesses they intend to call to defend the action. While the plaintiffs may be able to identify some of the defendant’s witnesses they may not be able to identify them all, or understand their relative importance to the defence, especially before examinations for discovery. Second, even if the plaintiffs did know the identity of the defendant’s witnesses, it is highly unlikely that these witnesses would co-operate with lawyers for the plaintiff. Third, requiring the plaintiffs to locate and interview the defendant’s witnesses could be significantly onerous in terms of time and expense. This is inconsistent with the direction in rule 1.04(1) that the Rules of Civil Procedure are to be "liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” [Emphasis added.] Finally, such a requirement serves no legitimate purpose. At this stage, the concern is whether the defendant’s witnesses are still available, willing and able to testify. It is the defendants who will know the answer to this question. If they are prejudiced in this regard, it is not asking too much that they bring it to the court’s attention.
[65] For the same reason, I reject the contention that Master Graham engaged in inappropriate speculation in concluding that MNR would have the addresses of their witnesses. This is not speculation but a reasonable inference from the fact that MNR did not suggest that they would suffer any actual prejudice from the delay. Again, if this was a real issue, it is not asking too much for MNR to have raised it.
Conclusion Regarding the Second Step of the Khan Test
[66] For the foregoing reasons, I have concluded that Master Graham did not commit any of the error of law alleged by MNR. Nor did the Master, in finding that the plaintiff had discharged his onus under the second branch of Khan, exercise his discretion on the wrong principles or misapprehend the evidence such that there was a palpable and overriding error. The amount of delay in this case is certainly a basis for concern. However, the Master’s finding that the plaintiff had rebutted the presumptive prejudice resulting from the delay, coupled with the fact that the MNR made no suggestion of actual prejudice, justifies his exercising his discretion in favour of the plaintiff. The Master’s decision on this point is entitled to deference and these grounds of appeal fail.
CONCLUSION
[67] In my view, the reasons of Master Graham reveal no errors of fact or law that would justify this court's intervention. The discretionary decision of the status hearing judge attracts deference in this court. As his decision is consistent with the applicable legal principles I have identified and reveals no reversible errors of fact, I would dismiss the appeal. In the circumstances, the parties are agreed that Farmers Oil is entitled to costs in the amount of $10,500, inclusive of disbursements and taxes.
Ducharme J.
Released: November 23, 2012
COURT FILE NO.: CV-01-CV219653-0000
DATE: 20121123
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
FARMERS OIL & GAS INC.
Respondent/Plaintiff
– and –
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO represented by the MINISTRY OF NATURAL RESOURCES and TALISMAN ENERGY INC.
Appellant/Defendant
REASONS FOR JUDGMENT
Ducharme J.
Released: November 23, 2012
[^1]: Infra, paras 56 and 62-65. [^2]: 1196158 Ontario Inc. v. 6274013 Canada Ltd. 2012 ONCA 544 at paras. 28 and 29. [^3]: In Oberding the Divisional Court was dealing with the two-fold test for a status hearing set out in Savundranayagam v. Sun Life Assurance Company of Canada, 2008 CanLII 54788 (ON SCDC), [2008] O.J. No. 4215 (Div. Ct.). This test is essentially the same as that in Khan and the court did say at para. 10 “The standard on this appeal is correctness given that it addresses a matter of law.” Given the subsequent decision in 1196158 Ontario Inc. v. 6274013 Canada Ltd. 2012 ONCA 544, this is no longer good law. [^4]: The discretionary nature of the decision at a status hearing was explicitly recognized in 1196158 Ontario Inc. v. 6274013 Canada Ltd. 2012 ONCA 544 at para. 16. [^5]: The MNR does not agree that the record supports as strongly the Master’s finding that the Plaintiffs had a continuing interest in pursuing the lawsuit and took steps to advance the litigation. But in oral argument they conceded that this did not constitute the type of palpable and overriding error that would justify appellate intervention. [^6]: Bolohan v. Hull, at para. 12. [^7]: Infra, paras. 43-53. [^8]: Graham v. Vandersloot (2012) 2012 ONCA 60, 108 O.R. (3d) 641 (C.A.) at para. 10; Marché at para. 17; Halton Community Credit Union Ltd. v. ICL Computers Canada Ltd. (1985), 8 O.A.C. 369 (C.A.), at para. 11; [^9]: The appellants also rely on Machacek v. Ontario Cycling Assn. 2011 ONCA 410; and Gallagher v. Southam Inc., [2007] O.J. No. 3161 (S.C.J). Machacek does not add anything substantive to the Marché analysis, but did apply it to a Registrar’s dismissal of an action under rule 48.14. In Gallagher v. Southam Inc., a case that predates Marché, Justice Gordon did state at para. 12 “In my view, it is not an acceptable response to simply blame former counsel.” However, this observation was very fact-specific as he found that the plaintiff had made no inquiries of counsel during a ten year period where nothing was done to advance the action. Consequently, I need not discuss these cases any further. [^10]: At para. 37, Sharpe J.A. writes “Finality, like the avoidance of unnecessary delay, is a central principle in the administration of justice. ‘The law rightly seeks finality to litigation’ and finality is ‘a compelling consideration.’” At para. 38, he goes on to say “When an action has been disposed of in favour of a party, that party's entitlement to rely on the finality principle grows stronger as the years pass. Even when the order dismissing the action was made for delay or default and not on the merits, and even when the party relying on the order could still defend itself despite the delay, it seems to me that at some point the interest in finality must trump the opposite party's plea for an indulgence.” Finally, at para. 41 he concludes in part “Reinstating the action at this point would undermine the finality principle…” [^11]: Para. 17 [^12]: Para. 27 [^13]: Para. 13 [^14]: Marché at para. 25. [^15]: 1196158 Ontario Inc., at para. 44 [^16]: 1196158 Ontario Inc., at para. 39 [^17]: 1196158 Ontario Inc., at para. 19 [^18]: 1196158 Ontario Inc., at para. 19 [^19]: 1196158 Ontario Inc., at para. 18 [^20]: 1196158 Ontario Inc., at para. 34 [^21]: 1196158 Ontario Inc., at para. 39 [^22]: 1196158 Ontario Inc., at para. 42 [^23]: In this regard Sharpe J.A. cited Chiarelli v. Wiens (2000), 2000 CanLII 3904 (ON CA), 46 O.R. (3d) 780 (C.A.), at para. 9. He also noted at para. 17 that the Master had also recognized that, “[I]t is a principle of very long standing that the client is not to be placed irrevocably in jeopardy by reason of the neglect or inattention of his solicitor, if relief to the client can be given on terms that protect his innocent adversary as to costs thrown away and as to the security of the legal position he has gained.” [^24]: 1196158 Ontario Inc., at para. 33 [^25]: 1196158 Ontario Inc., at para . 34