SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 10-47474
DATE HEARD: November 21, 2012

RE: 750 SERVICE CENTRE OASIS POINT INC et al v. 2018924 ONTARIO LTD et al

BEFORE: MASTER ROGER

COUNSEL:
Alyssa Tomkins for the Plaintiff
email: rcaza@plaideurs.ca
Ph: (613) 565-2292 Fax: (613) 565-2087

Michael Hebert for the Defendants
email: mhebert@beament.com
Ph: (613) 241-3400 Fax: (613) 241-8555

E N D O R S E M E N T (at Status Hearing)

[1] This is a contested status hearing resulting from a status notice issued by the court on March 17, 2012. It first came before me on August 30, 2012, and was adjourned to today, as the initial submissions revealed that the action might be vulnerable, in order to allow the parties to deliver affidavits and conduct cross-examinations, if required.

Background Information:

[2] This action seeks damages relating to the purchase of a service station. In January 2008 the corporate Plaintiff purchased a service station from the corporate Defendant. It is alleged that after the closing the Plaintiffs discovered an outstanding TSSA compliance notice and that, as a result, the Plaintiffs incurred substantial remedial costs.

[3] On January 5, 2010, the corporate Plaintiff made an assignment in bankruptcy.

[4] A Notice of Action was issued on January 20, 2010 and the Statement of Claim was filed on February 17, 2010. A Statement of Defence was delivered March 15, 2010.

[5] The Plaintiffs retained a lawyer in April 2010, Mr. Wansome.

[6] By letter dated July 28, 2010, Plaintiffs’ counsel wrote to Defendants’ counsel to suggest possible mediators. It appears that the Defendants did not respond to this letter.

[7] On September 24, 2010, the Defendants served a Notice of Change of Lawyers, appointing their current lawyer. As the parties did not select a mediator within the prescribed time, the court appointed a mediator.

[8] By letter dated September 30, 2010, Mr. Hebert wrote to Mr. Wansome to provide a copy of a bankruptcy search which showed the corporate Plaintiff in bankruptcy as of January 5, 2010. Mr. Hebert put the Plaintiffs on notice that the Statement of Claim was a nullity and asked whether the Plaintiffs would discontinue the action.

[9] By email of December 3, 2010, the court appointed mediator sent an email to both lawyers outlining his understanding, including that Mr. Wansome required some additional time to prepare for a mediation session and that the mediator would be contacted by March with a proposed mediation date.

[10] By letter dated December 27, 2010, Mr. Wansome wrote to Mr. Hebert, apparently further to a conversation of August 2010, to confirm that they had received instructions to amend the Statement of Claim and to ask for the Defendants’ written consent. It is not clear from the letter whether Mr. Wansome understood how to request a case conference or whether he understood that he could bring a motion to amend the Statement of Claim as he seems to be considering the Plaintiffs issuing a new statement of claim. The Plaintiffs wanted to amend the Statement of Claim (or issue a new statement of claim) prior to proceeding with a mediation.

[11] By letter dated January 5, 2011, Mr. Hebert responded to Mr. Wansome indicating that the Statement of Claim could be amended, as opposed to issuing a new claim, but repeated his warning that the action is a nullity considering the bankruptcy of the corporate Plaintiff, indicating: “We look forward to hearing from you as to how you wish to proceed”.

[12] By letter dated February 15, 2011, Mr. Wansome was informed by the trustee in bankruptcy that it would not be pursuing an action against the Defendants. The trustee indicates: “We understand that you will be seeking an Order (on behalf of your client) under s. 38 of the Bankruptcy and Insolvency Act”.

[13] There is no evidence before me of any communication between the parties following the letter of January 5, 2011, until January 4, 2012, when the current lawyers for the Plaintiffs wrote to Mr. Hebert to confirm that they had been retained, although a notice of change was likely served beforehand but that is not in the record. From reviewing the court’s case history it appears that the notice of change was filed on December 19, 2011.

[14] Essentially, we have very little concrete steps taken by the Plaintiffs from the time the action was started and we have a period of approximate ten months to one year when the Defendants did not hear from the Plaintiffs. The explanations provided by the Plaintiffs are as follows.

[15] One part of the explanation is that the Plaintiffs were otherwise occupied with another related action and had limited financial means. In December 2010, the Plaintiffs started a related professional negligence action against their transactional lawyer. That action was defended in February 2011. The Plaintiff explains, in his affidavit of September 17, 2012, that “Mr. Wansome was in the process of preparing the s. 38 motions for both claims when he was served with a motion for summary judgement in the Nirman action seeking that the action be dismissed on account of the limitation period having been missed”. The Plaintiff was cross-examined in that action in June and September 2011, a lawyer consulted by his deceased brother was cross-examined in November 2011, the Plaintiff had to answer many undertakings and Mr. Nirman, the defendant in that action, was cross-examined in January 2012.

[16] He explains that the motion for summary judgment in the professional negligence action was scheduled for March 2012 and required immediate attention starting in 2011. A motion to amend the statement of claim in that action was heard prior to the motion for summary judgment and the latter motion was then adjourned indefinitely to allow the defendants to amend the statement of defence and conduct examinations for discovery, which are scheduled to occur later in November 2012.

[17] He explains that it was always his intention to proceed with this action but that he has limited financial means, with the implication that he could only do so much in 2011.

[18] Another part of the explanation is that the Plaintiffs were required to retain a new lawyer. Mr. Wansome was informed that he might be in a conflict of interest on account of his possible delay in proceeding with the professional negligence action against the transactional lawyer, Mr. Nirman. As a result, the file was transferred to Mr. Caza and his associate in November 2011 and transferred again to Mr. Caza and a different associate in January 2012 when the new firm Caza Saikaley LLP was created. He indicates that there was a dispute between Mr. Caza’s firms (his initial firm and his new firm) regarding the payment of disbursements on this file which delayed the actual transfer of the file to Mr. Caza to March 2012.

[19] The Defendants have been clear for some time that they would put the Plaintiffs to their onus. They were ready to proceed on August 30, 2012, having served their affidavit on August 27, 2012. A memo from the proposed mediator confirms the above, that there was no movement on the file in 2011 for a period of about one year. They allege prejudice in the Plaintiffs’ failure to move the action as the Bank is in possession of the property and they allege it will therefore be impossible to have access to the property to analyse the environmental issues and refute the Plaintiffs’ claims. They also allege that the action has little merits, in any event, and that as constituted the action is a nullity considering the bankruptcy of the corporate Plaintiff.

[20] The Plaintiff finally did obtain a nunc pro tunc order on November 9, 2012, under s. 38 of the BIA authorizing him to take the action in his own name. The Plaintiff is in the process of complying with the procedural requirement of that order, including obtaining an assignment from the trustee. The Defendants apparently do not have a copy. The Plaintiff shall forthwith serve a copy of this order and related materials on the Defendants.

[21] The Plaintiff, as indicated above, states that it was always his intention to proceed with this action and disputes prejudice. He indicates that the Defendants will not be prejudiced if the action is allowed to proceed as the Bank has been in possession of the property since January 2010. As a result, the Plaintiff alleges that any prejudice arising from this is not as a result of any delay in litigating this action.

[22] Mr. Hebert indicated that he was just informed by the trustee that the property was recently transferred by the bank. There is no evidence before the court on this recent transfer, however, even accepting this, the Defendants would be in a somewhat similar position to the one in which they have been since early 2010, when the bank took possession, of having to deal with a third party. I note, as well, that the Defendants had ample opportunity to have investigated this aspect of the file early on following service of the Statement of Claim.

Law and analysis:

[23] 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. [1]

[24] 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 [2]. 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 [3].

[25] 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. [4] Conversely, if not satisfied that the action should proceed, the presiding judge or master may dismiss the action for delay. [5]

[26] There is no rule that a dismissal order cannot be made at a first status hearing. [6] 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, [7] has been implicitly rejected by the Court of Appeal in Khan and has been explicitly rejected by the Divisional Court in Malik. [8]

[27] In its recent decision, the Court of Appeal provides guidance on a number of issues relevant to status hearings. [9]

[28] 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. [10] 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. [11]

[29] At para. 20, the Court of Appeal notes:

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.

[30] The above really is the crux of this case.

[31] 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”. [12] 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. [13] 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”. [14] In this case, I find that the Defendants did nothing to impede the Plaintiffs up to January 2012. Thereafter, although the Defendants were within their rights, they were rather not willing to cooperate until the Plaintiffs brought a bankruptcy motion.

[32] This case is not all that dissimilar with the factual background in Bolohan v. Hull. [15] As a result, it is as well a very close call. However, considering the evidence on both parts of the two part test, I believe that the Plaintiffs should be allowed to proceed with this action but on a very tight schedule.

[33] There is no doubt that the Plaintiffs should have moved this action along in a much more timely manner. However, I am satisfied that the Plaintiffs have set forth not a strong but a sufficient explanation for the fact that this action was not set down for trial within two years of the first defence.

[34] When considering the balance between the interest of justice in compliance with the rules and allowing the parties to have a resolution on the merits, I am mindful that rules must be obeyed but, as well, that “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.” [16]

[35] Initially, in 2010, the Plaintiffs took some steps in communicating with counsel for the Defendants and with the trustee to address outstanding issues with the pleadings and bankruptcy of the corporate Plaintiff. The Plaintiffs were then significantly distracted during 2011 with the litigation demands of a related action against the lawyer who acted for them on the purchase of the service station. Subsequently, from November 2012 to March 2012, the Plaintiffs were delayed by their change of lawyer and by the fact that this lawyer was himself leaving his firm to form a new firm.

[36] On the issue of prejudice, the Defendants are in a somewhat similar position to the one they have been in since the third party took over possession of the property.

[37] Consequently, this action is allowed to proceed and the following timetable is ordered:

a. The Plaintiff shall expeditiously take all steps to regularize pleadings and comply with the Order of November 9, 2012.

b. If the Plaintiff intends to amend the Statement of Claim, the Plaintiff shall serve a draft of any such amended statement of claim by December 12, 2012.

c. Should the Defendants refuse to consent to the proposed amendments, the Plaintiff shall serve a motion to seek these amendments no later than December 31, 2013.

d. The parties shall exchange discovery plans, exchange sworn affidavits of documents and agree to hold and hold examinations for discovery all within 90 days following issuance and service of the amended claim.

e. Any motion to compel undertakings, advisements or objections shall be brought within 90 days from the date of the party’s examination for discovery.

f. The parties shall hold a mediation session before this action is set down for trial.

g. This action shall be set down for trial by December 31, 2013.

[38] This status hearing is an example of circumstances when it was appropriate for a defendant not to proceed in writing and on consent but to put the plaintiff to his or her onus under rule 48.14(13). The above is a “lifeline” for the Plaintiffs who must take all reasonable steps to proceed with this action and set it down within the ordered timetable.

[39] Despite the Plaintiffs’ success, the Defendants are entitled to their costs of the status hearing. Although the delay was sufficiently explained at the status hearing, that process was made necessary by the Plaintiff’s conduct. I have reviewed the costs outline provided by the Defendants and have considered the costs submissions made by counsel for the Plaintiffs. I am allowing costs to the Defendants on a partial indemnity basis. I have removed from the costs outline what appears to relate to the defence of the action rather than the status hearing. Consequently, I will allow costs to the Defendants for the status hearing in the amount of $3,200.00 for fees, plus $200.00 for disbursements plus applicable HST, payable by the Plaintiff Asim Rafi Syed within the next 30 days.

Master Pierre Roger

Date: November 21, 2012

[1] Amirrahmani, supra note 1 at para. 45. See also Malik v. 1645156 Ontario Ltd., 2012 ONSC 2887, 292 O.A.C. 329 (Div.Ct) [Malik].

[2] See Oberding v. Sun Life Financial Assurance Co. of Canada, 2010 ONSC 3303, 267 O.A.C. 120 (Div. Ct.); Khan v. Sun Life Assurance Co. of Canada, 2011 ONSC 4497, 95 C.C.L.I. (4th) 149 at paras. 14-15 [Khan (ONSC) cited to ONSC]; aff’d 2011 ONCA 650, 1 C.C.L.I. (5th) 183 [Khan (C.A.) cited to ONCA).; and Amirrahmani, supra note 1.

[3] Bolohan v. Hull, 2012 ONCA 121 at para 13.

[4] Rule 48.14(13)(a).

[5] Rule 48.14(13)(b).

[6] Malik v. 1645156 Ontario Ltd., 2012 ONSC 2887, 292 O.A.C. 329 (Div.Ct) [Malik] at para. 11.

[7] Clements v. Greenlaw, 2009 33028 (Ont. Div. Ct.).

[8] Malik, supra note 8.

[9] 1196158 Ontario Inc. v. 6274013 Ltd., 2012 ONCA 544.

[10] Ibid. at paras. 17-20 and see rule 1.04(1).

[11] Ibid. at para. 42.

[12] Ibid. at para. 28, citing from Wellwood v. Ontario Provincial Police (2010), 2010 ONCA 386, 102 O.R. (3d) 555 at para. 48.

[13] 1196158 Ontario Inc., ibid. at paras. 28-29.

[14] Ibid. at para. 30.

[15] Bolohan v. Hull, supra note 3 at paras. 15 to 17.

[16] 1196158 Ontario Inc, supra note 9 at para. 19.