SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 04-CV-273632CM2
DATE: 20120208

RE: Bégin v. Cameron et al.

BEFORE: Master Glustein

COUNSEL:
William D. Howse and Nick Ranieri for the plaintiffs

Paul J. Brett for the defendants Jake Cameron, Venture Trading Inc., Data Signal International (DSI-Canada) Inc., Robert Sutherland, and Edwin “Ed” Dyck (appearance by teleconference)

HEARD: February 3, 2012

REASONS FOR DECISION

Nature of motion and overview

[ 1 ] I grant the motion by the plaintiff Claire Bégin (“Bégin”) to set aside the dismissal order of the registrar dated April 1, 2011 (the “Dismissal Order”).

[ 2 ] I accept the submissions of the defendants Jake Cameron (“Cameron”), Venture Trading Inc. (“VTI”), Data Signal International (DSI-Canada) Inc., Robert Sutherland (“Sutherland”), and Edwin “Ed” Dyck (“Dyck”) (collectively, the “responding parties”) that the evidence does not establish either an adequate explanation for the litigation delay or inadvertence.

[ 3 ] However, I agree with Bégin that she has rebutted the presumption of prejudice and acted promptly to set aside the Dismissal Order. Further, the contextual factor of an independent investigation by Canada Revenue Agency (“CRA”) into the same investment which is the subject of this action supports setting aside the Dismissal Order.

[ 4 ] I make this order on the basis of a new timetable to either be agreed upon by the parties or set by the court at a telephone case conference.

Analysis

[ 5 ] I rely on the decision of the Court of Appeal in Wellwood v. Ontario (Provincial Police), 2010 ONCA 386, [2010] O.J. No. 2225 (C.A.) (“ Wellwood ”), which adopts the contextual approach of the Court of Appeal in Scaini v. Prochnicki (2007), 2007 ONCA 63, 85 O.R. (3d) 179 (C.A.) (“ Scaini ”) and sets out the presumption of prejudice arising from the passage of a limitation period.

[ 6 ] I consider the following four factors as set out in Reid v. Dow Corning Corp. (2001), 11 C.P.C. (5th) 80 (Ont. Mast.) (“ Reid ”) , rev'd on other grounds (2002), 48 C.P.C. (5th) 93 (Ont. Div. Ct.) , as relevant to the determination of whether the court should set aside the Dismissal Order: (i) explanation of the litigation delay from the institution of the action until the set down date, (ii) whether the dismissal order was the result of inadvertence, (iii) whether the motion to set aside the dismissal order was brought promptly after the dismissal order came to the plaintiff’s attention, and (iv) whether there is any prejudice to the defendants 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. These Reid factors are “likely to be of central importance in most cases” ( Scaini , at para. 24 ).

[ 7 ] Prejudice is a key consideration on a motion to set aside a dismissal order ( Finlay v. Van Paassen , 2010 ONCA 204 (“ Finlay ”), at para. 28 ).

[ 8 ] The Reid factors must be considered along with any evidence as to contextual factors so that “the court [may] consider and weigh all relevant factors to determine the order that is just in the circumstances of the particular case” ( Scaini , at paras. 23-24 ) Consequently, I also review additional factors which Bégin submitted were relevant to the contextual approach under Scaini .

(a) No adequate explanation of the litigation delay from the institution of the action until the set down date

[ 9 ] Bégin led no evidence to adequately explain the delay in the progress of the litigation from the institution of the action in August 2004 until the set down date. At a minimum, there was inadequate evidence to explain the delay from the institution of the action in August 2004 until my production order in May 2010. Even after that point, the evidence is not satisfactory. In brief, Bégin failed to “satisfy the court that steps were being taken to advance the litigation toward trial, or if such steps were not taken to explain why” ( Reid , at para. 41).

[ 10 ] The only evidence Bégin filed on the motion was from a law clerk at her counsel’s office. Bégin’s evidence to explain the litigation delay from the institution of the action to the Dismissal Order is as follows:

1. The statement of claim was issued in August 2004;

2. The statement of defence was filed in January 2005;

3. The statement of claim was amended in May 2006 and October 2007; [1]

4. Examinations for discovery took place in 2008 and 2009;

5. On December 15, 2009, CRA wrote to Bégin (the “CRA Letter”) and advised that CRA would reassess Bégin on the same investment by Bégin with VTI which is the subject of this action. CRA stated in its letter that CRA had found no evidence of any business conducted by VTI. CRA stated that:

(i) “[CRA] has undertaken a review of Venture Trading Inc. and the investment, through your self-directed RRSP, in the shares of this corporation”;

(ii) “There is no indication that the company has ever conducted an active business or has held shares or debt of another corporation engaged in an active business”; and

(iii) “The company has not demonstrated that it carried on any business activity, other than raising $1.00 per share as corporate capital;

6. CRA also contacted Bégin’s counsel “in the spring of December 2009” [sic] “to inform him that they had found no evidence of any business transaction or investment on behalf of the defendant VTI” (the “CRA discussion”);

7. I heard a motion on May 4, 2010 at which I (i) ordered the responding parties to comply with various undertakings and answer certain refusals and (ii) adjourned the balance of the motion to be scheduled with both a motion by responding parties’ counsel to be removed as lawyer of record for Dyck and a motion by Bégin for costs against the responding parties’ counsel personally;

8. After the May 4, 2010 order, Bégin “continued to pursue undertakings, address representation issues and otherwise continued with the litigation process”;

9. There is no correspondence from responding parties’ counsel relating to outstanding undertakings and the representation of Dyck;

10. “during the month of January 2011, counsel for the [responding parties] contacted [plaintiff’s counsel’s] office with respect to getting a copy of [my] order, dated May 24 [sic], 2010”; and

11. “The action is a live action which the Plaintiff actively continues to pursue”.

[ 11 ] The above evidence does not satisfy the test in Reid. In summary:

1. There is no evidence at all to explain the 4-year litigation delay between issuing the statement of claim in August 2004 and examinations for discovery at some time in 2008. While the statement of claim was amended in 2006 and 2007, there is no explanation why amendments to the pleadings resulted in a 4-year delay to begin examinations for discovery;

2. There is no evidence of the length of examinations for discovery, the number of parties examined, or any issues of complexity that resulted in the examinations for discovery taking place in 2008 and 2009. The court has no evidence to explain the scope of examinations for discovery necessary to provide an explanation for this litigation delay;

3. There is no evidence why the CRA Letter in December 2009 (or the CRA discussion) in any way resulted in a litigation delay. To the contrary, Bégin brought a motion for undertakings and refusals in May 2010 so the CRA Letter and the CRA discussion do not appear to have caused any litigation delay. Consequently, there is no explanation for the litigation delay up to the May 2010 order;

4. A general statement that Bégin “continued to pursue undertakings, address representation issues and otherwise continued with the litigation process” after the May 4, 2010 order is not sufficient to satisfy the test under Reid . Bégin failed to lead evidence as to what steps were taken to seek compliance with the order, or if no steps were taken, why they could not have been taken. A bald assertion that a plaintiff “otherwise continued with the litigation process” or “continued to pursue undertakings [and] address representation issues”, without any supporting evidence, cannot be accepted as an adequate explanation of a litigation delay.

This is particularly egregious as the action was case managed from the outset, and Bégin could have easily scheduled a further motion or case conference to address any alleged failure of the responding parties to comply with my order; and

5. A telephone call from responding parties’ counsel in January 2011 asking for a copy of my May 2010 order does not constitute evidence of a step taken by Bégin to advance the litigation.

[ 12 ] Consequently, there is no adequate explanation as to the litigation delay for the almost 7-year period from the statement of claim issued in August 2004 until the Dismissal Order on April 1, 2011. Bégin failed to satisfy this Reid factor.

(b) No evidence of inadvertence

[ 13 ] There is no evidence of inadvertence in missing the March 30, 2011 deadline to set the action down for trial, a date I fixed in the May 4, 2010 order.

[ 14 ] Bégin led no evidence that she or her counsel intended to set the action down for trial by that deadline but failed to do so through inadvertence.

[ 15 ] Bégin relies on her evidence on this issue [2] that (i) plaintiff’s counsel “had not received either the status notice, being Form 48C.1” or a “Notice of Approaching Dismissal”, and (ii) “at no time did [plaintiff’s counsel’s] office receive a “Notice of Approaching Dismissal”. However, such evidence does not establish inadvertence.

[ 16 ] First, there was no notice to be provided to plaintiff’s counsel prior to dismissal. In my order, I required the action to be set down by March 30, 2011 and as such no notice would be provided.

[ 17 ] Second, Bégin’s counsel had obtained several prior extensions of set down dates from the prior case management master, from 2008 until my May 4, 2010 order, none of which would have been initiated by a notice from the court, for the same reason that a court-ordered deadline does not generate such a notice.

[ 18 ] Consequently, I do not accept Bégin’s submission that the court ought to infer inadvertence due to a misunderstanding that a notice was required. Bégin filed no evidence to that effect, and the limited evidence that no notice was sent or found in the files does not establish inadvertence given the history set out above. For these reasons, Bégin has not satisfied this Reid factor.

(c) The motion was brought promptly

[ 19 ] It is not contested that the motion was brought promptly after Bégin became aware of the Dismissal Order. The evidence is that Bégin first became aware of the Dismissal Order by email and telephone conversation from the defendant Kristine Dow on August 10 and 11, 2011 [3] . Bégin’s counsel immediately requested a copy of the Dismissal Order.

[ 20 ] On the next day, August 12, 2011, Bégin’s counsel attended at the court house and sought to review the file. However, as the file was stored off premises, Bégin’s counsel requisitioned the file by a “Storage Retrieval Request Form” dated August 12, 2011.

[ 21 ] Bégin’s counsel contacted the motion scheduling office on several occasions throughout September 2011, but was not able to obtain a motion date until November 30, 2011, which was adjourned so that the responding parties’ counsel could participate by teleconference.

[ 22 ] On the above evidence, the motion was brought promptly. Bégin has satisfied this Reid factor.

(d) Bégin did rebut the presumption of prejudice and there is no actual prejudice

[ 23 ] As I discussed above, prejudice is a “key” consideration on a motion to set aside a dismissal order ( Finlay , at para. 28 ). There is a presumption of prejudice arising from the passage of a limitation period and where that presumption arises, the plaintiff bears the burden of rebutting that presumption, on proper evidence ( Wellwood , at para. 60 ). Where the presumption is so displaced, the onus shifts to the defendant to establish actual prejudice ( Wellwood , at para. 60 ).

1. Bégin rebutted the presumption of prejudice

[ 24 ] In the present case, Bégin did not file any direct evidence that “documents have been preserved, key witnesses are available, [or] certain elements of the claim may not be in issue” ( Wellwood , at para. 62 ). Bégin’s broad assertion [4] that “there is no prejudice to any party by restoring the matter” is not based on any such evidence, and as such the assertion does not rebut the presumption of prejudice.

[ 25 ] However, Bégin relies on the CRA Letter and the CRA discussion for her submission that she has rebutted the presumption of prejudice. I agree that the CRA Letter and the CRA discussion constitute proper evidence to rebut the presumption.

[ 26 ] The CRA Letter demonstrates that CRA reviewed the investment at issue in the action, made by Bégin in VTI through her self-directed RRSP. As I noted above, CRA stated that:

(i) “[CRA] has undertaken a review of Venture Trading Inc. and the investment, through your self-directed RRSP, in the shares of this corporation”;

(ii) “There is no indication that the company has ever conducted an active business or has held shares or debt of another corporation engaged in an active business”; and

(iii) “The company has not demonstrated that it carried on any business activity, other than raising $1.00 per share as corporate capital”.

[ 27 ] The CRA Letter, dated December 15, 2009, demonstrates that CRA had sufficient evidence available to support Bégin’s claim for damages arising from her investment in VTI, on the basis that the company never engaged in active business. CRA’s review would have considered much of the evidence relied upon by Bégin in her action, as is confirmed by CRA when it states in the CRA Letter that “the information and details provided by [Bégin’s counsel] on February 14, 2007, contained relevant facts and information that has been carefully considered”. Consequently, I rely on the CRA Letter to find that Bégin established that documents have been preserved.

[ 28 ] The evidence of the CRA discussion also establishes that CRA conducted an investigation in which CRA would have reviewed relevant documents to this action and concluded that VTI did not conduct an active business.

[ 29 ] Further, while the CRA Letter and CRA discussion are not admissions of liability by the responding parties, they also rebut the presumption of prejudice by leading evidence that “certain elements of the claim may not be in issue”, i.e. whether VTI ever carried on any active business.

[ 30 ] Consequently, I find that the CRA Letter and CRA discussion rebut the presumption of prejudice.

[ 31 ] The evidence of Cameron in his responding affidavit also supports the rebuttal of the presumption of prejudice.

[ 32 ] Cameron states that “Canada Revenue Agency is presently conducting an ongoing criminal investigation into alleged tax evasion, and seized all of the relevant documents in my possession in this matter many months ago” and “On a rolling three month basis, Canada Revenue Agency consistently obtains three month extensions of the period during which they are entitled to retain the records of the Defendant corporations formerly in my possession”.

[ 33 ] Consequently, on Cameron’s evidence, the relevant documents available to defend the action have been preserved.

[ 34 ] For the above reasons, I find that Bégin rebutted the presumption of prejudice.

2. There is no evidence of actual prejudice

[ 35 ] Cameron and Sutherland filed responding affidavits in which they stated that:

(i) They are having financial problems and are either in the process of entering into bankruptcy (Cameron) or are contemplating bankruptcy (Sutherland);

(ii) They have difficulty accessing the documents because CRA has seized them (Cameron);

(iii) Due to “various stressors” such as the CRA criminal investigation and financial problems, Cameron has “very little recollection of the details of Ms. Bégin’s investments, particularly without access to any of the documents”;

(iv) The action is “an acute stressor” for Sutherland, who is on medication “to attempt to battle health-related stress factors”;

(v) “The passage of additional time since the May, 2010 hearing has served to further erode my memory of the events giving rise to Ms. Bégin’s claim” (Cameron and Sutherland); and

(vi) After April 8, 2011, both Cameron and Sutherland concluded that Bégin was not continuing with her action, and Sutherland took the additional step of informing his employer that the action was dismissed.

[ 36 ] The above evidence is not sufficient to demonstrate actual prejudice to Cameron or Sutherland. General statements about the passage of time affecting memory are not sufficient. There is no evidence of specific documents lost over time or of specific witnesses who have died or disappeared and cannot be located. Bald assertions of prejudice do not suffice ( Finlay , at para. 29 ; Reid , at para. 41).

[ 37 ] Further, evidence of Cameron or Sutherland’s financial position or stress arising from litigation or health condition does not constitute actual prejudice in presenting the case at trial.

[ 38 ] Finally, there is no evidence of steps taken after Cameron and Sutherland concluded that Bégin was not continuing with the action that was prejudicial to their ability to present their case at trial.

[ 39 ] For the above reasons, the responding parties have not established actual prejudice.

(e) Contextual factors

[ 40 ] As the Court of Appeal stated in Scaini , a contextual approach “invites the court to make the order that is just in the circumstances” ( Scaini , at para. 23 ). In the present case, the criminal investigation undertaken by CRA that led to its conclusion that VTI never engaged in active business, and the fact that the responding parties have been engaged in civil and criminal proceedings relating to this investment, demonstrate that this case is not similar to the other cases relied upon by the responding parties in which nothing (or very little) took place on any front with respect to the issues in dispute.

[ 41 ] To the contrary, the CRA investigation, which resulted in (i) the responding parties being actively engaged in responding to criminal proceedings relating to the same investment at issue in the civil proceeding, (ii) the seizure of relevant documents, and (iii) a conclusion by CRA that VTI never carried on active business, is a proper contextual factor favouring the continuation of the action as the just result.

Order and costs

[ 42 ] For the above reasons, I find that the just result is to grant the motion. Consequently, I set aside the Dismissal Order. If counsel cannot agree within 30 days on a timetable to set the action down for trial, I will conduct a telephone case conference on a date to be scheduled by counsel in which I will set the timetable.

[ 43 ] I order no costs of the motion. Bégin did not seek costs as she asked for an indulgence of the court. Further, while Bégin was successful on the motion, it was only after Bégin filed late supplementary affidavit material after the responding parties had addressed the initial affidavit evidence which did not contain the CRA Letter or information about the CRA discussion that was integral to these reasons.

Master Benjamin Glustein

DATE: February 8, 2012

[1] (there is no direct evidence on the pleadings but I accept the case history report on this point which was not challenged)

[2] (as discussed earlier, through an affidavit from a law clerk at her counsel’s office)

[3] (a conversation initiated by Bégin’s counsel to “inform Defendant Dow that [Bégin’s] Counsel would be bringing a motion for Default Judgement against all defendants”)

[4] (as discussed above, through an affidavit from a law clerk at her counsel’s office)