Court File and Parties

COURT FILE NO.: 58303

DATE: 20130625

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Stephen Melanson., Plaintiff

AND:

ControlChem Canada Ltd., Douglas Fast and Josip Saric,

Defendants

BEFORE: A.J. GOODMAN J.

COUNSEL:
M. Butkus, Agent for Cohen Highly LLP on behalf of the Plaintiff

T. Gorsky, Counsel for the Defendants ControlChem Canada Ltd and Douglas Fast

G. Bobesich, Counsel for the Defendant Josip Saric

HEARD: June 10, 2013

ENDORSEMENT

[1] The issue in this motion is whether the plaintiff has met his onus to set aside the Registrar’s Order dismissing this action for delay.

[2] For the following reasons, the plaintiff’s motion is dismissed.

Background:

[3] The action arises out of the termination of an employment relationship between the plaintiff, Stephen Melanson and the defendant, ControlChem Canada Ltd. The defendant, Douglas Fast, is an owner, director and controlling mind of ControlChem and the defendant, Josip Saric, is a former owner of ControlChem, who operated the company’s European offices.

Position of the parties:

The Plaintiff:

[4] In its factum, the plaintiff outlined the history of this litigation. Mr. Jannetta assumed carriage of the action on February 15, 2011. On February 22, Mr. Jannetta requested the defendants’ consent to the late filing of the Reply, or alternatively their consent to a revision of the timetable. The Reply was served on March 8, 2011 and the defendants consented to the revised timetable which provided that the action be set down for trial by August 31, 2011.

[5] The deadline to set the matter down for trial by the date fixed by Rady J.’s order came and went. Mr. Jannetta deposed that his reminder system did not alert him to the pending expiry of the agreed-upon timetable.

[6] On September 22, 2011, the Registrar issued an order dismissing the action for delay. On October 5, 2011, Mr. Jannetta received the Registrar’s Order, which arrived at or about the same time as Mr. Jannetta’s departure for Texas to attend his grandfather’s funeral. Mr. Jannetta returned to his office on October 19, 2011.

[7] On November 7, 2011 Mr. Jannetta contacted Mr. Gorsky by telephone, to advise him that he had been out of the country and to confirm the plaintiff’s intention to proceed with the action. Mr. Gorsky acknowledged receipt of Mr. Jannetta’s telephone call wherein Mr. Jannetta requested the plaintiff’s consent to a motion to set aside the Registrar’s Dismissal Order. The plaintiff submits that Mr. Gorsky did not provide consent to Mr. Jannetta’s request.

[8] Following the call with Mr. Gorsky and having received clarification from Mr. Raikes in this regard, Mr. Jannetta made arrangements to meet with his client to obtain instructions. He met with Mr. Melanson on December 21, 2011 and Mr. Jannetta obtained instructions to do what was necessary to bring the within motion.

[9] In or about January 2012, Mr. Jannetta was advised to consult with LawPRO and obtain advice regarding the pending motion to set aside the Registrar’s Order. After several attempts to report the dismissal of the action to LawPRO by telephone, he was advised to file a report via the website. Mr. Jannetta filed his report to LawPRO on February 8, 2012. LawPRO retained counsel in September 2012, and the motion was served in November 2012.

[10] Ms. Butkus submits that any delay in this case was due to inadvertence and that plaintiff’s counsel acted reasonably and as expeditiously as possible in the circumstances of this case to bring this motion. Ms. Butkus argues that the defendants have not suffered prejudice and that they have acted in a manner to delay or thwart the plaintiff’s claims. In the alternative, Ms. Butkus submits that any prejudice can otherwise be compensated by an order for costs.

The Defendants:

[11] The defendants submit that this motion be dismissed because the plaintiff was unacceptably dilatory in bringing this motion and the plaintiff has proceeded in a laggard fashion throughout the entire course of this proceeding.

[12] The defendants submit that the defence of the action has been irreparably prejudiced by intervening corporate changes and by the loss of evidence, including a “water treatment sample”, computer information and the plaintiff’s credit card statements all which relate directly to the defendants’ pleadings. It is submitted that the defendants would be unfairly prejudiced in their ability to defend this legal proceeding if resurrected.

Legal principles:

[13] A Registrar’s Order dismissing an action for delay may be set aside or varied on such terms as are just. In deciding whether or not to set aside a Dismissal Order, the Court will adopt a contextual approach and consider all relevant factors in arriving at a just decision. This includes the application of well-established principles known as the Reid factors, cited by the Court of Appeal with approval, in Marché D’Alimentation Denis Thériault Ltée v. Giant Tiger Stores Ltd., 2007 ONCA 695, [2007] O.J. No. 3872.

[14] The “Reid factors” originate from the case of Reid v. Dow Corning Corp. (2001), 11 C.P.C. (5th) 80 at para. 41 (Ont. S.C). These factors include:

(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.

[15] In Scaini v. Prochnicki, 2007 ONCA 63, [2007] O.J. No. 299, the Court of Appeal rejected the notion that in order to set aside a Registrar's dismissal order, a moving party must satisfy each element of the four-part test in Reid. [^1]

Analysis:

[16] The plaintiff has the overall onus on this motion and must demonstrate that the Reid factors have been met. I accept that the plaintiff need not satisfy each element in Reid in order to have the Registrar's Order set aside. The authorities provide that a court must not approach this issue on a rigid basis rather, through the lens of a more contextual analysis. The issue of prejudice is a key factor but not the sole consideration for this type of motion.

[17] I am also cognizant that Rule 2.01 reflects the general principle found in Rule 1.04(1), which guides the interpretation of all the rules. Ultimately, I will exercise my discretion upon a consideration of the relevant factors and the evidence and will attempt to balance the interests of the parties.

[18] Explanation of the Litigation delay: In addressing the issue of litigation delay, the plaintiff must adequately explain the delay in the progress of the litigation from the start of the action until the deadline for setting down the trial and must satisfy the Court that steps were being taken to advance the litigation towards trial. The cases distinguish between actions which have been deliberately held in abeyance and those in which steps are being taken to move the litigation along, albeit slowly.

[19] In civil proceedings, it is the plaintiff who has the obligation to drive the legal proceeding forward. As stated by the Ontario Court of Appeal in Wellwood v. Ontario (Provincial Police), 2010 ONCA 386, “under Ontario’s Rules for contemporary litigation, the party who commences a proceeding bears primary responsibility for its progress. For this reason, the initiating litigant generally suffers the consequences of a dilatory regard for the pace of the litigation”.

[20] I have reviewed Mr. Jannetta’s affidavit, the letters filed and the transcripts of the cross-examinations. Plaintiff’s counsel has placed considerable emphasis on the defendants’ actions or inaction during the initial segments of the litigation leading up to the Registrar’s Order. The plaintiff repeatedly blames the defendants for their conduct during this timeframe; for example, the inordinate procrastination or reluctance in providing relevant productions and the defendants’ unwillingness to scheduling timely examinations for discovery.

[21] The defendants submit that the plaintiff has failed to adequately explain the delay between May 23, 2008 when he commenced the action, and August 31, 2011, the deadline for setting the action down for trial in the Status Hearing Order.

[22] I agree. In my opinion, the plaintiff has not provided an acceptable or intelligible explanation as to why it took fourteen months after he received the Statement of Defence to serve an Affidavit of Documents, and additional time to produce the documents contained in that affidavit. I accept the defendants’ argument that the plaintiff only served his initial documentary productions with both a sworn and supplementary affidavit of documents nearly two and a half years after the statement of defence was delivered. [^2] Throughout the initial stages of the litigation, the plaintiff appeared not to have advanced the timely prosecution of this file.

[23] I do not find any fault with Mr. Gorsky’s insistence that examinations for discovery could not proceed without production of all the relevant documents as requested by the defendants in various letters to counsel. I do not accept the plaintiff’s position that the defendants did not move for a further and better Affidavit of Documents or that the defendants impeded the discovery process by requests to obtain undertakings. Instead, it is the plaintiff who failed to respond to defendants’ counsel’s repeated requests. In my opinion, it is the plaintiff who adopted a strategy or approach which effectively stalled the advancement of its claim in this litigation.

[24] Inadvertence in missing the deadline: If the plaintiff leads satisfactory evidence to demonstrate an intention to set the action down for trial within the time limit and, moreover, that the dismissal order was made as a result of inadvertence, the second Reid factor will be satisfied.

[25] The principal evidence with respect to this factor is a statement by Mr. Jannetta in his affidavit that “for an unknown reason, my reminder system failed to warn me of the pending expiry of the agreed-upon timetable.” During his cross-examination, Mr. Jannetta admitted that he was not even sure whether the deadline was entered into his, or anyone else’s calendar. [^3]

[26] Mr. Jannetta is employed with a highly-respected law firm in London. He has the benefit of working with many competent counsel and support staff. There are still some unexplained questions and considerable gaps in the evidence as it relates to the existence or use of the lawyer’s “reminder system” and who was tasked with appropriate monitoring or follow-up with this file.

[27] In any event, Mr. Jannetta deposed that he was aware of the Registrar’s Order on October 5. Mr. Jannetta did not immediately address the Order because of a death in his family requiring his travel to Texas. That is quite understandable; however why wasn’t anyone else in the firm tasked with the matter? Aside from the funeral and counsel’s return to his office on October 19, there is little in the way of a satisfactory explanation as to why Ms. Elliott, Mr. Jannetta, or anyone else in the Cohen Highley firm did not contact the client or opposing counsel or take immediate action once the notice had been received.

[28] I am not satisfied with Mr. Jannetta’s affidavit evidence and his explanations provided in cross-examination dealing with the period up to the issuance of the Registrar’s Order. [^4] Not only do I find some internal inconsistencies in the evidence, but the facts advanced on behalf of the plaintiff are vague with respect to the material issues before me. Frankly, Mr. Jannetta’s evidence appears to be somewhat self-serving in nature. Mr. Jannetta’s bald assertion that through inadvertence steps were not taken to advance the file or comply with Order are far from compelling. Even with the transfer of the file, the departure of Mr. Raikes and the involvement of various assistants who worked on the file with Mr. Jannetta, I am not satisfied that the plaintiff has established that the failure in missing the deadline was as a result of inadvertence.

[29] The Motion was brought promptly. This third Reid factor involves a consideration of whether the motion to set aside the dismissal order was brought promptly. Even a substantial delay in bringing the motion will not be considered sufficient to deny a motion to set aside a Registrar’s Order if a court is satisfied on a contextual basis that it is just that the Order be set aside.

[30] There is no dispute that on November 7, Mr. Jannetta called Mr. Gorsky and requested an indulgence to set aside the Registrar’s Order. I prefer the defendants’ position that having been in contact with counsel, Mr. Gorsky expected a clear explanation in writing for the delay before he could provide consent. However, what didn’t occur following this telephone contact is perplexing. Mr. Jannetta did not follow up with any explanation in writing. More importantly I do not accept the explanation - if indeed one was provided- as to why counsel did not take any immediate steps to protect his clients’ interests after the telephone call with Mr. Gorsky. One would have reasonably expected that having been alerted to this issue and discussing it with opposing counsel that some action would have been taken to rectify the matter.

[31] I find it quite telling that Mr. Jannetta chose not to advise his client of the existence of the Dismissal Order until December 21, 2011, almost three months after it was rendered.[^5] While not mandatory, I do not have an affidavit from the client outlining his position regarding his interest in the continuation of this litigation. I do not place much weight on Mr. Jannetta’s reference in his affidavit to his client’s intentions. In the circumstances of this case, I would have expected some direct evidence from the client on this issue.

[32] Several other questions still remain unanswered. After receiving instructions from the client, why didn’t counsel act on those instructions? Why was there an inordinate delay in making initial contact with LawPRO? What happened during this intervening time frame? Having not received a response or acknowledgment from LawPRO, why was there no prompt follow-up? [^6]

[33] Mr. Jannetta deposed that he was directed by his client to take “such steps as were necessary to have it [the order] set aside”. Yet, the evidence does not disclose that any contact was made with defendants’ counsel or a motion filed following the meeting with his client. In fact, this motion was not commenced until November 2012, approximately fourteen months after the Dismissal Order. Mr. Jannetta suggests that this was due to communication difficulties with LawPRO, but he provides scant details and no intelligible explanation as to why it took until January 2012 to contact LawPRO, and a further month to file a LawPRO claim on its website, and a further seven months for LawPRO counsel to be retained. Mr. Jannetta’s evidence fails to provide a reasonable explanation as to why there was a delay in contacting LawPRO.

[34] In my view, the evidence speaks to a delay that was not unintentional. I am persuaded that Mr. Jannetta, having knowledge of the circumstances deliberately conducted himself in a manner inconsistent with his stated position. Even if I am wrong in my assessment of counsel’s conduct, I am satisfied that the plaintiff has failed to establish that efforts to set this action down for trial or set aside the Order in a timely manner was as a result of inadvertence.

[35] Prejudice to the defendants: In deciding whether or not it is just to set aside a dismissal order, the plaintiff must convince the Court that the defendants will not suffer any significant prejudice in presenting their case at trial as a result of the plaintiff’s delay or steps taken following the dismissal of the action. The plaintiff must show, at least prima facie, that the defendants have suffered no prejudice as a result of the delay, or if there is a presumption of prejudice a rebuttal of the presumption. If the onus is met, the evidentiary burden shifts to the defendants to demonstrate actual prejudice.

[36] At the outset, I do not accept the defendants’ reference to any prejudice arising from a lost “water sample”. I find that any assertion of prejudice based on this sample is not material as there is no nexus to the pleadings.

[37] While the defendant asserts prejudice in this case, I am satisfied that the prejudice in this case is not limited to that of a generic nature as a result of the normal consequences flowing from the delay in litigation.

[38] The plaintiff has failed to rebut the presumption of prejudice with respect to the missing or undisclosed Visa credit card statements. At this juncture, these credit card statements appear to be relevant and may provide evidence in support of the issues advanced by the defendants in their Statement of Defence. It is unknown whether these statements still exist or whether the plaintiff can produce these documents. Requests for such production have been repeatedly met with claims of being “not relevant”.

[39] I agree with defendants’ counsel that even in the face of this motion and the passage of time, the plaintiff has fallen back on repeated assertions of irrelevancy and there is no reliable evidence about any reasonable efforts to search or secure these documents pending a motion to determine their relevancy. Based on the affidavit of Ms. Erskine, the loss of these documents or their availability wanes with every passing month and may now be irretrievable.

[40] I now turn to the defendants’ corporate reorganization and Mr. Saric’s current status vis-à-vis the corporation. No party is suggesting that Messrs.’ Saric and Fast entered into their share purchase agreement for the purpose of defeating the plaintiff’s interests in this litigation or to raise a potential claim of prejudice. The defendants structured the share purchase transaction upon reliance on the Dismissal Order and after a reasonable period of time passed. I am satisfied that both individual defendants were entitled to consider that the litigation had ended and both were entitled to enter into the share purchase transaction with that understanding.

[41] While it is true that Mr. Saric was always exposed to litigation, initially his interests were protected by corporate counsel. This situation has now changed as Mr. Saric must defend the action in his personal capacity. I agree with the plaintiff that increased legal fees and financial exposure to mount a defence generally do not give rise to establishing “prejudice” to the extent required for this type of motion. However, in this case, Mr. Saric must now retain independent legal counsel to defend against the action and I find that there is prejudice to Mr. Saric to the extent that cannot otherwise be compensated by an order for costs.

[42] Mr. Gorsky submits that one of the factors to be considered in a motion to dismiss is whether the plaintiff’s conduct is contumelious. I do not reach that conclusion in this case. However, I am satisfied that the plaintiff has failed to rebut the presumption that the defendants will not suffer prejudice should the action be allowed to proceed.

[43] As a final observation, it seems to me that at certain times during the cross-examination of Mr. Jannetta, counsel was indecorously objecting to relevant questions within the parameters of this motion.[^7] While Mr. Gorsky submits that Ms. Butkus was obstructionist in her repeated objections, I would not go as far as defendants’ counsel urges. However, there is some validity to the defendants’ concerns about the nature of the many interruptions by counsel on seemingly valid questions to the live issues raised in this motion. I can only conclude that some of the questions objected to would have resulted in answers that were likely not favourable to the plaintiff’s position. I agree with Mr. Gorsky that refusals to answer relevant questions and a failure to provide full details about the circumstances surrounding the reminder system do not enhance the plaintiff’s position in addressing the issues in this motion.

[44] Finally, in Broniek-Harren v. Osborne, [2008] O.J. No. 1690 (S.C.J.) Gray J. described the competing principles to have cases determined on their merits with the need for the orderly procedural progress of litigation.

The policy underlying the Rules of Civil Procedure is twofold: to ensure that cases that are not settled are tried on their merits; and to ensure that cases are processed, and heard, in an orderly way. A civilized society must ensure that a credible system of justice is in place, and the Rules of Civil Procedure, made pursuant to the Courts of Justice Act, reflect the scheme created by the Province for the orderly handling of civil cases.

The Rules reflect a balance. The litigant does not have an untrammelled right to have his or her case heard. In order to be heard, a case must be processed in accordance with the Rules. By the same token, adherence to the Rules must not be slavish in all circumstances. They are, after all, designed to ensure that cases are heard. Throughout the Rules, the principle is reflected that strict compliance may be dispensed with where the interests of justice require it: see, for example, Rules 1.04(1), 2.01, 2.03, 3.02, and 26.01. The difficult issue, in any particular case, is to determine when non-compliance reaches the point that it can no longer be excused. The Court, and society as a whole, have an interest in ensuring that the system remains viable. If the Rules can be ignored with impunity, they might as well not exist.

[45] I am also reminded by Sharpe J.A.’s comments in Giant Tiger, to the effect that a party is entitled to rely on the finality principle and “at some point the interest in finality must trump the opposite party’s plea for an indulgence”. In my opinion, reviving this action, particularly after a lengthy period of time since the Registrar’s Order, would undermine the principle and desire for finality.

Conclusion:

[46] In similar cases, sometimes involving analogous rules, the Ontario Court of Appeal has held that an important consideration underlying any consideration of the merits of these types of motions is the laudable goal of having disputes resolved on their merits. I am mindful that the case law cautions judges when considering dismissing actions for any multitude of reasons, not to punish litigants for counsel’s actions in the conduct of litigation. While I am reticent to deny the plaintiff the right to have his day in court, and a potential remedy for an alleged wrongdoing; this is a case where in balancing all of the interests, the plaintiff has not satisfied his onus pursuant to Rule 48.14 and the Reid factors.

[47] The plaintiff’s motion to set aside the Registrar’s Order for dismissal of the action is denied.

[48] If the parties cannot agree on the issue of costs, I will consider brief written submissions. These cost memoranda shall not exceed 3 pages in length, (not including any bill of costs or offers). The defendants shall file their costs submissions within 15 days of the date of this endorsement. The plaintiff may file its submissions within 15 days of receipt of the defendants’ materials. The defendant may file a reply within 5 days thereafter.

“Justice A.J. Goodman”

A.J. Goodman J.

June 25, 2013

[^1]: In Steele v. Ottawa-Carleton (Regional Municipality), [1998] O.J. No. 3154 (Gen. Div.) Master Beaudoin, at para. 17, described the guiding principles in deciding whether to set aside a Rule 48.14 dismissal.

[^2]: See Mr. Gorsky’s letter dated December 22, 2010 and the letter from Sarah Low dated January 14, 2011.

[^3]: During Mr. Jannetta’s cross-examination, questions related to this issue were objected to and while a “best efforts” undertaking was provided, I am still left with unconvincing evidence regarding the “reminder system”. The plaintiff claims that the document management undertaking provided to Mr. Gorsky is of no benefit to the inquiry, as the Order was sent to Mr. Raikes’ department who had no policy regarding emails.

[^4]: I note repeated objections to questions about the reminder or docketing system. Refer to Mr. Jannetta’s transcript of November 12, 2012, pp. 39-45.

[^5]: During Mr. Jannetta’s cross-examination, there appeared to be some uncertainty as to the exact date.

[^6]: Mr. Jannetta deposed that he kept no records of his attempts to contact LawPRO. Mr. Jannetta provided the February 8, 2012 date in response to a question about the date of his report to LawPRO.

[^7]: Some examples may include - Mr. Jannetta’s transcript dated November 12, 2012 at P.4. Q. 8; P. 7 Q. 11; P.10. Q. 17; P. 22 Q. 57; P. 23, Q 58; P. 27 Q. 64; P. 29 Q 71; P. 108 Q. 77.