Court File and Parties

COURT FILE NO.: 10-CV-409695

MOTION HEARD: August 1, 2013

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 10-CV-409695

Semaan et al. v. OneWorld Energy Inc. et al.

BEFORE: Master Joan Haberman

COUNSEL: MacDonald, A. for the plaintiff Diskin, M. for the defendants, Wallace and McIlroy

ENDORSEMENT

Master Haberman:

[1] The plaintiffs commenced suit by Notice of Action issued on August 31, 2010. The Notice of Action was amended before the statement of claim was filed on September 28, 2012.

[2] On December 21, 2012, the court issued a Notice of Status Hearing with respect to this matter as it had not been set down for trial in compliance with the timelines established by subrule 48.14. The plaintiffs sought a Status Hearing and one was convened for April 4, 2013.

[3] At that time, for the first time, the court was advised that the defendants, Wallace and McIlroy, were not prepared to discuss a consent timetable according to which the action would go forward. Instead, they asked the plaintiffs to show cause as to why the action should be permitted to proceed. No other defendant attended or indicated they had difficulty with the action proceeding. It appears, however, that the others are bankrupt and an order to continue has only been sought and obtained against only one of them.

[4] Although the Rule technically requires a plaintiff to be ready to show cause if asked to do so, the vast majority of status hearings, until recently, have proceeded on consent, by way of submission of a joint proposed timetable. In this case, plaintiffs’ counsel was advised before the first appearance in Status Hearing Court that the two individual defendants would be seeking a dismissal. Despite that, he filed no materials and was not prepared to address this issue at that time. In that the court did not have sufficient time to deal with a contested matter on the regular status hearing list that day, the hearing was put over to August 1, 2013, after some discussion to assess whether there was any real basis for this issue to be explored in depth.

[5] The matter was heard as scheduled on August 1, 2013 and my decision was reserved at that time.

THE PLAINTIFFS’ EVIDENCE

[6] There was no evidence filed by any of the plaintiffs, personally, or by their counsel. Instead, the affidavit of Christina Cheng, legal assistant to counsel who argued the motion, was submitted as the factual record. Her evidence is based, in part, on her review of the file; in part, on what she knew, personally, and, in several important areas, on what she was apparently advised by counsel. Though she avoids using the phrase “I was advised by Mr. McDonald”, the inference is obvious when she talks about what counsel knew and when he knew it.

[7] Cheng’s evidence is sloppy and omits critical detail. Further, to the extent that any of her evidence based on what she learned from counsel is contentious, I cannot rely on it. It is trite law that a person cannot be counsel and a witness in the same proceeding. Counsel cannot circumvent that rule by having his evidence emerge through the mouth of an assistant or a colleague.

What the plaintiffs claim are Defendant-related delays

[8] As Cheng explains, this action involves allegations of fraud, fraudulent and negligent misrepresentation, and conspiracy. There are six defendants. The defendant, Green Breeze Energy Inc. (“Green Breeze”) is a subsidiary of the defendant, OneWorld Energy Inc. (“OneWorld”), and the defendant, Huron Tract Holdings (“Huron”) is a subsidiary of Green Breeze. The defendant Miser Lighting Inc. (Miser) is, in turn, a subsidiary of Huron.

[9] The defendant Wallace is the co-founder of Green Breeze and an employee or agent of that company, Miser and Huron, while the defendant, McIlroy was an employee or agent of Green Breeze. As of March 2007 he was probably an officer of Miser and as of September 2007, he was a director of Miser and an agent of Huron.

[10] On May 31, 2011 OneWorld and Green Breeeze were ordered to deliver their amended statement of defence within 30 days of being served with the plaintiffs’ amended statement of claim unless the parties agree otherwise. The amended statement of claim was served on July 11, 2011, so that these defendants were bound to deliver their amended pleading by August 11, 2011. Instead, it was served on September 23, 2011 – about 6 weeks later, though there was no agreement to extend that deadline. This is one defendant-related delay that the plaintiffs point to. In the larger scheme of things, this six week gap is not really an issue.

[11] Huron is bankrupt and was put into receivership in March 2009, before the action was initiated. KPMG was appointed as receiver by court order of March 31, 2009. By letter of November 9, 2010, KPMG agreed to the continuation of this action against Huron. Sometime thereafter, KPMG was replaced as trustee by BDO.

[12] The defendant, Miser, has been bankrupt since April 2012 and BDO was also appointed as their receiver by court order. The defendants, OneWorld and GreenBreeze, have been bankrupt since June 2012, though this did not come to the attention of plaintiffs’ counsel until October 2012 when he received a Notice Requiring Persons to prove Claims. There is no evidence to suggest that efforts were made to continue the actions against any of the bankrupt defendants, aside from Huron, and in their case, the order to continue appears to have been granted on consent.

[13] The plaintiffs raise these bankruptcies and receiverships as further cause for delay for which they were not responsible. I note, however, that in all this time, they have taken no steps to try to continue the action against any of the corporate defendants aside from Huron and that no steps appear to have been taken to advance the action between the time of Miser’s bankruptcy in April 2012 and the plaintiffs’ learning of OneWorld and Green Breeze’s financial status in October of the same year, so there is an unexplained gap of six months. There is also no evidence of any efforts taken to proceed against the two individual defendants who sought the show cause hearing.

Chronology according to the Plaintiffs

[14] The Notice of Action was issued on August 31, 2010 and an Amended Notice of Action was filed on September 28, 2010. The statement of claim was filed (not issued as Ms. Cheng states) on the same day.

[15] Notices of intend to defend were served by Wallace on October 19, 2010 and by OneWorld and Green Breeze on October 26, 2010, all through counsel. I assume Ms. Cheng is mistaken when she claims that McIlroy served a Notice of Intent to Defend on November 3, 2012, and that he did so again though counsel on January 13, 2011. Only the latter date is reflected in the action’s Case History.

[16] Mr. Diskin initially acted for Wallace, only. He now acts for McIlroy, as well. On October 28, 2010, he served a Request to Inspect Documents. Counsel for the two corporations that had delivered notices of intent to defend served a Request for Particulars on November 10, 2010.

[17] OneWorld and Green Breeze served their statement of defence on April 4, 2011 and McIlroy and Wallace served theirs, along with a crossclaim against those two corporations, on the same date. The statement of claim was amended in July 2011. There is no evidence regarding any steps taken by the plaintiffs or by their counsel thereafter, until several months after receipt of the Status Notice in December 2012.

[18] On July 16, 2011, the plaintiff, Dory Semaan, passed way. A motion is now scheduled for September 16, 2013 to appoint a litigation guardian. This delay was apparently caused by counsel’s inability to obtain instructions from the executor of the estate, the deceased’s brother, until May 2012. There is no explanation as to why that was the case, nor any the evidence as to why the motion to appoint litigation counsel was not scheduled shortly after instructions were obtained, about 11 months before the initial attendance at Status Hearing court, so well over a year ago.

[19] In August 2011, counsel for OneWorld raised the possibility of a motion for security for costs, writing at least twice to enquire of the plaintiffs’ position, as it appears that OneWorld hoped to resolve the issue on consent. There is no reference in the record to any response having been received from plaintiffs’ counsel.

[20] In late September, OneWorld and Green Breeze served an amended statement of defence along with their crossclaim against their co-defendants. They then changed counsel on January 4, 2012.

[21] The issue of security for costs was raised again by new counsel for OneWorld in April 2012. At that time, new counsel advised that she had received instructions to bring the motion – but again, she appears to have taken no steps towards that end. As OneWorld was declared bankrupt two months later, that is not surprising.

[22] It seems that OneWorld kept the fact of their bankruptcy largely to themselves. In June 2012, either just before or just after they declared bankruptcy, their counsel wrote to both KPMG, Huron’s then trustee, and to BDO, Miser’s trustee, on behalf of all parties, asking them to preserve the documents of each of these parties and requesting an opportunity to review the documents and to take copies of those relevant to the litigation.

[23] By October, plaintiffs’ counsel was aware that OneWorld counsel would no longer be pursuing this issue in view of their client’s bankruptcy, yet he took no steps to contact BDO, himself, until March 26, 2013, 5 months after receipt of the Status Notice. At that time, he wrote regarding Miser’s documents, only.

[24] In her affidavit, Ms. Cheng claims the plaintiffs have not yet received any of the documents requested from KPMG and BDO. In fact, production of documents was never sought from either trustee– all that was sought was an opportunity to review the documents and to make copies of those that were relevant to the litigation. The trustees would be in no position to assess relevance, hence the wording of the request. Further, by the time plaintiffs’ counsel got involved, KPMG was out of the picture and his inquiry to BDO was with respect to Miser, only. It is not clear if he ever followed up regarding Huron’s documents.

[25] The Status Notice was issued on October 22, 2012. Up until that point, Ms. Cheng states that plaintiffs’ counsel was unaware that OneWorld and Green Breeze were bankrupt. One therefore wonders why, in that context, he took no steps to advance the action as he would have been unaware of the stay against these parties.

[26] There is no evidence indicating that, after receipt of the Status Notice, plaintiffs’ counsel contacted counsel or the trustee for OneWorld and Green Breeze, to find out what was going on at their end. There is also no evidence that he got in touch with counsel for Wallace and McIlroy during this time frame, either.

[27] On March 20, 2013, plaintiffs’ counsel received a letter from the firm that had been representing OneWorld and Green Breeze, advising that the lawyer that had been handling the file had left the firm and that the firm was no longer involved with the file. The purpose of the letter was to inform plaintiffs’ counsel that no one from that firm would be attending the Status Hearing.

[28] It is noteworthy that former counsel for the two bankrupts wrote to plaintiffs’ counsel – plaintiffs’ counsel does not appear to have initiated contact with them or to have tried to contact former counsel for these parties upon receipt of the Status Notice.

[29] Also on March 20, 2013, plaintiffs’ counsel first circulated a draft timetable, seeking consent. The trustee for OneWorld and Green Breeze advised that they were taking no position.

[30] Though served with the Status Notice in October 2012, plaintiffs’ counsel waited until March 27, 2013 to serve affidavits of documents for most but not all of the plaintiffs. Ms. Cheng does not explain why none was served on behalf of the plaintiff, Williamson, at that time and not until May 14, 2013, after the first attendance at Status Hearing Court.

[31] By e-mail of April 1, 2013, counsel for McIlroy and Wallace advised that they would be seeking to have the action dismissed for delay. The plaintiffs were therefore on notice before their counsel first attended Status Hearing court that there would be no joint timetable submission. Instead, they should have filed materials addressing the requirement that they show cause. They filed nothing.

[32] It was only on May 3, 2013, more than 6 months after receipt of the Status Notice and notice of the bankruptcy of OneWorld and Green Breeze, and after having been advised that two of the defendants would be seeking a dismissal of the action that plaintiffs’ counsel wrote to counsel for the trustee in bankruptcy, seeking copies of their insurance policies. Presumably, this relates to a motion to continue he may have been considering at that time – but that is not stated, nor is there any explanation as to why he waited so long after learning of these events before taking this step. The issue of seeking to continue against the bankrupts in not addressed by Cheng in her evidence.

[33] Ms. Cheng’s reference to the response that counsel received is a mischaracterization of that document. Counsel did not “refuse” to provide copies of the policies but indicated that, as he had already stated, he was not in a position to assess which policies were or were not relevant to the claim. He referred plaintiffs’ counsel to another counsel for assistance. There is no evidence to suggest that this was followed up.

[34] The letter from the trustee’s counsel is important for another reason. Though Ms. Cheng does not go into this at all in her affidavit, it seems that the plaintiffs had filed a proof of claim in the OneWorld bankruptcy and had been told he should consider withdrawing it for a variety of reasons. I will return to this later as it features in the position of the defendants.

[35] The above represents the sum total of the plaintiffs’ evidence. They claim that the delays in the progress of the action were caused by the bankruptcies of the 4 corporate defendants; the death of Dory Semaan and delayed instructions in that regard; and OneWorld’s threatened motion for security for costs that never materialized.

THE DEFENDENTS’ EVIDENCE

[36] The defendants filed the affidavit of William Wallace, who claims to speak on his own behalf and on behalf of McIlroy. He offers no explanation for why McIlroy is not able or available to speak for himself.

[37] I have some difficulty with the manner in which these defendants have put their evidence before the court. In several instances involving important points, Wallace refers to what he was told by Mr. Diskin, counsel who argued the case.

[38] As I stated earlier with respect to the plaintiffs’ evidence, it is trite law that counsel cannot be a witness and an advocate in the same event, nor can he circumvent that rule by having someone else put his evidence in for him. As a result, to the extent that anything Wallace states based on what he was told by Diskin is contentious, it can have no weight.

[39] There are other problems with Wallace’s evidence. We encounter the first problem at paragraph 2. There, Wallace describes himself as a former employee of Green Breeze. He describes McIlroy as the former president of Miser Lighting. Immediately after effectively stating that McIlroy was a former president of this now bankrupt entity – in effect, an officer thereof – he states:

Neither Mr. McIlroy or (sic) I were officers or directors of any of Miser, Green Breeze, Huron Tract Holdings and OneWorld.

[40] Defence counsel tried to explain away this obvious inconsistency as a typographical error, but never advised which version represents the true state of affairs, so it remains unclear if McIlroy was ever an officer of Miser.

[41] Wallace points out that the events giving rise to the action took place in 2006 and 2007, yet the action was not started until 2010. Since then, he states that the action has not progressed beyond the exchange of pleadings. In that Wallace swore his affidavit in July 2013 that statement is not accurate. Though little has been done over a long period of time, the plaintiffs had all served their affidavits of documents by the time he swore that his evidence was true.

[42] Wallace states that he believes the key documents in the litigation are in the possession of Green Breeze or Miser, yet he fails to say why that would be the case, and he then notes that all 4 made assignments into receivership or bankruptcy. Miser and Huron were first, having their made assignments even before the action was commenced.

[43] Wallace then claims he was told by his lawyer, Mr. Diskin, that no motions have been brought to lift the stay of proceedings as against any of the corporate defendants. That, too, is technically not accurate. KPMG, while acting as trustee for Huron, agreed to the continuation of the action some time ago.

[44] Wallace does point out that none of the corporate defendants have provided documentary production. While that is accurate, that is the result of the interposition of trustees for all of them. The trustees for Huron and for Miser were asked to preserve documents some time ago by OneWorld counsel on behalf of all parties. As a former president of Miser (or so it seems), this is certainly something McIlroy could have pursued, himself. In fact, any of the parties were within their rights to make the request, and if Wallace is of the view that the documents of these two companies are “key” to his defence, it is curious that he makes no reference to having asked the trustees for them or for access to them, himself. It is one thing to say it is up to a plaintiff to move a case along, but quite another to take no steps to protect your own position, in terms of seeking out any documents you believe are necessary to your defence.

[45] Wallace then asserts that he was advised by Diskin that the plaintiffs filed a proof of claim in the OneWorld bankruptcy and that the proof was denied. It is not clear how Diskin knows this as no documents are provided. However, this is central to the defence theory that the plaintiffs sat back and took no steps to move the action forward as they had hoped to make a claim in the bankruptcy. It was only when it became clear that this was not going to be a successful strategy that they began to show a renewed interest in this action.

[46] Wallace then claims that he and McIlroy both deny the allegations made against them – not an uncommon position for a defendant – and he points the finger at Dan Dwyer, a non-party to the action, as having maliciously spread false statements against them. Wallace states that Dwyer was the founder, president and sole director of Green Breeze at the time of the events giving rise to this litigation. I note Dwyer has not been added by Wallace or McIlroy or by any other parties, for that matter, as a third party to this action.

[47] Wallace then strays into hearsay, claiming he was advised by two former directors of Green Breeze and OneWord, Cobb and Baryole, that Dwyer had been making threats against the former directors and that a restraining order had to be obtained. In addition to being hearsay, it is entirely unclear how any of this has any bearing on the matters in issue on a show cause hearing.

[48] Wallace asserts that Dwyer is unquestioningly the originator of this law suit. In that Wallace states no source at all for his belief, there are, in fact, many questions to be asked as to how he reached this conclusion. To prove his point, Wallace attaches a letter which he received from McIlroy, who in turn claims to have received it from Wilson, another non-party. Wilson claims he got it directly from Dwyer. When the fate of the future of an action hangs in the balance, double hearsay is not persuasive.

[49] The document appended as an exhibit to illustrate this point involves a series of e-mails Working backwards, the first is an e-mail from McIlroy to Wallace dated October 25, 2010, attaching the rest. McIlroy states:

Here ya go, Bill!

[50] It is unclear how or when McIlroy received this document. The e-mail sent by Wilson back in January 2009 was addressed to bman7799@gmail. I have no idea who that is, but the sender states:

Please treat as confidential. I don’t really want Chuck to have it Brian.

[51] Wallace does not explain who Chuck is or how this fell into McIlroy’s hands.

[52] The original e-mail, attaching a letter from Dwyer, was sent by Derek Ingram to James Sofi and others, and copied to Dwyer, on January 10, 2009.

[53] Wallace also alleges that Dwyer initiated a smear campaign against Green Breeze and individuals related to that entity. He quotes liberally from another Dwyer-created document, and states that to the best of his knowledge, none of what he sets out from the document is true. He also denies that criminal charges were laid against him or against McIlroy, as Dwyer appears to have stated in the document.

[54] Clearly, Dwyer has some negative things to say about how Miser was operated and why investments were lost. Wallace has equally strong comments to make about Dwyer but it is far too early in the piece for the court to identify who the rogue is here. While I am required to exercise my discretion in these cases on the basis of all relevant facts and within the context of the legal test articulated by the Court of Appeal, this is not a summary judgment motion, nor has the evidence been put before me in a manner which would allow me to draw any conclusions as to which version of events to prefer at this early stage.

[55] Wallace then adds that the plan to enter into an agreement resulting in the sale of Miser was created by Dwyer and Richard Lehnen, who he alleges held a significant ownership stake in both Green Breeze and Huron, and who was a director of Miser. Again, Wallace fails to explain how he knows these things or to attach corporate searches to support his assertion regarding the alleged directorship.

[56] According to Wallace, Lehnen, a non-party, passed away several years ago. He fails to state whether this was before or after the action was started. If it was before, how can it be a relevant factor?

[57] Wallace claims that despite his best efforts and what he is advised and believes are the best efforts of Mr. Diskin, they have been unable to locate Dwyer. He fails to state what his and Diskin’s efforts consisted of or when they began to look for him, but he did concede that he located Dwyer on LinkedIn and on Zoominfo, though the telephone numbers provided on each site had been reassigned.

[58] Wallace has neither third partied Dwyer nor explained why he hasn’t done so, except to state that he can’t be found. Yet he claims that both Dwyer and Lehnen each have key evidence related to his defence of the action and he claims that his ability to present his defence has been seriously compromised by Lehnen’s death and by his inability to summons Dwyer at trial as he cannot locate him. For good measure, he adds that he does not believe Dwyer would obey a court summons even if he could be found and served with one. If that is, indeed the case, how can the defendants’ inability to locate Dwyer be viewed as prejudice caused by delay?

[59] Having painted Dwyer as the rogue in the piece, I am hard pressed to understand why Dwyer was not third parties out the outset, before Wallace realized he could not find him. That would have been a good way to motivate Dwyer to attend the trial, so that having to locate him down the road to serve him with a summons and hoping that he will obey it would both be non-issues.

[60] Finally, Wallace claims that Dory Semaan’s death in July 2011 has also greatly prejudiced his defence of the action as his counsel can neither have discovery of him nor examine him at trial. I imagine this state of affairs will be equally problematic, or more so, for the plaintiffs.

THE LAW

[61] The Court of Appeal has recently had the opportunity to revisit the issue of how the court should assess the position of a plaintiff who has run afoul of Rule 48.14(13) and must show cause as to why his action should be permitted to proceed.

[62] In all situations that can bring an end to an action short of a hearing on the merits, the court considers the impact of Rule 1.04, which states that all of the Rules are to be liberally construed in order to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

[63] The phrasing of that Rule highlights the potential conflict between an expeditious and less costly end to an action and a hearing on the merits. In all cases where procedural dismissal is presented as an option, those competing interests must be balanced. The purpose of each Rule that could lead to dismissal, as well as its plain wording, assist the court is assessing which of the two competing principles should be dominant under any Rule that could lead to this result.

[64] In Faris v. Eftimovski et al., 2013 ONCA 360, the Court of Appeal reiterated the position it had already articulated in Bolohan v. Hull, 2012 ONCA 121, to the effect that the tests to be applied under this Rule and on a Rule 24.01 motion to dismiss are not one and the same. They explain this by focusing on the purpose of each of these Rules.

[65] The court made it clear that in the latter case, as the dismissal for delay is sought by a defendant who has complied with the Rules and who takes a deliberate step to bring an action to an end due to the plaintiff’s delay, it is the defendant who must show that the delay has been caused by intentional misconduct by the plaintiff or by his counsel, of a nature and degree that demonstrates a disdain or disrespect for the court’s process. In such cases, the defendant must satisfy the court that the delay was inordinate and inexcusable and that it gives rise to a substantial risk of interference with a fair trial. In other words, Rule 24.01 is intended to deal with abuses of the court process. Why should a party be permitted to continue to make use of the court process if he is not prepared to abide by court rules? That is what this Rule is aimed at controlling.

[66] In such cases, the Court of Appeal has traditionally favoured an approach that promotes that cases be heard on their merits, so they constructed tight hoops through which a defendant had to jump before an action would be dismissed. Managing to get through all part of the test that applies in these cases is not an easy feat, and defendants succeed only in the clearest of cases.

[67] In these cases, which the Court of Appeal states are rare, the court favours a hearing on the merits over an administrative dismissal that brings a quick and inexpensive end to the dispute.

[68] In Feris, the Court of Appeal described Rule 48.14 as having a different role than Rule 24.01, thus leading to a different test and a different emphasis when the Rule 1.04 balancing act is performed. Rather than controlling abuses of the court process, Rule 48.14 is intended to control the pace of litigation.

[69] The onus, in these cases, is on a plaintiff to show cause as per the actual wording of the Rule. Subules 48.14(1) and (2) give a plaintiff two years from the filing of the first defence to set an action down for trial or 180 days to restore a matter to the trial list after it has been struck off.

[70] The Court of Appeal considers these time frames to be considerable, such that when that aspect is added to the plain wording of these Rules, the balance undertaken pursuant to Rule 1.04(1) shifts towards ensuring an expeditious resolution to an action. The pendulum appears to have swung away from giving plaintiffs the benefit of the doubt and allowing them their day in court to putting them in the position of having to show cause as to why they should be permitted to continue with their action in the face of their dilatory conduct.

[71] A different panel of the Court of Appeal adopted a similar but not identical approach in 1196158 Ontario Inc. v. 6274013 Canada Limited et al. 2012 ONCA 544, released a few weeks after Feris. Once again, the court speaks of the balancing act the court must perform pursuant to Rule 1.04, highlighting the challenge of finding the right balance between its two potentially competing goals. This panel appears to have taken a more tempered stance, however, commenting on the need to ensure that the approach taken by the court is sufficiently flexible to leave room for unexpected or unusual contingencies.

[72] As I read this, the Court of Appeal means to remind us to avoid taken a rigid approach by devising strict Rules that apply across the board to all plaintiffs at all times. As Sharpe J.A. stated:

We must allow some latitude for the unexpected and unusual contingencies that make it difficult or impossible for a party to comply. We should aim 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.

[73] Sharpe J.A. sites the decision of his fellow-panelist, Laskin J.A., in Finlay v. Paasen, 2010 ONCA 204, as the basis for his thesis. There, Laskin J.A. spoke of construing the Rules and procedural orders in a way that advances the interests of justice, and ordinarily permits the parties to get to the real merits of their dispute.

[74] The principles I extract from these two cases, when read together and in the context of the case law already dealing with this Rule, are as follows:

1. The primary responsibility for moving an action forward lies with the plaintiff (see Wellwood v. OPP, 2010 ONCA 386);

2. As a result, Rule 48.14(1) clearly places the onus on a plaintiff who receives a status notice to show cause as to why his action should be permitted to proceed;

3. The test to be applied requires a plaintiff to show that he has an acceptable explanation for the delay and that if he is permitted to proceed, that the defendant would suffer no non-compensable prejudice;

4. The test is conjunctive so that the plaintiff must prove both parts of it;

5. As a result, even if the defendant puts in no evidence about delay or about prejudice, the action could still be dismissed if the plaintiff’s evidence regarding either aspect of the test is not compelling and convincing;

6. Though the approach favoured when applying Rule 48.14(1) is to lean towards an expeditious resolution of actions, the court must be wary that it does not take a formulaic approach and discount unexpected contingencies. At the end of the day, the court must make the order that is just, on a case by case basis. This requires some flexibility by the court when dealing with unexpected and unusual contingencies.

[75] As I have said in many previous decisions, what this all comes down to is the evidence. Plaintiffs cannot treat show cause hearings as perfunctory events that involve no more than throwing a chronology of events at the court. It is not for the court to extract or infer from the facts why the action has bogged down. It is for the plaintiff to explain why various steps took as long as they did to complete; to address all apparent time gaps; and to affirm their ongoing and current interest in proceeding with their action.

[76] The person in the best position to put this explanation forward may be the plaintiff, himself, or, in some cases, it may be his counsel. This will depend on why the action has stalled. The appropriate deponent will rarely be the law clerk or secretary to counsel with carriage, or the articling student down the hall who has had no involvement with the file.

[77] Selecting the appropriate deponent is something counsel must consider carefully in the context of the reasons for the delay. If the action did not move forward as a result of personal issues involving the plaintiff, such as her own illness; a death in the family; or a corporate reorganization, the plaintiff is in a far better position than her counsel to explain the impact of the event on her ability to focus on her action.

[78] If, on the other hand, the action stalled because of a death of a party, a legal complication, or an issue involving counsel’s practice or her own life, of course, counsel should provide the affidavit and have someone else argue the motion.

[79] In some cases, delays may be attributable to both counsel and the plaintiff, such that two affidavits may be warranted.

[80] The selection of the right deponent in all motions is critical if the evidence tendered is expected to carry much weight. In show cause hearings, where the fate of the action lies in the balance, choosing the right person to speak about what has taken place is particularly important. This is not something that should simply be left to one’s law clerk to deal with. Counsel must review the proposed evidence to ensure that it addresses both aspects of the test thoroughly and thoughtfully.

[81] Further, alluding to the words of Sharp J.A. in 1196158 Ontario Inc., the plaintiff must ensure that if there were unexpected or unusual contingencies that created delays, they are set out with particularity and supported by documentary evidence where possible. The extent of the delay created by such events should be woven into the chronology so the court can easily see and accept their significance in the big picture. The court will generally works on the basis of “show me, don’t tell me” where possible so documents are crucial if they are available.

[82] There is no formula that can be applied here, except to ensure that the action runs as smoothly as possible from the time the claim is issued, such that all delays can be easily explained. It is understood that snags may arise up from time to time that delay the progress of an action, but if a plaintiff can demonstrate legitimate and reasonable ongoing efforts to address them in a timely way, they will have met the first part of the test.

[83] Thus, the bankruptcy of a party is not, in and of itself, a sufficient way to explain a delay. A plaintiff must go further and explain what steps they took and when they were taken when steps were available. They must explain if they considered whether they should pursue a motion to continue the action and if they decided against it, why that was the case. On the other hand, if they decided to bring the motion, they must explain any delays in moving in that direction.

[84] Similarly, when a party dies, it is not enough to say there were difficulties getting instructions, when more than a few months’ delay ensures. The nature of those difficulties must be set out so the court has a context within which to exercise discretion. Absent a factual matrix, how can a plaintiff expect the court to be flexible? In each case, it is up to counsel to convince us that we should be, and the best way to do that is through the evidence.

[85] Where delays are inevitable for one reason or another, a plaintiff should consider seeking consent extension orders with respect those cases that justifiably should move more slowly. For example, Rules 48.14 and 48.15 generally do not work well for many personal injury cases. With respect to Rule 48.15, counsel and insurance adjusters will often try to directly negotiate a settlement for the smaller and less complex cases without the interposition of defence counsel. This allows an insurer to put additional funds towards settlement of the claim as they save on legal costs if they are not required to appoint counsel early on. Before an action is administratively dismissed, counsel should seek an extension of that timeline so that this process can be undertaken without jeopardizing the action.

[86] Similarly, in Rule 48.14 cases, plaintiff’s counsel in personal injury cases often wait until the eve of the expiry of the two-year limitation period before issuing process. This makes sense if one considers that it often takes about two years before a plaintiff’s injuries plateau, such that counsel is not in a position to assess whether or not the claim will pass the statutory thresholds until that time. It makes no sense to engage the litigation process in earnest and to force a plaintiff to incur substantial costs by having to serve the claim once it had been issued to meet a limitation period if it is not yet clear that they can meet threshold.

[87] While a consent order cannot be obtained in such cases as the claim will not have been served, plaintiff’s counsel should consider seeking an extension of the time for service of the claim, along with the Rule 48.14 timeline, on an ex parte basis, setting out in full in the evidence why an extension is merited on the facts of the case at that time. The evidentiary burden for getting an extension will be less stringent that having to show cause at a status hearing, though there will still be a requirement to thoroughly explain why more time is needed. This is done by producing the medical evidence compiled to-date, so the court can see for itself that the prognosis remains tentative. This will give context to counsel’s submission that it makes sense to wait awhile before serving the claim.

[88] While these Rule were devised as a “one size fits all”, our courts deal with a diverse variety of cases, some of which do not adapt easily to these particular Rules. Counsel must therefore find a way to work within them as long as they are with us. They have to be pro-active and find ways to ensure they can demonstrate to the court that they have been making ongoing efforts to move forward and where that is not possible, they must be able to explain why the action has stalled.

[89] In the alternative, counsel should seek to extend the timelines before they receive a Status Notice from the court and be ready to explain to the court why an extension is both needed and warranted. In each case, counsel should be doing their own time computations rather than rely on court notices, so they can anticipate when that Notice is likely to arrive in order to head it off at the pass. Receipt of a Status Notice should not be the trigger for action, as that puts the plaintiff in a show cause position.

[90] One last word before leaving the subject of evidence. As this is the plaintiff’s show cause hearing, it is conceivable for a defendant to file no evidence at all and to succeed in bringing an action to a halt. It is this aspect of the way in which this Rule has been applied that is troubling, on two levels.

[91] First, if the defendant fails to give a plaintiff a heads up as to where they are coming from, the plaintiff is put to great effort and likely expense in having to address the entirety of the action, hoping that they touch on the period of time or the particular issue that the defendant plans to raise with the court. It is rare for a party to be put in the position of having to justify their actions, or inaction, without being told where the attack is coming from. It seems to me that the reverse onus creates a form of “hearing by ambush” where the defendant who initiates the process and has raised no objections through the life of action files nothing.

[92] The other area of concern involves resources. When Status Hearings were first reintroduced to Toronto Rules after the demise of Case Management, the masters were charged with presiding over these courts. At the outset, 25 matters were put on each of our Status Hearing lists. Of those, a substantial number settled on the basis of consent timetables and were sent in to the court as “in writing Status Hearings” in significant numbers, such that we usually had no more than 10 or 12 matters to address in court. Very few show cause hearings were sought in those early days, as even those matters that went to Status Hearing court were resolved at that time.

[93] Over time, our lists have expanded while our numbers have diminished. Thus, those of us sitting in Status Hearing Court do so more frequently now.

[94] Further, cases that have been struck from the trial list that have not been reinstated within a prescribed period of time have been added to those lists. For the most part, they are much older cases.

[95] As a result, the 25 matters we started with per court were increased to 36 and have been increased again more recently, so they now stand at 42 – 42 matters per court list. Some still settle out before the date of the hearing (which involves a large number of in writing motions) but we are still left with 20-30 matters per court to deal with. Of those, at least one and, at times, two are contested. These are usually put over to another day so that both parties can prepare properly and so that the court has time to adequately address them.

[96] The issue becomes where to put these contested hearings once they are put over. I have been adding them, two at a time, to days on which I sit in Status Hearing Court, to be heard after I expect court will be done. But it is often difficult to predict how long that court will go in view of the current length of those lists, so it is no longer safe to book one opposed hearing at 11:30 and another at 2:30.

[97] In view of the potential ramification of a loss for a plaintiff, these motions are hard fought and take time so I now hear only one pre-scheduled contested matter per Status Hearing court in the afternoon, so I am not forced to rush my court.

[98] These contested matters usually result in a reserved decision as there is considerable evidence to wade through. As a result, from the time the matter first hits a Status Hearing list to the time it is heard and a decision is ultimately released can take several months. If the plaintiff’s position does prevail, the initial delay complained of can be significantly compounded. This, along with the cost ramifications of putting a plaintiff to a show cause without any real indication as to the nub of the problem from the defence perspective are two issues a defendant should carefully consider before taking this position.

CONCLUSION and ORDER

[99] I have already noted that the plaintiffs’ choice of deponent was not well-considered. I have also pointed out several gaps in their evidence that have not been explained. These are some of them:

1. Dory Semaan passed away in July 2011 but no steps have been taken to appoint a litigation guardian for the estate. That motion is now pending for September 16, 2013, more than two years later. The only explanation for this extensive delay is the assertion that counsel had difficulty obtaining instructions from Dory’s brother, the estate executor. No details as to the nature or timing of those difficulties, however, are provided. To begin, with, this evidence ought to have come from counsel with carriage and the motion should have been argued by other counsel. This problem is exacerbated by the lack of detail provided. When the explanation that has been provided in the supporting evidence leads to 5 more questions, it is extremely difficult for a court to declare that the explanation provided is an acceptable one. In this case, I find that it is not acceptable. I am not able to say that flexibility is warranted on the basis of this issue as I have not been provided with a sufficient evidentiary basis to enable me to reach that conclusion;

2. The plaintiff relies heavily on the threatened security for costs motion as a further basis for its inertia. Again, there were things the plaintiffs could have done to keep the action moving in the face of the threat of this motion. They could have tried to address the defendants’ concerns by providing evidence regarding the sufficiency of their assets in Ontario. If that was not feasible, then aware that they had some vulnerability on a motion of this kind, they could have explored the amount of security being sought and tried to negotiate an arrangement that all parties could live with. If a contested motion was inevitable, they should have pressed defence counsel for dates so that could get the motion on and get the action back on track. They also could have prompted the selection of a motion date by proposing that the parties schedule other events, such as examinations for discovery, which would have forced the defendants to either bring their motion or to leave it. There is no evidence that any of this was done – the plaintiffs appear to have sat back and waited for the motion. I am therefor unable to give much weight to this as a legitimate basis for the delay as plaintiff’s counsel appears to have simply waited for a motion that never came;

3. By October 2012, the plaintiff should have realized that the security for costs motion was not likely to happen as, by this point, they knew that the party proposing it was now bankrupt. Yet, they still did not follow up in the quest for access to documents first sought by the counsel for the now bankrupts Green Breeze and OneWorld until March 26, 2013, five months later. In that regard, it appears they followed up only with respect to Miser’s documents. No follow up for Huron documents has been shown nor is there any evidence as to why that is the case.

All that counsel sought from the trustee was an opportunity to review documents, rather than production of same. Again, there is no evidence that any efforts were made after the March 2013 letter to make these arrangement;

4. Nor is there evidence of any efforts made or even consideration given to obtaining orders to continue against the two newer bankrupts. As noted above, while the fact of a bankruptcy could be a relevant cause for delay, it does not merit a flexible approach from the court without further details about what was or was not done and why;

5. Following receipt of the Status Notice in October 2012, there is no evidence of any steps taken by plaintiffs’ counsel to advance the action until March 2013, five months later, and no explanation is provided for that gap. That was when counsel first followed up regarding a desire to review Miser’s documents and when he first circulated a draft timetable. That is also when draft affidavits of documents were served with respect to some, but not all, of the plaintiffs. Activity generated by receipt of a Status Notice will generally be viewed as too little too late, unless the reasons given for the earlier delay are found to be acceptable;

6. The plaintiff, Williamson, did not serve an affidavit of documents until May 14, 2013, after the first attendance at Status Hearing Court and by which time it was clear that the plaintiffs would have to show cause. No explanation is provided as to why this plaintiff’s affidavit was not served with those of the others;

7. Finally, though put on notice that they would have to show cause on April 1, 2013, plaintiffs’ counsel attended the first hearing on April 4, 2013 without a show cause brief or any explanation as to why none had been prepared. The 1^st was a Monday, the 4^th a Thursday.

[100] The evidence filed does not come close to providing an acceptable explanation for the delay in moving forward with this action. Although the defendants were either bankrupt or under receivership, there are allegations of fraud in this action and an order to continue had already been obtained against Huron. Why would no effort have been made to pursue the same relief regarding the others and if not, why is there no explanation for that?

[101] Again, though one of the plaintiffs passed away early on in the life of the action, the explanation for the failure to get instructions is simply that there had been some difficulty in doing so, without any indication as to why that was and how long it lasted. As I pointed out earlier, explanations that raise a multitude of questions cannot be viewed as acceptable.

[102] As the test under Rule 48.14 is a conjunctive one, the plaintiffs’ failure to provide the court with an acceptable explanation for their delay is enough, in and of itself, to lead to a dismissal of the action, without my having to consider the issue of lack of prejudice or the defendants’ evidence.

[103] In that the issue of costs of the motion and of the action may well follow on release of these Reasons, it is appropriate to comment regarding both.

[104] Insofar as prejudice, it is not addressed at all in Cheng’s original affidavit. She raised it only in a supplementary affidavit, and then, only in response to the defendants’ evidence regarding the whereabouts of Dan Dwyer. Cheng claims that plaintiff’s counsel is in touch with Dwyer. There is no positive assertion to the effect that the defendants would suffer no non-compensable prejudice if the action were allowed to proceed. Cheng also fails to deal with any of the other grounds of prejudice that the defendants advance.

[105] Turning to the defendants’ evidence, I have already pointed out the difficulty with an affidavit that, in part, reflects what should be coming from counsel’s mouth. I have questioned the degree of hearsay regarding important issues and the apparent inconsistency regarding the role of Wallace in Miser Lighting contained within one paragraph of McIlroy’s affidavit. I have also pointed out that the deponent at times resorts to conjecture to get his point across. In short, I find the defendants’ evidence sloppy and problematic in many respects.

[106] At the end of the day, however, I need not even consider the defendants’ evidence if the plaintiffs fail to show cause by meeting the two-part test ascribed to Rule 48.14 by the Court of Appeal. In my view, the plaintiffs have failed to meet the first part of the test as they have failed to provide an acceptable explanation for the delay.

[107] As regards prejudice, the defendants raise some interesting factual scenarios, including the death of a non-party before the action began, whose evidence they claim is pivotal. While I am not required to decide the issue in view of my other findings, I am hard pressed to accept that the death of a potential witness before an action was even started can be considered as relevant to the prejudice discussion.

[108] As to whether a death that occurs after the action was started but before one could reasonably have expected the action to have been set down for trial (before there has been “delay”), can constitute the level of prejudice anticipated by this Rule, that will, no doubt, be the subject of debate another day. There is no need to consider it at this time in view of my findings with respect to the first part of the test. I raise it only to point out that the issue is not necessarily as straightforward as the defendants suggest.

[109] Having determined that the plaintiffs have failed to provide the court with an acceptable explanation for their delay, I am of the view that they have not met their evidentiary burden under Rule 48.14, such that this action must be dismissed.

[110] If the parties are unable to agree as to costs, I can be spoken to.

Master Joan M. Haberman

Released: September 9, 2013