SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-04-272137CM3

DATE: 2013/10/04

RE: Eldorado Bay Properties Inc. and Manuel Aldana v. DSM Investment Group Limited, Wes Wilson, and Re/Max Realtron Realty Inc.

BEFORE: MASTER GRAHAM

HEARD: April 25, 2013 with further written submissions received July 10, 2013

COUNSEL:
A. J. Esterbauer for the plaintiffs

G. Tighe for the defendant DSM Investment Group

H. Engell for the defendants Wilson and Re/Max

REASONS FOR DECISION

(Motions by plaintiffs to restore the action to the trial list and by defendants to dismiss the action for delay)

[1] The plaintiffs in the action move under rule 48.11 of the Rules of Civil Procedure for an order restoring this action to the trial list. The defendants bring a cross-motion under rule 24.01(1)(e) to dismiss the action for delay on the grounds that more than 30 days (in this case over three years) have passed since the action was struck from the trial list.

[2] The parties argued the motion on April 25, 2013 and I reserved my decision. On June 4, 2013, while my decision was still under reserve, the Court of Appeal released Nissar v. Toronto Transit Commission, 2013 ONCA 361, [2013] O.J. No. 2553, which established a test for restoring an action to the trial list that was different than the test on which counsel made their submissions. I then convened a telephone case conference on June 25, 2013 at which time, on the consent of all counsel, I ordered that they be permitted to make further submissions in writing by July 10, 2013, based on the law as stated in Nissar and on two other Court of Appeal decisions released after the hearing. I subsequently received written submissions from all counsel.

[3] The action arises out of the purchase by the plaintiff from the defendant DSM Investment Group (“DSM”) of a residential apartment building located at 68 Fifteenth Street in Toronto (“the property”). The agreement of purchase and sale is dated May 14, 2003. The transaction closed on August 19, 2003 for a purchase price of $1.75 Million. Within three months of the closing, counsel for the plaintiffs put DSM on notice of misrepresentation claims in relation to the transaction and these claims form the basis of this litigation.

[4] The statement of claim was issued on July 8, 2004 and names as defendants DSM, the vendor of the property and Wilson and Re/Max, the purchaser’s real estate agent and his agency. The plaintiff claims damages based on alleged misrepresentations by DSM with respect to the vacancy rate, income, rental arrears and overhead expenses for the property. The plaintiff also alleges that DSM destroyed or disposed of documents in an effort to conceal its misrepresentations. The allegations against the real estate agents are that the defendant Wilson informed the plaintiff Aldana that the property was “good”, that the vacancy rate was less than 2%, that “the deal was good” and that he could make a large profit. The plaintiff also alleges that the agents breached the terms of their contract with the plaintiff.

[5] The history of the action from the issuing of the statement of claim to the setting down of the action for trial is as follows:

1. July 8, 2004: Statement of claim issued.
2. August 13, 2004: DSM defended the action.
3. August 27, 2004: Wilson and Re/Max defended the action.
4. November 15, 2004: Case conference to address problem in scheduling mediation.
5. July 4, 2005: Case conference to address issues relating to production of documents and timing of discoveries.
6. July 14, 2005: Plaintiffs’ motion at which Master Albert ordered that DSM provide further documents before discovery.
7. July 25 and 26, 2005: Examinations for discovery of defendants.
8. August 16, 2005: Examination for discovery of the plaintiff Aldana.
9. September 26, 2005: Case conference to address issues arising out of examinations for discovery, at which dates were scheduled for the continuation of the plaintiff’s examination, a motion to deal with counsel’s conduct at the DSM discovery, and the further discovery of DSM.
10. October 21, 2005: Further case conference with respect to production and discovery issues.
11. November 15, 2005: Motion before Master Albert at which DSM was ordered to re-attend on December 14, 2005.
12. January 19, 2006: Case conference at which Master Albert granted leave to the plaintiffs to deliver an amended statement of claim by January 31, 2006 and leave to the defendants to deliver amended statements of defence by February 15, 2006. Further discovery of DSM and the plaintiffs was also ordered.
13. January 27, 2006: Plaintiff filed amended statement of claim. The plaintiff alleged in the amended pleading that there was environmental contamination of the property and that the defendant Wilson failed to provide the plaintiffs with a phase I environmental assessment, authored by Briggs Canada Limited.
14. March 1, 2006: Continued examination for discovery of DSM.
15. July 18, 2006: Motion before Master Albert re: undertakings and refusals from plaintiff’s examination for discovery.
16. 2007: Ongoing communications among counsel with respect to outstanding undertakings.
17. August 8, 2007: Plaintiffs delivered the trial record.

[6] The history of the action subsequent to the setting down of the action on August 8, 2007, including the attempts of plaintiffs’ counsel to determine the status of the action and to bring this motion, is as follows:

1. October 9, 2007: The trial coordinator wrote to counsel enclosing a trial certification form to schedule a pre-trial conference and the trial.
2. November 21, 2007: An associate in the firm representing the defendant DSM left a voicemail message for plaintiff’s counsel regarding the trial certification form but received no response.
3. April 17, 2008: The trial coordinator informed counsel for all parties by email that the certification form had not been returned, that a pre-trial conference and trial date had not been arranged and that the matter would be struck off the trial list on July 2, 2008. Mr. Solomon of the firm representing the plaintiffs does not recall seeing this email but also does not deny receiving it.
4. July 2, 2008: Action struck from the trial list.
5. September 30, 2010: Plaintiff’s then counsel Martine Morin asked her firm’s process server to determine the status of the file from the court.
6. October 1 and 5, 2010: The firm’s process server confirmed that the file was still active but was then given information that the file was inactive. In light of the discrepancy Ms. Morin asked the process server to re-attend to verify the status of the action. In the subsequent period, the process server had difficulty locating the court files but did locate a case history showing the status as “inactive”.
7. “Spring” 2011 (per plaintiffs’ factum): Mr. Solomon first learned that the action may have been struck from the trial list.
8. August 5, 2011: Mr. Solomon first attempted to file a motion to restore the action to the trial list by way of a motion returnable October 24, 2011.
9. October 3, 2011: The defendants having advised that they would oppose the motion, Ms. Morin wrote to the court requesting a special appointment for the motion. It is acknowledged by the court that owing to errors for which the court system is responsible, a telephone case conference to schedule the special appointment was not held until May 7, 2012.
10. May 7, 2012: The plaintiffs’ motion to restore the action to the trial list was scheduled to proceed on September 12, 2012.
11. June, 2012: The plaintiff Aldana first became aware that the action had been struck from the trial list.
12. September 18, 2012: According to the plaintiffs, owing to the recent retainer of Mr. Esterbauer in the matter as counsel for the plaintiffs, and the agreement of the parties to participate in a mediation in both this action and a related proceeding on January 8, 2013, this motion was re-scheduled to proceed on April 25, 2013. According to the defendants, the adjournment was necessary because the plaintiffs delivered further material on which the defendants wished to cross-examine. Regardless of the reason for the adjournment, my case conference order of September 18, 2012 shows that the adjournment was on consent.
13. April 25, 2013: Motion argued.

Law

[7] Rule 48.11 is as follows:

48.11 Where an action is struck off a trial list, it shall not thereafter be placed on any trial list except,

(a) in the case of an action struck off the list by a judge, with leave of a judge; or

(b) in any other case, with leave of the court.

[8] The test for when leave may be granted to restore an action to the trial list was recently determined by the Court of Appeal in Nissar v. Toronto Transit Commission, 2013 ONCA 361, [2013] O.J. No. 2553 to be the same as the test in 1196158 Ontario Inc. v. 6274013 Canada Ltd. (2012), 2012 ONCA 544, 112 O.R.(3d) 67 (C.A.) for allowing an action to proceed at a status hearing. In Nissar, the Court stated:

30 In my view, it is preferable to place the onus on a plaintiff to explain the delay and satisfy the court that it would not be unfairly prejudicial for the defendant to have the action restored to the trial list. This court has held that it is the plaintiff’s responsibility to move the action forward and prosecute the matter as diligently as possible: see Wellwood v. Ontario Provincial Police, 2010 ONCA 386, 102 O.R. (3d) 555 at para.48.

31 Therefore, the applicable test is conjunctive: a plaintiff bears the burden of demonstrating that there is an acceptable explanation for the delay in the litigation and that, if the action was allowed to proceed, the defendant would suffer no non-compensable prejudice. [emphasis added]

Is there an acceptable explanation for the delay in the litigation?

[9] The plaintiffs set the action down for trial on August 8, 2007, slightly more than three years after the action was commenced. This is not an unusually long period of time for the setting down of an action in which there have been a number of interlocutory proceedings and the defendants have not relied on any delay prior to the setting down of the action as a reason for the court to refuse to restore the action.

[10] The defendants submit that the delay between the setting down of the action on August 8, 2007 and the plaintiffs’ first attempt to bring this motion on August 5, 2011 is a lengthy period of unexplained delay that, given the conjunctive nature of the test, would in itself warrant the dismissal of the motion.

[11] The period of delay would not begin to run as of the date on which the plaintiffs set the action down for trial, because there would inevitably be some lapse of time following the setting down of the action before dates would be set for a pre-trial conference and trial.

[12] The delay would begin to run at the point at which the plaintiffs failed to respond to or act upon the correspondence from the trial co-ordinator of October 9, 2007 enclosing the Trial Certification Form. There is no explanation offered by the plaintiffs’ former counsel for their failure to respond to this correspondence. Even if the correspondence had not been sent or received, once the plaintiffs have set the action down, it is incumbent upon them to follow up with the trial office from time to time to determine the status of the action.

[13] I calculate the delay in the matter to be from October, 2007, being the point at which the trial co-ordinator sent the Trial Certification Form to the plaintiffs’ counsel, until August, 2011, when plaintiffs’ counsel first took steps to move to restore the action to the trial list. This period spans 3 years, 10 months. During this period, in September and October, 2010, Ms. Morin took some steps to ascertain the status of the matter but those enquiries appear to have been abandoned.

[14] The issue under the first part of the test in Nissar, supra is whether the plaintiffs can provide an acceptable explanation for this delay.

[15] The plaintiffs’ explanation for the delay is essentially that they were involved in other litigation related to this action.

[16] The history of these other proceedings is as follows:

1. The first mortgagee on the property, The Equitable Trust Company, commenced an action against the plaintiff Eldorado Bay Properties and obtained a judgment in that action on September 13, 2007. Equitable subsequently became the mortgagee in possession of the property and discovered that the property had environmental problems that had not been detected by Briggs Canada Limited, which prepared the environmental assessment of the property (see para. [5]13. above).

2. In June, 2008, First National Financial and The Equitable Trust Company commenced an action (CV-08-354965) against Briggs Canada Limited (“Briggs”) alleging negligence in failing to discover and/or disclose contaminants on the property.

3. On July 28, 2009, the plaintiffs in this action, Eldorado Bay Properties and Manuel Aldana, commenced an action against Briggs (CV-09-383919) alleging that they received and relied on the Briggs environmental assessment to their detriment when deciding whether or not to purchase the property.

4. In both of the actions commenced against it, Briggs named DSM, Wilson and Re/Max as third parties. In the Eldorado v. Briggs action (CV-09-383919), Wilson and Re/Max pleaded in the main action that the three actions should be tried together.

5. On October 22, 2009, the property was sold to a third party for $1,575,000. This fact was not included in the plaintiffs’ materials on this motion.

[17] The plaintiffs submit that there was an informal agreement among counsel in the two actions against Briggs to hold common examinations for discovery. The Briggs representative was examined on February 14, 2012, while the plaintiffs in this action were attempting to schedule their motion to restore the action to the trial list.

[18] The Equitable Trust v. Briggs action was settled following a mediation that was held on May 30, 2012. The plaintiffs in this action submit that they will be entitled to a credit in the amount of that settlement against the judgment that Equitable Trust obtained against it. The plaintiffs further submit that the damages in this action could not have been quantified at trial without a resolution of the Equitable Trust v. Briggs action.

[19] The plaintiffs further submit that as a result of the related actions, this action appears to have been held in abeyance by all parties, including the defendants. The plaintiffs rely on the fact that the defendants Wilson and Re/Max pleaded in the third party defence in the Equitable Trust v. Briggs action that there were overlapping damages in the three actions which required that they be tried together to avoid both increased costs and inconsistent findings.

[20] The plaintiffs submit that the defendants acquiesced to this action being held in abeyance pending the resolution of the other actions or the other actions being ready for trial together with this action. Even if this matter had not been struck from the list, the action could not have proceeded more expeditiously.

[21] The defendants Wilson and Re/Max submit that the plaintiffs have alleged in this action that Wilson never provided them with the Briggs environmental assessment, to their detriment, and have alleged in the Briggs action that they received the assessment and relied on it to their detriment. The defendants submit that these inconsistent positions constitute an abuse of the court’s process. They also rely on the fact that the plaintiffs’ former counsel Mr. Solomon was not aware if his firm informed the defendants in this action of the commencement of the Briggs action.

[22] The defendant DSM acknowledges that the damages claimed by the plaintiffs in their action against Briggs are related to the damages in this action, namely their losses arising out of the purchase of the property. However, DSM did not become aware of the action against Briggs until Briggs served its third party claim. The plaintiffs did not previously inform DSM that they were pursuing Briggs for the same losses that they were claiming in this action. DSM, in its third party defence in the Briggs action, pleaded that the plaintiffs had set this action down for trial and took no further steps to move it forward.

[23] The defendants rely on Gravelle v. Denis Grigoras Law Office, 2013 ONCA 339, a case in which the plaintiff moved to set aside the registrar’s dismissal of his action for delay. The judge at first instance dismissed the plaintiff’s motion to set aside the dismissal order and the Court of Appeal upheld the lower court’s decision. One of the issues on appeal was whether the plaintiff had provided an adequate explanation for a litigation delay of two years and four months between correspondence from the defendant’s counsel stating that he would seek instructions with respect to a proposed pleading amendment upon receipt of the proposed pleading and the registrar’s dismissal of the claim following the plaintiff’s failure to take any action on receipt of a status notice.

[24] The plaintiff in Gravelle attempted to explain the delay on the basis that “he was taking a ‘wait and see’ approach to this action, that is, awaiting the outcome of other litigation before proceeding with this action”. The Court of Appeal’s response to this submission was as follows (at paragraph 4):

4 While there may be some circumstances in which such an approach is justified, the appellant failed to provide any information that would justify such an approach in this case. The fact that the appellant was occupied with other litigation and his personal affairs is not a sufficient explanation for taking no active steps to move an action forward.

[25] The issue on the motion before me is whether the facts of the case constitute circumstances that would justify the plaintiffs unilaterally holding the action in abeyance owing to other related pending actions. The plaintiffs’ position in this regard would be much stronger if they had informed opposing counsel that that was what they were doing. If the plaintiffs were, in fact, holding this action in abeyance while waiting for the related actions to “catch up”, then it was incumbent on them to notify the parties to this action of that intention. In this case, what really appears to have happened is that they neglected the action, and when they realized that it was struck from the trial list, they decided to rely on the other pending actions as an excuse for their inactivity on this matter.

[26] My view in this regard is supported by the fact that on cross-examination, plaintiffs’ counsel Mr. Solomon had no explanation as to why there was no communication between his firm and counsel for the defendants from August, 2007 to August, 2011 and specifically, he did not rely on the other pending actions as an excuse. His evidence was that Ms. Morin had day-to-day carriage of the file on behalf of the plaintiffs from 2007 to 2011. No evidence from Ms. Morin was put before the court on this motion.

[27] The first communication from plaintiffs’ counsel to defendants’ counsel following the striking of the action on July 2, 2008 was the service of the motion record to restore the action to the trial list in August, 2011. This is not consistent with the alleged intention of the plaintiffs to hold this action in abeyance so that it could proceed to trial with the other actions. If that really had been the plaintiffs’ intention, their counsel should have corresponded with opposing counsel in all actions to advise of this intention and to seek their consent. There is no evidence of any such correspondence.

[28] Accordingly, I find that the plaintiffs’ involvement in the related pending actions is not sufficient to explain their delay in prosecuting this one. I conclude that the plaintiffs have failed to provide a satisfactory explanation for the lengthy litigation delay of three years and ten months following the sending by the court of the confirmation forms to counsel in October, 2007 and the initiation of this motion in August, 2011.

[29] The plaintiffs have therefore failed to meet the first part of the test in Nissar, supra, and, based on the fact that both parts of the test must be satisfied in order for the action to be restored to the trial list, this failure is sufficient for the court to dismiss the motion. However, for the sake of completeness, I will address the second part of the test.

If the action were allowed to proceed, would the defendant suffer any non-compensable prejudice?

[30] The law as stated in Nissar, supra is clear that the plaintiff must, in addition to providing an acceptable explanation for the delay in the litigation, demonstrate that if the action was allowed to proceed, the defendant would suffer no non-compensable prejudice. This onus on the plaintiff is consistent both with the presumption of prejudice that inevitably accumulates with the passage of time and with the plaintiff’s obligation to prosecute the action diligently.

[31] The plaintiffs submit that all available documents were produced early in the action with the exception of documents that they allege that the defendant DSM failed to preserve and which are the subject of a spoliation claim against DSM. They rely on a statement by counsel for DSM at discovery that this is a “documents case”, as opposed to a case that depends primarily on the testimony of witnesses. They further submit that the alleged misrepresentations made by DSM to the plaintiffs in relation to the property are fully documented. In addition, examinations for discovery were completed at an early stage and transcripts of the examinations of all of the parties’ witnesses are available to refresh their memories. (The chronology set out at paragraph 5 above does confirm that the examinations were completed by March 1, 2006.)

[32] The defendant DSM submits that the plaintiffs have produced no evidence to rebut the presumption of prejudice arising from the delay and states specifically that the individual plaintiff admits that he does not have a perfect memory of the events surrounding the transaction and cannot remember who the tenants of the building were or which units were occupied during the relevant time period. Similarly, a principal of DSM either has only vague recollections of the events of the transaction or no memory at all.

[33] DSM submits that the lawyer who originally acted for DSM in the 2003 transaction, now age 84, and another lawyer who previously represented DSM are no longer in private practice. DSM does not state the issues in the litigation that these individuals would be expected to testify about. DSM also states that key witnesses can no longer be located and that the plaintiffs have refused to provide information related to tenants who inhabited the property at the time of the purchase. Further, the parties have been unable to locate former tenants and none of the evidence of former tenants has been preserved.

[34] DSM also submits that the plaintiffs have refused to provide information related to cash receipts for rental payments for relevant periods of time. DSM admits that bank deposit books have been disposed of but states that other financial records for the property were kept.

[35] The plaintiffs’ response to these submissions is that none of DSM’s allegations of prejudice result from the passage of time while the litigation was in progress. DSM has offered no evidence that it searched for tenants at any time prior to July 9, 2012 even though they were on notice of the plaintiff’s claim since November, 2003. In addition, DSM is responsible for its own inability to provide full and complete answers regarding vacancies at the property as a result of its own actions in disposing of relevant documents. DSM’s own admission that relevant evidence was destroyed after it was put on notice of the claim militates against a finding in its favour that prejudice has resulted from the delay for which the plaintiffs are responsible.

[36] The property was sold on August 19, 2003 and the statement of claim was issued on July 8, 2004. The action was set down for trial on August 8, 2007. DSM had notice of the claim and the alleged misrepresentations within at most a year of the sale of the property and therefore had ample opportunity to attempt to locate and obtain evidence from any tenants if it chose to do so.

[37] If evidence from the former tenants was not available at the time that the action was set down for trial, it would not reasonably be available now. Accordingly, the submissions of DSM with respect to the lack of availability of evidence from former tenants of the property do not amount to prejudice arising from the delay.

[38] The defendants Wilson and Re/Max rely on the fact that the defendant Wilson is now 73 years old and accordingly, would be at least 74 years of age when the case is reached for trial, in the event that it is restored to the trial list. Counsel describes Mr. Wilson as “an elderly man” and contends that because of his age, the plaintiff’s delay has created actual prejudice to Wilson and Re/Max.

[39] The fact that someone is 74 years old does not mean that his ability to testify is compromised, and as was noted during argument, this age is less than the mandatory retirement age for judges in Canada. Further, there is no evidence that Mr. Wilson suffers from any infirmities. I do not accept that Mr. Wilson’s age gives rise to any actual prejudice.

[40] The defendants Wilson and Re/Max also submit that Joe Snidero, who swore the affidavit of documents on behalf of Re/Max, died in March, 2012. However, it is admitted that he had no direct involvement in the plaintiff’s purchase of the property. Accordingly, I cannot find that his death, although occurring after when the trial likely would have been concluded if the plaintiffs had acted expeditiously after setting the action down, has given rise to any prejudice.

[41] The defendants Wilson and Re/Max also rely on the death of their first counsel Mr. Wassermuhl in December, 2010 as evidence of prejudice. Their submission is that his observations of the parties at examinations for discovery would have been helpful to trial counsel. However, as Mr. Wassermuhl’s presence at trial would not have affected the nature or quality of the evidence that would be presented to the trial court, his passing does not give rise to any prejudice.

[42] Based on the evidence summarized at paragraph 31 above, I accept that the plaintiffs have rebutted the presumption of prejudice. For the above reasons, I find that the defendants have not demonstrated any actual prejudice and I conclude that if the action were allowed to proceed, the defendants would not suffer any non-compensable prejudice. However, as indicated above, as the Court of Appeal requires the plaintiffs to satisfy both parts of the test in Nissar, supra, and they have failed to do so, their motion to restore the action to the trial list is dismissed. As the action can no longer proceed as a consequence of this ruling, there is no need for me to rule on the cross motions to dismiss the action for delay.

[43] If the parties cannot agree on the costs of the motion, they may arrange to speak to that issue before me.

MASTER GRAHAM

October 4, 2013