Superior Court of Justice - Ontario

CITATION: ORSI v. FROMSTEIN, 2013 ONSC 7850

COURT FILE NO.: CV-10-405291

HEARD: DECEMBER 18, 2013

RE: Angela Orsi, Litigation Administrator for The Estate of Francesco Orsi and Angela Orsi, Anthony Orsi and Paul Orsi, in their capacities as Estate Trustees of the Estate of Vincenza Orsi v. Elliot Fromstein

BEFORE: MASTER R.A. MUIR

COUNSEL: Kim Mullin for the plaintiffs Gaynor J. Roger for the defendant

REASONS FOR DECISION

[1] These reasons for decision are in relation to a contested status hearing at which the plaintiffs were required to show cause why their action should not be dismissed for delay pursuant to Rule 48.14(13) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”).

BACKGROUND

[2] This is a professional negligence claim. The defendant is a chartered accountant. For a period of time he provided accounting and tax advice to the plaintiffs Vincenza and Francesco Orsi (“Vincenza” and “Francesco”). The plaintiffs’ claims arise primarily from the defendant’s alleged failure to make proper tax filings on behalf of Vincenza and Francesco in the United States. The claim also deals with the administration of Francesco’s estate.

[3] The plaintiffs allege that they have suffered $5,000,000.00 in damages as a result of the defendant’s conduct. The defendant denies the allegations made by the plaintiffs in the statement of claim. He specifically denies that he was negligent or breached any contractual or other obligations owed to Vincenza and Francesco.

[4] The plaintiffs’ claims began as two actions. One was brought on behalf of Francesco’s estate (Francesco had died in 2002). The second was brought on behalf of Vincenza. Francesco’s action was commenced by way of a notice of action issued on June 18, 2010. Vincenza’s action was commenced by way of a notice of action issued on September 28, 2010. The plaintiffs’ statements of claim are both dated December 16, 2010. Obviously, they were not prepared in a timely fashion. Rule 14.03(3) requires a statement of claim to be filed within 30 days of the issuance of a notice of action.

[5] The defendant was served with copies of the notices of action and statements of claim on or about December 16, 2010. The actions were delayed between December 2010 and March 2011 while the parties debated an issue relating to the late filing of the statements of claim. Eventually, the defendant provided his consent to the late filings. Notices of intent to defend were served on March 18, 2011 in both actions.

[6] No defences were demanded at that time. It appears that the defendant required additional information from the plaintiffs in order to plead to the claims. The plaintiffs apparently agreed to provide this additional information. However, the process of obtaining this additional information resulted in a considerable period of delay. The plaintiffs’ lawyers had to consult and meet with lawyers in the United States on at least two occasions. Many additional documents had to be reviewed. It was not until July 4, 2012 that a proposed fresh statement of claim was provided to the defendant’s lawyer. More than 15 months had passed since the notices of intent to defend were served. It appears that there was little or no communication with the defendant’s lawyer during this time period.

[7] It appears that in the spring and summer of 2012, the defendant began to experience certain health issues. These health problems apparently made it difficult for him to instruct his lawyers. The defendant’s lawyers were unable to prepare a statement of defence during this time period and sought an indulgence from the plaintiffs which was granted.

[8] Vincenza passed away in July 2012. This had the effect of staying her action. The plaintiffs’ lawyer encountered some difficulty in assembling the documents necessary to obtain an order to continue and regularize the estate proceedings. Eventually, an order to continue was signed by the registrar on December 14, 2012.

[9] In early January 2013, the plaintiffs’ lawyers determined that it would be necessary to regularize the proceedings with respect to Francesco’s estate as well, in order to include all estate trustees as parties. The plaintiffs proposed that one motion be brought to obtain an order appointing Angela Orsi (“Angela”) as litigation administrator for the estate’s action, consolidating the two claims and filing a fresh statement of claim applicable to both.

[10] On January 15, 2013, the plaintiff’s lawyer asked for the defendant’s consent to this relief. No response was received until March 1, 2013. At that time, the defendant’s lawyer advised that the motion could proceed on an unopposed basis as long as it was without prejudice to any limitation defence that might be available to the defendant. The plaintiff’s lawyer immediately agreed to this condition.

[11] It was not until April 8, 2013 that the defendant’s lawyer confirmed that her client did not object to the relief sought. The plaintiffs’ lawyer then booked the first available date for the motion, being August 20, 2013. The requested order was made on that date.

[12] In the interim, the court had issued a status notice on March 22, 2013. The plaintiffs filed a requisition for a status hearing. The status hearing was then scheduled to be heard by me on September 4, 2013.

[13] The defendant then prepared a statement of defence. It is dated August 21, 2013 but was apparently served in July 2013. It was filed on August 27, 2013. Around the same time, the defendant indicated that he was planning to bring a motion for summary judgment based on a limitation defence.

[14] A few days before the September 4, 2013 status hearing the defendant’s lawyer advised the plaintiffs’ lawyer that the defendant intended to seek a dismissal order at the return of the status hearing. As a result, the status hearing was adjourned to be heard by me on December 18, 2013.

ANALYSIS - APPLICABLE LAW

[15] Rule 48.14(13) provides as follows:

48.14(13) At the status hearing, the plaintiff shall show cause why the action should not be dismissed for delay and,

(a) if the presiding judge or case management master is satisfied that the action should proceed, the judge or case management master may,

(i) set time periods for the completion of the remaining steps necessary to have the action placed on or restored to a trial list and order that it be placed on or restored to a trial list within a specified time,

(ii) adjourn the status hearing to a specified date on such terms as are just, or

(iii) if the action is an action to which Rule 77 may apply under rule 77.02, assign the action for case management under that Rule, subject to the direction of the regional senior judge,

(iv) make such other order as is just; or

(b) if the presiding judge or case management master is not satisfied that the action should proceed, the judge or case management master may dismiss the action for delay.

[16] The applicable test to be applied on a contested status hearing is set out in the decision of the Court of Appeal in Khan v. Sun Life Assurance Co. Of Canada, 2011 ONCA 650 at paragraph 1:

[T]he appellant [plaintiff] bore the burden of demonstrating that there was an acceptable explanation for the involved litigation delay and that, if the action were allowed to proceed, the respondent [defendant] would suffer no non-compensable prejudice.

[17] The test is conjunctive. The presiding judge or case management master may still dismiss the plaintiff’s action even in situations where the delay has been satisfactorily explained or the plaintiff has demonstrated that the defendant would not be prejudiced. In 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544, the Court of Appeal described the Khan test as follows at paragraph 32:

The test is conjunctive, not disjunctive. Even if the plaintiff can provide a satisfactory explanation for the delay, the action will be dismissed if there would be prejudice to the defendant. And if the plaintiff is not able to provide a satisfactory explanation for the delay, it is still open to the judge to dismiss the action, even if there is no proof of actual prejudice to the defendant.

[18] Rule 48.14(13)(b) provides that the presiding judicial officer at a status hearing may dismiss the action for delay. The Court of Appeal has held that it is “open to the judge to dismiss the action” [emphasis added]. The court’s decision is therefore a discretionary one. However, the Court of Appeal has recently confirmed the test to be applied, as set out in Khan and 1196158 Ontario Inc., above and specifically emphasized that a plaintiff is responsible for moving an action forward and it is the plaintiff who must bear the consequences of conducting his or her action in a dilatory manner. See Faris v. Eftimovski, 2013 ONCA 360 at paragraph 33.

[19] These are the factors and principles I have followed in determining the issues before me on this status hearing. Having done so, I have come to the conclusion that the plaintiffs’ action should be allowed to continue.

DELAY

[20] I have considered the evidence and the submissions of counsel. On balance, I am satisfied that the plaintiffs have provided an acceptable explanation for the litigation delay.

[21] As a preliminary point, the defendant takes the position that I should consider the initial delay on the part of the plaintiffs in commencing their actions in the first place. Some of the issues in this action date back to 1997. The defendant argues that the plaintiffs’ additional investigation in 2011 and 2012 should have taken place before these claims were issued. Conducting the investigation after the claims were issued resulted in unnecessary delay.

[22] I do not accept this argument. The case law is clear. The delay with which the court is concerned is the litigation delay, either from the date of the commencement of the action or from the date of the delivery of the first defence as contemplated by Rule 48.14. See Khan at paragraph 1.

[23] The plaintiffs are responsible for some initial delay from the date of the issuance of the notices of action to the delivery of the notices of intent to defend. The plaintiffs failed to file their statements of claim in a timely manner. The defendant was not served with the plaintiffs’ pleadings until several months after the claims were issued. No explanation is provided in the evidence for the plaintiffs’ failure to file their statements of claim on time. I do not view the defendant’s initial reluctance to consent to the late filing as unreasonable in the circumstances. I see no acceptable explanation for this delay.

[24] I do, however, accept the plaintiffs’ explanation for the balance of the delay with this proceeding. The defendant requested further particulars before he would plead to the statements of claim. Providing those particulars proved to be a complicated and time consuming exercise involving lawyers in another jurisdiction. A comparison of the original claims with the fresh statement of claim makes it clear that a significant investigation was undertaken by the plaintiffs in order to provide the defendant with the additional information he was seeking. The plaintiffs’ lawyer should have kept the defendant’s lawyer apprised of what was being done between March 2011 and July 2012, but that failing does not alter the fact that the plaintiffs were actively taking the steps necessary to advance this claim.

[25] The balance of the delay up to the first return date of this status hearing is also adequately explained. The progress of the action was stalled by Vincenza’s passing, the procedural complications relating to the estates and, to some extent, the poor health of the defendant. The waiting time for available motion dates also contributed to the delay.

[26] In my view, the only unacceptable delay is in connection with the time period from the commencement of this action up to the delivery of the notices of intent to defend. The plaintiffs have failed to satisfactorily explain why they failed to file their statements of claim on time. The balance of the delay, however, has been satisfactorily explained. Certainly the plaintiffs could have done more to expedite this claim. However, the standard is not perfection. It is only necessary that the explanation be satisfactory. The overall delay in this case is certainly not of a similar duration as was found in cases such as 1196158 Ontario Inc. and Faris (5 years in both). At no point can it be inferred that the plaintiffs abandoned their claim. On balance, the plaintiffs have met this element of the test.

PREJUDICE

[27] There are three aspects to the prejudice analysis. The death of Vincenza. The poor health of the defendant. The fact that some of the events giving rise to this claim took place many years ago coupled with the reality of fading memories.

[28] Vincenza is no longer available to give evidence. This is obviously a serious issue, especially given the fact that Francesco passed away before this action was started. However, the evidence from the plaintiffs is that Angela has been involved with the issues in this action since 2002 and is able to provide direct evidence. There is some authority for the proposition that the prejudice that may arise from the unavailability of a witness may be overcome if another witness who has knowledge of the matters in issue is available to give evidence. See Tate v. Philp, 2013 ONSC 4921 at paragraph 16.

[29] I do agree with the defendant that ideally this evidence should have come from Angela herself, rather than from her lawyer. However, I note that the defendant has not contradicted this statement in his evidence. Furthermore, it would appear that the absence of evidence from Francesco and Vincenza would not significantly prejudice the defendant. Rather, it is the plaintiffs who may now be unable to contradict the defendant’s evidence.

[30] Moreover, I am satisfied from a review of the pleadings that this action is mostly a documents case regarding the accounting and tax advice given to the plaintiffs by the defendant. The major issues in this action will likely turn on an examination of financial documents and an application of the applicable law. It is likely that expert evidence will play a large role in the outcome of the trial.

[31] I agree that the defendant’s health issues are a concern. The defendant is clearly suffering from serious health problems that may complicate his ability to defend this action. However, it does appear that defendant’s medical conditions are stable, at least for the time being. It is my view that reasonable steps can be taken to accommodate the defendant in order to allow him to mount a full defence and receive a fair trial while minimizing the impact of this proceeding on his health.

[32] Finally, I acknowledge that memories fade over time and the events giving rise to this action go back many years. However, the action itself is not that old and the delay to date has not been inordinate. The defendant has been aware of the claim since December 2010. As well, it appears that all documents have been preserved. The plaintiffs’ lawyers are in possession of thousands of pages of documents. There is no suggestion from the defendant that his documents are not available. As I have indicated above, I view this action as mostly a documents case.

CONCLUSION

[33] On at least three recent occasions the Court of Appeal has stated that the test to be applied at a contested status hearing is conjunctive. Both parts of the test must be satisfied. The delay must be explained. There must be no prejudice to the defendant. There have been decisions in the past where the court applied a contextual analysis and ultimately made the order that is just in the circumstances of each particular case. See the decision of Master Dash in Koepcke v. Webster, 2012 ONSC 357 (Master) at paragraph 23. Master Dash’s approach in Koepcke was followed by the Divisional Court in Pouget v. Hynes, 2013 ONSC 487 (Div. Ct.) at paragraph 35. It was also the approach I adopted in Business Development Bank of Canada v. I Inc., 2013 ONSC 1749 (Master) at paragraph 14. This, of course, is the approach mandated by the Court of Appeal in connection with motions to set aside administrative dismissal orders. However, all of those decisions pre-date the decision of the Court of Appeal in Faris. As Morgan J. stated in Saini v. Sun Life Assurance Co. of Canada, 2013 ONSC 4463 at paragraph 8:

The thrust of the recent case law from the Court of Appeal is that the judge or master presiding at a status hearing is not to aim at fixing a tardy action but at dismissing it, unless there is cogent evidence in the record establishing a reason not to do so.

[34] Nevertheless, the Court of Appeal has made it clear in its decision in 1196158 Ontario Inc. that the court’s decision at a contested status hearing must balance two fundamental principles: the public and private interest in discouraging delay and the preference for a determination of disputes on their merits. Ultimately, the decision of the court on a contested status hearing is a discretionary one. As I have said, Rule 48.14(13)(b) provides that the presiding judicial officer at a status hearing may dismiss the action for delay. See also 1196158 Ontario Inc. at paragraphs 17-20 and 32.

[35] I have carefully considered these principles in the context of this action. There are certainly serious issues regarding the delay to date and the potential for prejudice. Nevertheless, for the reasons set out above, I am satisfied that the plaintiffs have met the applicable test and that it is in the interest of justice that this action be allowed to continue.

ORDER

[36] I therefore order that the plaintiffs’ action be allowed to continue. As a term of granting this indulgence to the plaintiffs, and considering the defendant’s health issues, I am ordering that the plaintiffs’ examination for discovery of the defendant take place by way of written questions and answers pursuant to Rule 35.

[37] The parties shall confer and attempt to agree on a timetable for the remaining steps in this action. The proposed timetable shall be provided to the court for approval by January 24, 2014. If the parties are unable to agree on a timetable, they shall provide the court with written submissions by January 24, 2014.

[38] Finally, if the parties are unable to resolve the issue of costs, they shall make submissions in writing, also by January 24, 2014.

[39] I wish to thank both counsel for their excellent submissions. They were of great assistance to the court.

Master R.A. Muir

DATE: December 19, 2013