CITATION: Elia v. Alizadeh, 2015 ONSC 1529

COURT FILE NO.: 01- CV-205661

MOTION HEARD: 20140820

REASONS RELEASED: 20150316

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

Paul Elia, Furl Investments Limited,

Furl Automotive Inc., and Highcastle Investments Limited

Plaintiffs

• and-

Shahin Alizadeh, Downtown Automotive Inc., King Parliament Automotive Inc., 997350 Ontario Inc. (formerly known As King Toyota Inc.), Key Holdings Inc., 1007006 Ontario Limited, Cina Hull, Charisma Marketing Inc., 1390835 Ontario Limited, and MPI Investment Corp.

Defendants

BEFORE: MASTER D. E. SHORT

COUNSEL: Jeffrey W. Kramer & Fax: (416) 601-0712

Alexander Minkin

-for the Moving Defendants

Gary H. Luftspring & Fax: (416) 364-1697

Andrea J. Sanche

-for the Plaintiffs

REASONS RELEASED: March 16, 2015

Reasons for Decision

“Before you borrow money from a friend,

decide which you need more.” — Anon.

I. Overview

[1] On this motion brought in 2014, the Moving Defendants ask this Court to find this this action was deemed dismissed pursuant to Rule 48.15(6) in 2012; and, if that is not the case, then for an Order dismissing this 2001 action for delay pursuant to Rule 24.01 of the Rules of Civil Procedure, (the "Rules").

[2] In this action, the plaintiffs Paul Elia (“Elia”) and his related companies, seek payment of amounts owed by several of the corporate defendants and their principal, the defendant Shahin Alizadeh (“Alizadeh” or “Shahin”). on promissory notes. Further relief is claimed based on alleged activities of various defendants that are said to have impeded recovery on the amounts advanced.

[3] On this motion, the defendants, Alizadeh, Downtown Automotive Inc. (“Downtown Auto”), King Parliament Automotive Inc. (“King Parliament”), 997350 Ontario Inc. (formerly known as King Toyota Inc.) (“King Toyota” or “997”), Key Holdings Inc. (“Key Holdings”) 1007006 Ontario Limited (“1007”). Cina Hull and Charisma Marketing Inc. ("Charisma") (all collectively referred to herein as the "Moving Defendants"), seek an order determining the dismissal of this action.

[4] In my view the relationship between the parties is highly relevant to the disposition of this motion.

[5] The Statement of Claim contains this description of the relationship of the principal individuals in 2001:

“Nature of Alizadeh/Elia relationship

3. During the mid 1980s and for many years thereafter, Elia and Alizadeh were the closest of friends. They spent much time together. They vacationed together.

4. Alizadeh is an experienced operator of vehicle dealerships.

5. Alizadeh had been, before he and Elia had become friends, experienced and financially successful in other vehicle dealerships of his. Elia knew so. Elia knew nothing about the vehicle dealerships business. Alizadeh knew so.

6. As set out below, Elia advanced money to three vehicle dealerships run by Alizadeh.

7. Elia advanced the money trusting Alizadeh as a friend, acceding to Alizadeh's repeated appeals to their continuing friendship, with Alizadeh running the three businesses throughout, with Elia trusting that Alizadeh would be as good as his word, with Elia trusting Alizadeh to deal with him honestly, openly, and fairly.

8. Alizadeh knew so.”

[6] Included in that pleading are these further allegations with respect to the defendant Cina Hull:

“Hull, inadequate reporting, and advances between the three vehicle dealership businesses

40. Hull is Alizadeh's spouse. She has lived with him for many years.

41. Hull has worked in, and has received substantial amounts from, the three vehicle dealership businesses.

42. Alizadeh and Hull have for years shared a common interest in defeating, have agreed with one another to do all they can to defeat, and have acted together to defeat, Elia's entitlement to have his advances repaid.

43. Hull continues to assert (through her Charisma corporation) claims under the Personal Property Security Act to hold security against the Toyota franchise corporation.

44. Any advances were with money obtained (whether directly or indirectly) from Alizadeh or with money raised by or on the strength of assets owned (whether directly or indirectly) by Alizadeh. The security was obtained as a result of Alizadeh and Hull acting together for the purpose of using that security to "cut out" Elia's interests despite both Alizadeh and Hull knowing that doing so contravened the basis on which Elia advanced. That basis had been that neither Elia advances or Alizadeh advances would have priority over one another. Any claims held by Hull and Charisma if otherwise enforceable stand no higher in priority respecting Elia than would Alizadeh's.

45. The basis on which Hull initially filed claims to hold security on the strength of documents for which Elia was to have been one of the Toyota signing officers. The documents were never given to Elia to sign.”

[7] Further allegations concerning the history leading up to the 2001 action contained in the pleading include the following:

“Alizadeh 's pervasive breaches of fiduciary duty in his dealings with Elia

96. As set out above in paragraph 7, Elia advanced the money trusting Alizadeh as a friend, acceding to Alizadeh's repeated appeals to their continuing friendship, with Alizadeh running the three businesses throughout, with Elia trusting that Alizadeh would be as good as his word, with Elia trusting Alizadeh to deal with him honestly, openly, and fairly.

97. Given the nature of the relationship, given the nature of the trust which (as Alizadeh knew) Elia reposed in Alizadeh, given the nature of Alizadeh' s appeals and promises thereafter to Elia, given the basis on which Alizadeh repeatedly sought and obtained indulgences from Elia, and given that Alizadeh was the one running the businesses throughout, fiduciary obligations attached requiring that Alizadeh deal with Elia honestly, openly, and fairly.

98. Alizadeh breached those obligations. Having obtained Elia's money, Alizadeh took unfair advantage of Elia at every turn.

a. Repeatedly appealing to their friendship, Alizadeh prevailed on Elia to allow more time to pay, to allow payment amounts to be low, and to overlook defaults on schedules set. Elia acceded….”

[8] With respect to the present action, the Moving Defendants have only filed (in June, 2001) a Notice of Intent to Defend. As a consequence there is not yet a responding pleading in this action with respect to any of the above pleaded assertions.

II. Early History of Dispute

[9] On March 12, 1999, the plaintiffs Elia and Furl Investments Limited (“Furl") commenced Action No. 99-CV-154469 (“1999 Action”), seeking among other relief, payment from the defendants Alizadeh, King Toyota and Key Holdings for amounts due under promissory notes.

[10] The plaintiffs sought, amongst other relief, payment from Alizadeh, Key Holdings and King Toyota for amounts due under promissory notes. The plaintiffs alleged that they loaned money to these defendants between July 1990 and September 1994. The provisions of the individual notes were not before me.The defendants point out in their factum that the plaintiffs failed to specify when the defendants defaulted under the promissory notes.

[11] However, the plaintiffs’ factum on this motion asserts:

The Moving Defendants who were defendants to the 1999 Action filed a Statement of Defence and Counterclaim, dated June 24, 1999 (the "1999 Defence"). In their 1999 Defence, those defendants admitted that Elia loaned funds to Shahin and Key Holdings from his companies, although they disputed the quantum owed. In the 1999 Defence, they also alleged that there was a business arrangement in respect of some loans provided by Elia and his companies, which meant that the debts were not loans but were shareholder advances in respect of 997.

[12] Elia and Furl filed a Reply and Defence to Counterclaim on August 6, 1999.

[13] By motion returnable August 13, 1999, the Alizadeh defendants moved to discharge financing statements that the plaintiffs had registered against them pursuant to the Personal Property Security Act.

[14] Hull brought a motion for summary judgment seeking a dismissal of the action as against her, returnable on the same date.

[15] By cross-motion returnable November 2, 1999 the plaintiffs sought leave to amend the statement of claim. The motions of Hull and the Alizadeh defendants were adjourned to November 2, 1999 to be heard at the same time as the plaintiffs' cross-motion.

[16] By endorsement dated November 4, 1999, Justice Spiegel adjourned Hull's summary judgment motion to January 20, 2000 and granted leave to the plaintiffs to amend the statement of claim. However, citing the plaintiffs' delay in filing their motion to amend, Justice Spiegel ordered them to pay costs to Hull in the amount of $1,800.

[17] By a second endorsement and order dated November 4, 1999, Justice Spiegel dismissed the Alizadeh Defendants' motion to discharge the PPSA registrations and ordered them to pay costs to the plaintiffs in the amount of $5,000 plus GST.

[18] After that series of motions, on February 15, 2001, the plaintiffs commenced the within action ("2001 Action"), which incorporates the allegations and issues in the 1999 Action and adds further claims and parties.

[19] Hull moved for an order that the 1999 Action be discontinued, or alternatively that the 2001 Action be struck, on the ground that the existence of both actions amounted to an abuse of process.

[20] The motion was heard on July 16, 2002. By endorsement dated October 4, 2002, Justice Then stayed the 1999 Action and allowed the 2001 Action to continue on the condition that the plaintiffs pay the costs of the 1999 Action, as well as the costs award of $1,800 as ordered by Justice Spiegel. Justice Then also ordered the plaintiffs to pay the costs of the motion before him.

[21] The plaintiffs filed a notice of motion for leave to appeal the Order of Justice Then; but apparently did not proceed with that motion.

[22] The parties delivered cost submissions to Justice Then in October of 2002; however apparently no decision with respect to costs was delivered. Based on the materials before me, it appears neither side took steps to follow up on the cost awards.

[23] The Moving defendants assert that the plaintiffs “did not satisfy the conditions required continue the 2001 Action as ordered by Justice Then; namely, the payment of the costs of the 1999 Action and the $1,800 cost award as ordered by Justice Spiegel to Hull.”

[24] However the costs of the 1999 action seem never to have been fixed. As well, I don’t know whether the $5000 costs award against the then moving defendants (i.e. flowing the other way) was ever paid.

[25] In any event, the Moving Defendants assert that following 2002 the plaintiffs “took no steps to move the 2001 Action forward until April 15, 2013.”

[26] Based upon that alleged inaction, they now bring this motion.

III. Two Pronged Argument

[27] The Moving defendants make two alternate and concurrent arguments to justify the Order sought. They argue that this matter was either deemed to be administratively dismissed by virtue of the application of a specific transition provision in the Rules of Civil Procedure or, in any event, the case ought to be dismissed as a result of the plaintiffs' delay in prosecuting the action.

[28] I turn first to the deemed dismissal argument. In 2010 substantial amendments were made to the Rules. Many of the amendments were aimed at removing various delays which could be addressed either by a more “hands-on” case management approach or by enacting various provisions which automatically brought actions to an end, in the event that various prescribed steps were not taken on a timely basis.

[29] Those provisions have met with various degrees of success. Rule 48.15 which treated cases as abandoned, if not defended within 180 days, has now been revoked by O. Reg. 170/14, s. 10.

[30] The former two year period for setting a matter down has now effectively been extended to five years.

[31] While not necessary for this decision, I am nevertheless comforted that these amendments appear to reflect an approach that seems to have moved towards striving to permit matters to be resolved on their merits, rather than by the application of somewhat arbitrary time limits.

IV. Rule 48 in Transition

[32] Rule 48 is entitled “Listing for Trial”. Rule 48.01 provides that “after the close of pleadings, any party to an action or to a counterclaim or crossclaim in the action who is not in default under these rules or an order of the court and who is ready for trial may set the action down for trial, together with any counterclaim or crossclaim.”

[33] The 2010 amendments contemplated that cases ought to have been ready to be tried within two years after they were started. Rule 48.14 was the “hammer” that was expected to drive the accomplishment of that objective.

[34] When this motion was argued Rule 48.14 (with my emphasis added throughout) read in part:

ACTION NOT ON TRIAL LIST

Definition

48.14 (0.1) In this rule, "defence" means,

(a) a statement of defence,

(b) a notice of intent to defend. and

(c) a notice of motion in response to an action, other than a motion challenging the court's jurisdiction.

[I note in passing that this provision was recently entirely revoked]

Status Notice

(1) Unless the court orders otherwise, if an action in which a defence has been filed has not been placed on a trial list or terminated by any means within two years after the first defence is filed, the registrar shall serve on the parties a status notice in Form 48C.l that the action will be dismissed for delay unless, within 90 days after service of the notice, the action is set down for trial or terminated, or documents are filed in accordance with subrule (10).

Dismissal by Registrar

(4) The registrar shall dismiss the action for delay, with costs, 90 days after service of the status notice, unless,

(a) the action has been set down for trial or restored to a trial list. as the case may be;

(b) the action has been terminated by any means;

(c) documents have been filed in accordance with subrule (10): or

(d) the judge or case management master presiding at a status hearing has ordered otherwise.

Setting Aside Dismissal

(16) An order under this rule dismissing an action may be set aside under rule 37.14.

[35] The application of this Rule presents difficulties in this case. Subsection 48.14(0.1) would seem to indicate the present action is a defended action, since a Notice of Intent to Defend was filed in 2002. At what point was the Registrar required to issue a Status Notice?

[36] Clearly no Status Notice was ever issued by the Registrar. It would appear that it was difficult to establish the number of older cases that were very dormant and probably had either been long resolved or forgotten when the new rules were implemented. This situation meant that it was impractical to issue notices or otherwise administratively deal with every such case. Instead the cases were left to be dealt with by previously existing approaches, such as bringing a motion under Rule 24 to have the action dismissed for want of prosecution.

[37] However this situation was further complicated by new Rule 48.15 which dealt with the required dismissal by the Registrar of new actions which were deemed abandoned by any plaintiff that failed to take steps to move their case forward within 180 days of the date on which the Statement of Claim was issued.

[38] From January 1, 2010, through to the time when this motion was argued, Rule 48.15 (with my emphasis added throughout) read in part:

ACTION ABANDONED

Dismissal

48.15 (1) The registrar shall make an order dismissing an action as abandoned if the following conditions are satisfied, unless the court orders otherwise:

1. More than 180 days have passed since the date the originating process was issued.

2. None of the following has been filed:

i. A statement of defence.

ii. A notice of intent to defend.

iii. A notice of motion in response to an action, other than a motion challenging the court’s jurisdiction.

3. The action has not been disposed of by final order or judgment.

4. The action has not been set down for trial.

5. The registrar has given 45 days notice in Form 48E that the action will be dismissed as abandoned.

Setting Aside Dismissal

(5) An order under this rule dismissing an action may be set aside under rule 37.14.

[39] As a defined “defence” was filed in 2001 and, in any event, no Notice in Form 48E was sent at any time, the action would seem not liable to being dismissed by the Registrar under Rule 48.15(1).

[40] However, the next subsection of the rule is relied upon by the moving party as establishing that this action was deemed dismissed on January 1, 2012, prior to this motion being brought and two years after the original Rules amendments were enacted.

[41] This argument flows from Rule 48.15(6) which provided:

Transition

(6) In the case of an action commenced before January 1, 2010, other than an action governed by Rule 76 or 77, the following rules apply, unless the court orders otherwise:

1. If a step is taken in the action on or after January 1, 2010 and before January 1, 2012, subrule (1) applies as if the action started on the date on which the step was taken.

2. If no step is taken in the action on or after January 1, 2010 and before January 1, 2012, the action is deemed on January 1, 2012 to be dismissed as abandoned on that date, unless the plaintiff is under a disability.

3. An action deemed to be dismissed under paragraph 2 may be set aside under rule 37.14 and, for the purpose, the deemed dismissal shall be treated as if it were an order of the registrar…

[42] Is this a rule of general application or does there need to be a breach of the elements of Rule 48.15 established for a case to be deemed abandoned?

[43] Before examining that question, it is perhaps helpful to note that as of January 1, 2015, while this matter was under reserve, all of Rules 48.14 and 48.15, as they previously existed, were revoked in their entirety. A new form of rule 48.14 was enacted by Ontario Reg. 170/14 (10) in part extending the time for setting a matter down for trial.

[44] Rule 48.15, however was simply erased and not replaced.

[45] For completeness, I note the new 2015 enacted provisions provide:

Dismissal Of Action For Delay

48.14 (1) Unless the court orders otherwise, the registrar shall dismiss an action for delay in either of the following circumstances, subject to subrules (4) to (8):

1. The action has not been set down for trial or terminated by any means by the later of the fifth anniversary of the commencement of the action and January 1, 2017.

2. The action was struck off a trial list and has not been restored to a trial list or otherwise terminated by any means by the later of the second anniversary of being struck off and January 1, 2017.

[46] It appears that under this new regime no warning notice will be send to counsel of the pending automatic dismissal by the registrar. Given the number of motions my colleagues and I had to address over the past few years where a warning was sent, we can only hope that the bar has already implemented a “tickler” system that will operate regardless of changes of carriage within the firm over the first five years of a case. I anticipate that inadvertence and a genuine intent to proceed will be that much harder to satisfactorily establish following January 1 2017

[47] If an action is not set down in accord with the new rule 48.14(1) provisions, and as the new deadline approchs, the parties may apply for a Status Hearing. New Subrules (4) to (8) address the need for a timetable in such situations and read:

(4) Subrule (1) does not apply if, at least 30 days before the expiry of the applicable period referred to in that subrule, a party files the following documents:

1. A timetable, signed by all the parties, that,

i. identifies the steps to be completed before the action may be set down for trial or restored to a trial list, as the case may be,

ii. shows the date or dates by which the steps will be completed, and

iii. shows a date, which shall be no more than two years after the day the applicable period referred to in subrule (1) expires, before which the action shall be set down for trial or restored to a trial list.

2. A draft order establishing the timetable.

Status Hearing

(5) If the parties do not consent to a timetable under subrule (4), any party may, before the expiry of the applicable period referred to in subrule (1), bring a motion for a status hearing.

(6) For the purposes of subrule (5), the hearing of the motion shall be convened as a status hearing.

(7) At a status hearing, the plaintiff shall show cause why the action should not be dismissed for delay, and the court may,

(a) dismiss the action for delay; or

(b) if the court is satisfied that the action should proceed,

(i) set deadlines for the completion of the remaining steps necessary to have the action set down for trial or restored to a trial list, as the case may be, and order that it be set down for trial or restored to a trial list within a specified time,

(ii) adjourn the status hearing on such terms as are just,

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

(iv) make such other order as is just.

[48] I regard these new provisions as providing guidance for the appropriate future course of action in this case if I determine to refuse the Moving Defendants’ motion.

[49] The new regulation implementing the above changes also contained this transitional framework with respect to existing problem cases:

Transition

(11) Subject to subrule (12), every status notice served under this rule, as it read immediately before January 1, 2015, ceases to have effect on that date, if the action was not dismissed before that date.

(12) If a status hearing in relation to a status notice was scheduled but not held before January 1, 2015, this rule, as it read immediately before that date, continues to apply to the matter.

(13) Every notice that an action will be dismissed as abandoned that was given by the registrar under rule 48.15, as it read immediately before January 1, 2015, ceases to have effect on that date, if the action was not dismissed before that date. [O. Reg. 170/14, s. 10]

[50] While I feel the amendments assist in responding to the Moving Defendants submissions on a Deemed dismissal, I ultimately am determing the present motion under the Rules in place when the motion was brought.

[51] As noted above, no status hearing was ever scheduled. No Status Hearing Notice was ever issued nor served and no notice of deemed abandonment was given by the registrar in this case. Was there nevertheless an effective deemed dismissal in this case?

V. Deemed Dismissal?

[52] The moving parties simply assert that in the case of an action commenced before January 1, 2010, if “no step” is taken between January 1, 2010 and January 1, 2012, the action is deemed to be dismissed as abandoned on January 1, 2012.

[53] They note as well that there is no proceeding currently before the court to set aside such a deemed dismissal.

[54] The plaintiffs argue that this is not the proper interpretation and that sub-rule 48.15(6) must be read in the context of Rule 48.

[55] The 2012-2013 Ontario Annual Practice authors observed in their commentary on this Rule:

“For actions commenced prior to January 1, 2010, other than a Rule 76 or 77 action, and unless the court orders otherwise: if a step is taken in an action between January 1, 2010 and January 1, 2012, the 180 day period applies as if the action started on the date the step was taken; and if no such step is taken, the action is deemed to be dismissed as abandoned on January 1, 2012 unless the plaintiff is under a disability. Such a deemed dismissal is to be treated as a registrar's order and may be set aside under rule 37.14.” [my emphasis]

[56] However, after that observation was published, Justice Ricchetti found in Pinevalley Trim & Doors Ltd. v. Tibollo & Associates Professional Corporation et al., 2012 ONSC 1002, that on an “holistic reading” of Rule 48, sub-rule 48.15(6) clearly only applies to undefended actions. In particular he observed:

[24] When the history of Rule 48.l4 and 48.15 is considered, it is clear that Rule 48.15(6) was needed to specifically deal with undefended actions which had been commenced prior to January 1, 2010. This "transition" provision has a purpose. It is to deal with pre-2010 actions which have languished for two years without a defence being filed.

[25] To suggest that Rule 48.15(6) should apply to defended actions would ignore that these actions have already been administratively managed effectively for years including pre-January 2010 and during the past two years.

[26] I am satisfied that a proper interpretation of Rule 48.15(6) is that it is a transition rule which only applies to actions which come within the ambit of Rule 48.15, namely, undefended actions.[my emphasis]

[57] The plaintiffs argue that since the Moving Defendants filed a notice of intent to defend this action and pursuant to Rule 48.14, a defended action includes an action in which a notice of intent to defend was filed. As well, if a notice of intent to defend has been filed, a Rule 48.15 notice would not be delivered to the plaintiff. Rather, a Rule 48.14 notice would need to have been generated by the registrar, as that Rule applies to actions in which a defence has been filed and not placed on the trial list. It is clear in this case no such notice was generated

[58] In my view I am clearly bound by the decision of Justice Ricchetti. However, in a more recent decision, released while this matter was under reserve Justice M.E. Vallee identifies some doubt as to whether the limitation imported into the Rule by his Honour is a correct approach.

[59] Less than two months ago, in Bradley v. Sun Life Assurance Co. of Canada, [2015] O.J. No. 219; 2015 ONSC 330; Justice Vallee addressed an application for leave to appeal from a decision on a motion that considered the impact of rule 48.15(6) where there had been an extended period of inactivity in a 2009 case. The reasons observe:

7 As noted earlier, on December 21, 2011 after a lengthy period of time in which nothing happened, the plaintiff's counsel contacted the court office and inquired as to whether a request for a Status Hearing would be considered a step in the action. Apparently, the court office advised him that it would be a step. Interestingly, no notice of a Status Hearing was ever sent.

8 Pine Valley Trim & Doors Ltd. v. Tibollo & Associates Professional Corporation et al, 2012 ONSC 1002, [2012] O.J. No. 585 is the only case that attempts to interpret Rule 48.15(6), the deemed as abandoned provision. In that case, the court determined that Rule 48.14(6) applied only to actions that were undefended. The defendant states that this is incorrect. There is no statement in the rule that it applies only to undefended actions. If the rule had been intended to apply only undefended actions, it would have said so.

9 The motion judge stated that there was significant doubt as to whether the case could be categorically dismissed. The defendant states that the motion judge should not have considered the fact that the court office staff told Mr. Ralston that a request for a Status Hearing would be considered to be a step. Requesting a Status Hearing cannot be considered as taking a step in the action. Furthermore, she should not have considered the fact that the court office considered this action to be a "live action." The manner in which the court office staff considers an action should not have been used to interpret a rule. The motion judge should not have been influenced by this in her reasons.

[60] In her reasons Justice Valle sets out this analysis of the now repealed provision:

“11. The motion judge considered the deemed abandonment rule in paragraphs 55 to 58 of her decision. She noted that there is little case law to interpret it. Further, even though the rule speaks of taking a step in the litigation, a definition of "step" is not provided in the rules. The motion judge considered the Pine Valley case. She noted that the court in Pine Valley determined that the rule applied only to undefended actions. She commented that there was nothing in the rule itself that indicates this. She went on to state that the conclusions in Pine Valley have been questioned. In paragraph 57 of her decision, the motion judge states:

Given the lack of clarity with respect to the meaning of "step" and whether or not the rule applies only to undefended actions, it is my view that there is significant doubt as to whether the case can be categorically viewed as having been deemed dismissed as abandoned.

The motion judge went on to state that the court office viewed the action as "live" and informed both counsel of this. They both relied on the information.

12 The motion judge was asked to determine that the deemed abandonment rule ought not to be narrowly construed as applying to only undefended actions. She was also asked to conclude that the action was deemed to be dismissed and that the plaintiff's request for a status hearing did not constitute taking a "step" in the litigation.

13 The motion judge exercised her discretion and concluded that it was not clear whether Rule 48.15(6)(2) applied in this circumstance. She noted that the Pine Valley decision was questionable. Furthermore, the matter before the court was not a motion for a deemed dismissal. It was a Status Hearing.

[61] The matter before me did not arise at a Status Hearing and does encompass a request for a recognition of an alleged “deemed” dismissal. In denying leave to appeal from an order that allowed the case to proceed her Honour considered whether “the proposed appeal involve matters of such importance that leave to appeal should be granted ?”:

The Defendant's Position

25. The defendant acknowledges that Rule 48.15(6) was abolished on January 1, 2015. In its place is a new rule which provides that actions that are commenced before January 1, 2012 which are not dismissed or scheduled for a Status Hearing by January 1, 2015 will be dismissed without notice. This provides counsel with a five year window and an end date which can be diarized. I note that in these types of actions, there will no arguments in the future as to whether a step has been taken or what in fact constitutes a step. Furthermore, concept of deemed abandonment has disappeared.

26. The defendant states some old cases could still be subject to Rule 48.15(6). The case at bar cannot be the only case in which a plaintiff fails to take a step for two years. Accordingly, given the motion judge's difficulty in apply the rule and the questionable decision in Pine Valley, this matter should be clarified by an appeal court.

[62] In dismissing the leave application Justice Vallee concluded:

27. Because the deemed dismissal rule has been abolished, there is no need to clarify the Pine Valley decision. While there may be a few other cases similar to the case at bar which have not been resolved or tried, the issue is not of such importance that it merits review by an appeal court. The phrase "of such importance" has been interpreted to mean as "of broad significance, general application related to the development of the law or the administration of justice. (See Almeida v. Almeida, [2012] O.J. No. 3174 referring to Greslik v. Ontario Legal Aid Plan, 1988 CanLII 4842 (ON SCDC), [1988] O.J. No. 525). The issues in this matter are of significance to only the parties and perhaps a small number of other cases in which an argument could be made that the actions have been deemed to be dismissed.

[63] This would appear to be one of that “very few” number of other cases similar to the one before Justice Vallee. Had rule 48.15(6) been numbered as rule 48.16, under the heading “Transition” I would be inclined to hold that a deemed dismissal had occurred. However, given the existing case law, I believe I am obliged to hold that by virtue of the “defence” of the action that was filed in 2001 this action was not effectively deemed dismissed.

[64] In any event, were it deemed dismissed, using the overriding concept of proportionality, with a view to effectively using court time, I would have treated the matter as a Rule 37.14 motion to set aside such a dismissal.

[65] In the event of a a motion seeking to set aside adeemed dismissal, there would seem to be no onus involved. Conversely, if this were a rule 37.14 motion, the plaintiff would bear the onus of establishing that the dismissal ought to be set aside. Given that this is a motion under Rule 24 the onus of establishing that the action ought to be dismissed, lies with the Moving Defendants.

[66] In addition, while this matter was under an inordinately long reserve, for which I express my regret to all parties, Associate Chief Justice Morocco sitting on the Divisional Court delivered reasons that provide me with what I regard as support for the conclusions I reached on the basis of the arguments I heard from the parties.

[67] In Dang v. Nguyen 2014 ONSC 7150, [2014] O.J. No. 5880; 2014 ONSC 7150 F.N. Marrocco A.C.J.S.C.J observed on an appeal dealing with the appropriate approach to cases such as this, in part:

4 Unbeknownst to the plaintiff, her claim was dismissed by the Registrar on July 10, 2012. The Registrar's order dismissed the plaintiff's claim as abandoned pursuant to Rule 48.15(1). Although not necessary for my decision, it is part of the context in which this matter arises that Rule 48.15 (1) has been repealed effective January 1, 2015.

[68] While he was addressing the abandonment rule (48.15), I similarly note that the now amended Rule 48.14 now allows a five year period which expires, had the action not already been administratively dismissed on the later of the fifth anniversary of the commencement of the action and January 1, 2017.

[69] Because this action has existed through a number of rule amendments it may well have fallen outside any rule that would have dismissed the action for failure to take a particular step. My reading of the new rule would suggest that as a consequence this action could not now be administratively dismissed for failure to take a step prior to January 1, 2017.

[70] I also observe that in the past month Justice Perell gave new guidance as to the approach to be taken by my colleagues on dismissal related motions. In Polyakova v. Weiss, [2015] O.J. No. 805; 2015 ONSC 1153 his Honour was dealing with an appeal from a decision of Master Graham setting aside a Registrar’s dismissal where no Status Hearing was requested by either side of the action. Justice Perell indicates that the test should be more onerous where a Status Hearing is requested. His analysis reads:

4 Under rule 48.14(16), the dismissal of an action under subrules 48.14(4) (dismissal by registrar) may be set aside under rule 37.14, and the fulcrum of this appeal is that the Master, somewhat reluctantly, applied the test established by the Court of Appeal in Scaini v. Prochnicki (2007), 2007 ONCA 63, 85 O.R. (3d) 179 (C.A.), Marché d'Alimentation Denis Thériault Ltée. v. Giant Tiger Stores Ltd. (2007), 2007 ONCA 695, 87 O.R. (3d) 660 (C.A.), Finlay v. Van Paassen, 2010 ONCA 204; Wellwood v. Ontario Provincial Police, 2010 ONCA 386; and Habib v. Mucaj, 2012 ONCA 880, [2012] O.J. No. 5946 (C.A.) for the setting aside of a registrar's dismissal order under the combination of rule 48.14(16) and rule 37.14.

5 Although asked to do so, the Master refused to apply the far more stricter test established by the Court of Appeal for rule 48.14(13) (disposition at status hearing) in Khan v. Sun Life Assurance Co. of Canada, 2011 ONCA 650; 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544, [2012] O.J. No. 3877 (C.A.), and Faris v. Eftimovski, 2013 ONCA 360 for determining at a status hearing whether to dismiss an action for delay.

6 In Nissar v. Toronto Transit Commission, 2013 ONCA 361, [2013] O.J. No. 2553 (C.A.), the Court of Appeal held that the stricter test also applies on motions to restore an action to the trial list under rule 48.11.

[71] Against that jurisprudential background Perell, J. considers the approach of the Master to a case where no status hearing was sought:

7 In paragraph 13 of his decision, the Master summarized the two tests, and it was his view that the test for setting aside a registrar's order that dismisses a dilatory action (rules 48.16 and 37.14) is far more lenient than the test to determine whether an action should be dismissed for delay at a status hearing (rule 48.14(13)) or the test for restoring an action to a trial list (rule 48.11). He stated:

The Scaini test for setting aside a registrar's dismissal order made under rule 48.14(4) requires the court to consider four factors: the plaintiff's explanation for the delay, whether there was inadvertence in the plaintiff's failure to meet the deadline for dismissal of the action, whether the plaintiff moved promptly after learning of the dismissal order and whether there is any significant prejudice to the defendant arising out of the delay that resulted in the dismissal. It is not necessary for the plaintiff to satisfy all four factors and the court must consider those factors in the context of the action as a whole. The test formulated in Khan to determine whether or not an action should be dismissed at a status hearing [rule 48.14(13] requires the court to consider only the first and fourth factors of the Scaini test, specifically the explanation for the litigation delay and prejudice to the defendant. Most importantly, however, under Khan the plaintiff must satisfy both parts of the test and does not have the benefit of the court taking a contextual approach to its consideration of the two factors. The Khan test is the more onerous of the two.

8 [The defendant] submits that the stricter test should have been applied and had it been applied, he submits that [the plaintiff’s] action would not have been resuscitated and would remain dismissed.

9 The Master agreed with [the defendant’s] submission that it was illogical for the court to apply a more lenient legal test for a dilatory plaintiff's failure to respond to a status notice than the test it would apply where the dilatory plaintiff actually responded to the status notice by requesting a status hearing.

10 However, in paragraphs 17 and 18 of his reasons, Master Graham stated that jurisprudentially, there was nothing he could do to address the perceived incongruity; he stated:

17. Although I agree with the submission in paragraph 30 of the defendant's factum that "there is no principled basis on which to continue to apply a more lenient test to set aside registrar's orders than would be applied at a status hearing", this incongruous state of affairs cannot be remedied on this motion by this court. The Court of Appeal established the test in Scaini in 2007 and reaffirmed it in numerous subsequent decisions. Khan was decided by the Court of Appeal on October 18, 2011 and was followed by the Court of Appeal's decision in 1196158 Ontario Inc., supra on August 21, 2012. Despite these two decisions establishing and confirming the test under rule 48.14(13), on December 10, 2012, the Court of Appeal in Habib, supra still applied the test in Scaini to the setting aside of a registrar's dismissal order. Similarly, in neither Faris nor Nissar did the Court of Appeal state that the Khan test would replace the Scaini test for the setting aside of a registrar's dismissal order.

18. If the Court of Appeal intended to change the test established in Scaini, then one could reasonably assume that it would do so explicitly, possibly by convening a five judge panel, which is customary when that court is considering overturning one of its previous decisions. As this has not occurred, the test established in Scaini is still applicable to motions to set aside a registrar's dismissal for delay.

[72] This range of approaches presented ongoing challenges to my colleagues and I with respect to such motions brought prior to the recent rule change. Justice Perell provides guidance from his prospective on the appropriate approach to these cases:

11 I disagree with the Master that there is no principled basis on which to continue to apply a more lenient test to set aside registrar's orders than would be applied at a status hearing. It is clear that the Rules Committee wished to apply rule 37.14 for this particular circumstance. (I note parenthetically that this legislative intent is confirmed by the recent amendment to rule 48.14.) Recognizing that a Registrar's dismissal is an administrative, non-judicial, and non-discretionary order made without any review of the particular circumstances, and recognizing that in most circumstances, a plaintiff will respond to a status notice appropriately and avoid a status hearing altogether, it does not strike me as illogical that the test for setting aside the Registrar's order should be more lenient than the determination made at a more robust determination of whether there has been a delay that may be more than a technical non-compliance with the time periods for moving an action along.[my emphasis]

12 On a principled basis, the test used for rule 37.14 seems appropriate for dealing with a request to set aside an administrative, non-judicial, and non-discretionary order, and I disagree with [the defendant’s] argument that by applying rule 37.14 to a registrar's order, it will just encourage plaintiffs to not respond to the status notice. The reason that plaintiffs, or more precisely their lawyers, fail to respond to status notices is oversight or negligence, and, thus, speaking about encouragement in this context is a non-sequitur.

[73] I appreciate Justice Perell’s candor in describing the environment which those who consider the proper interpretation of the Rules toil:

13 In any event, a body of procedural law can be just and fair without necessarily being perfectly logical and perfectly congruous, and, more to the point, Master Graham's decision was jurisprudentially impeccable as a matter of stare decisis. As a lower court, he was bound, just as this lower court is bound, to follow the authority of the Court of Appeal as to what test to apply to the circumstances of a registrar's dismissal, and the Master did so.

[74] Against that guidance I turn to considering the second prong of the Moving Defendant’s argument.

VI. Rule 24: Dismissal of Action for Delay

[75] Having determined that the action was not already deemed to have been dismissed I turn to considering whether it ought now to be dismissed pursuant to Rule 24. That rule sets out when such a dismissal may be available:

24.01 (1) A defendant who is not in default under these rules or an order of the court may move to have an action dismissed for delay where the plaintiff has failed,

(a) to serve the statement of claim on all the defendants within the prescribed time;

(b) to have noted in default any defendant who has failed to deliver a statement of defence, within thirty days after the default;

(c) to set the action down for trial within six months after the close of pleadings; or

(d) REVOKED: R.R.O. 1990. Reg. 194, r. 24.01(2).

(e) to move for leave to restore to a trial list an action that has been struck off the trial list, within thirty days after the action was struck off.

[76] The Moving Parties assert that given the plaintiffs' delay in prosecuting this action, the court ought to order this action dismissed for delay.

[77] On such a motion is on the moving parties to satisfy the court that in all the circumstances of the matters the case ought to be dismissed. Inasmuch as the defendants have not filed a statement of defence is arguable that they are not in a position to bring this motion as their failure to file a statement of defence in accord with the rules may well mean they are in default “under these rules”. Conversely, the plaintiffs are clearly in default of rule 24.01(1) (b).

[78] That issue requires a consideration of the impact of Rule 18 which read in part:

TIME FOR DELIVERY OF STATEMENT OF DEFENCE

18.01 Except as provided in rule 18.02 or subrule 19.01 (5) (late delivery of defence) or 27.04 (2) (counterclaim against plaintiff and non-party), a statement of defence (Form 18A) shall be delivered,

(a) within twenty days after service of the statement of claim, where the defendant is served in Ontario….;

NOTICE OF INTENT TO DEFEND

18.02 (1) A defendant who is served with a statement of claim and intends to defend the action may deliver a notice of intent to defend (Form 18B) within the time prescribed for delivery of a statement of defence.

(2) A defendant who delivers a notice of intent to defend within the prescribed time is entitled to ten days, in addition to the time prescribed by rule 18.01, within which to deliver a statement of defence.

[79] Rule 19.01 deals with the failure to file a timely defence and contains a restriction on rule 19.01(5) to Rule 18.01. It reads in part :

NOTING DEFAULT

Where no Defence Delivered

19.01 (1) Where a defendant fails to deliver a statement of defence within the prescribed time, the plaintiff may, on filing proof of service of the statement of claim, …require the registrar to note the defendant in default.

Late Delivery of Defence

(5) A defendant may deliver a statement of defence at any time before being noted in default under this rule.

[80] Is a defendant who fails to file a Statement of Defence under rule 18 in default, but not so noted? Is such a defendant in such a state of “unnoted default” still in default for the purpose of being disqualified from being entitled to bring such a motion? It would appear that a plaintiff that does not note the defendant in default, is subject to having their action dismissed under Rule 24.01(b) for not having noted the defendant in default within 30 days of the default.

[81] Is the test for granting relief to a plaintiff that has failed to note the defendants in default due to courtesy or oversight, one where more leniency ought to be granted on such a motion, than if a defence had been filed years ago?

[82] In Lazaris v. Computer Logistics Inc., 2013 ONSC 4757; 2013 CarswellOnt 12743, which I examine in more detail later in these reasons, Master Muir expresses the view that it is at least arguable that a Master lacks jurisdiction to make an order under Rule 24.011if the moving party is “in default”, or if there is no “failure” by the plaintiff to comply with any of the defined, lettered categories in Rule 24.01.

[83] Regardless of the proper approach to that issue I feel an overall contextual examination of the particular circumstances of this action is appropriate.

VII. The Plaintiffs' Delays

[84] The Moving Defendants’ factum makes these observations:

• Subsequent to the 2002 motions the plaintiffs took no steps to move the 2001 Action forward until April 2013.

• By letter dated April 15, 2013, new counsel for the plaintiffs requested a timeline for the delivery of statements of defence as well as a discovery plan.

• It has been between 18 and 23 years since the loans alleged to have been made by the plaintiffs. It has been more than 14 years since the 1999 Action was commenced.

• Other than the incomplete motions referred to above, the plaintiffs have taken no steps to move this matter forward since 2002. The parties have not prepared affidavits of documents and there have been no examinations for discovery.

• The plaintiffs were represented by the firm Goodman & Carr LLP from 1999 until the firm dissolved in or about March, 2007. From that time until April 15, 2013, there was no existing law firm on the record for the plaintiffs.

[85] On the latter point, when a litigant’s law firm dissolves out from under them, through no fault of theirs, I am inclined to make some allowance for the result delay. However, six years is an inordinate time to be without counsel of record, unless a reasonable justification is put forth.

[86] Many elements of the claim relate to the funding of various automobile dealerships that no longer are active. The Moving Defendants point to these events and circumstances as prejudicing the defence of these claims; for example:

• the controller at King Toyota at the time relevant to the events described in the pleadings, passed away in 2005 or 2006. It is asserted that HE “would have been the only witness to have an intimate knowledge of the finances of King Toyota.”

• King Toyota stopped operating in 2000; King Parliament and Downtown Automotive stopped operating in 2002. Over the years, many of the records of these companies were lost or disposed of.

[87] Based upon cross examinations held with respect to this motion the Moving Defendants further assert:

• The plaintiffs have not retained any documents in support of their claims in the statement of claim that payments made by Downtown Automotive, King Parliament and King Toyota were made with the intent to defeat the plaintiffs' claims, contrary to the Assignment and Preferences Act.

• The plaintiffs have not retained any documents in support of their claims in the statement of claim that King Toyota was insolvent when it declared dividends from 1994 to 1995.

[88] While these latter items may be relevant to a future summary judgment motion, I am not certain that the plaintiff failing to retain or possess documents to support or justify its claims (assuming it ever had any such documents) is a ground for dismissing the action under Rule 24.

[89] In this regard, citing the Divisional Court’s decision in Albrecht v. Meridian Building Group Ltd., [1988] O.J. No. 901; 27 C.P.C.(2d) 213 ; the plaintiffs argue in part that:

. “…This action involves payment on a debt. The issues are those of contract interpretation: the Moving Defendants have not denied the existence of the promissory notes. Witnesses' memories are not required for a trial of this action; rather, the relevant evidence is primarily contained in the documents. which the plaintiffs have preserved. As the presumption of prejudice has been rebutted. the onus shifts to the Moving Defendants to lead convincing evidence of actual prejudice.”

[90] I find the plaintiffs’ further submissions persuasive in this regard:

45. The Moving Defendants have led no convincing evidence of actual prejudice. Although this action was commenced in 2001, the Moving Defendants point to the dissolution of some of the corporate defendants in 2000 and 2002 (and the possible destruction of records) as evidence of prejudice. Yet, these records were destroyed in the face of this lawsuit, which the court found was actually a continuation of an earlier 1999 lawsuit. The Moving Defendants were well aware of the issues underlying the 2001 Action and of their obligation to preserve and to produce all relevant documents. They never confirmed with the Plaintiffs that that they had no intention of continuing the lawsuit and that it was safe to destroy records. That they have failed or refused to take these steps is not supportive of their argument of prejudice. Further, the Moving Defendants have not identified when these records were destroyed: the delay cannot be prejudicial if the destruction occurred before the alleged delay. [see Gulf Canada Ltd. v. Horton CBI. Ltd. (1988), 28 C.P.C. (2d) 113 (Sask. Q.B.)at para 13].

VIII. Settlement Discussions

[91] The plaintiffs seek to explain their significant delay by referring to settlement discussions between Alizadeh and Elia which took place during the period from 2007 to 2012.

[92] The Moving Defendants assert that between February 6, 2002 and August 14, 2007, there were no settlement discussions between Alizadeh and Elia, save and except for a single meeting in 2004. Further it is asserted that, there were never any settlement discussions with the other defendants.

[93] It seems to me that the other parties to the litigation are closely allied with one of the two main protagonists and as a consequence I do not feel the latter point is persuasive.

[94] The nature of the discussions is important to my determination in this case.

[95] In August 2007, Elia approached Saul Shulman ("Shulman") to represent him in discussions with Alizadeh. Shulman was an advisor to Elia and members of his family, and received a significant annual financial compensation.

[96] The Moving Parties evidence is that, as at that time in 2007, “no steps had been taken in the action in 5 years, over 8 years had passed since the commencement of the 1999 Action, and between 12 and 15 years had passed since the events at issue in the actions. Alizadeh considered the lawsuit to be dead and so advised Shulman.” Nevertheless I reiterate that there were also no steps taken by any of the defendants to addressany concerns with respect to this delay.

[97] Mr Shulman is a lawyer and filed an affidavit with respect to his involvement in this matter upon which he was cross examined. No viva voce evidence was heard at the hearing of this motion

[98] Mr Shulman swore an affidavit stating that the purpose of the negotiations was to repair the personal relationship between Elia and Alizadeh and to resolve a broader dispute between them, which included some of the issues in the actions. He acknowledged that at no time did any of the other defendants engage in settlement discussions. Hull and Charisma Marketing had no involvement in these discussions. In fact it appears Mr. Shulman was not aware that they were parties to the actions.

[99] Based upon their cross-examination of Mr. Shulman the Moving Parties note that he apparently never saw the pleadings or any materials filed in the actions. The lawyers representing the parties in the actions were not involved in the negotiations, nor did they ever speak to Shulman in this period.

[100] In one of his affidavits filed on the motion Mr Alizadeh denies that there was ever any agreement between him and Elia to freeze or suspend the litigation or to hold the litigation in abeyance. On cross-examination, Shulman admitted that there was never any correspondence reflecting any such an agreement.

[101] On a motion such as this, it is impossible and inappropriate to make definite determinations of all the factual elements. Often the parties are simply seeing the same events through different lenses.

[102] Here the Plaintiffs assert that the Moving Defendants have not shown that there has been unexplained delay that has caused them prejudice and has raised a substantial risk to their right to a fair trial.

[103] The factum filed on behalf of the plaintiffs asserts:

“4. Indeed, since the commencement of this action in 2001, Alizadeh and the plaintiff, Paul Elia ("Elia"), have engaged in protracted settlement discussions to resolve this litigation. Since 2007, Alizadeh and Elia engaged in mediated discussions with Saul Shulman ("Shulman"), a retired lawyer and friend of Elia's, in an attempt to resolve this dispute. They negotiated on the agreement that Elia would suspend taking further steps in this action as both parties felt that settlement was preferable to litigation. The responsibility for the delay is shared by Elia and Alizadeh as they mutually agreed to hold the litigation in abeyance.

5. The Moving Defendants have not been prejudiced by any delay. They have not lead evidence of actual prejudice, and have only alluded to vague possible prejudice that has clearly not materialized. As the action involves payment on a debt owing, if witness evidence is needed (which is not apparent), only the testimony of the contracting parties, Elia and Alizadeh, will be probative at trial.

This is a document-driven matter. In that respect all documents relevant to the issues in the dispute have been preserved: Elia has maintained and produced the notes and copies of cheques and spreadsheets documenting all payments relating thereto. Although the Moving Defendants have not disputed the authenticity of the notes. any issues as to the application of limitation periods or the law relating to the notes can be pleaded in defence and argued at trial and is not indicative of prejudice.”

[104] In their evidence, Shulman and Elia confirm that the decade of negotiations between Elia and Alizadeh was with respect to this litigation, which both had agreed to hold in-abeyance, in the hopes that their discussions would give rise to a settlement.

[105] Mr. Alizadeh suggests, however, that there were only “intermittent settlement discussions”, which were not “ongoing or intensive”.

[106] In this regard the plaintiffs respond to Mr Alizadeh’s recollection, in their factum, in these terms:

“He alleges that he only met with Elia on one occasion to discuss settlement, in 2004. Further, he suggests that he only made one settlement proposal, in December 2007, after which he “did not engage in further serious settlement discussions with Elia”.

[107] Relying upon Mr Shulman’s affidavit, the plaintiffs’ factum asserts:

“11. Quite contrary to the allegations of Alizadeh, the evidence demonstrates that over the last 11 years Alizadeh and Elia engaged in numerous and ongoing discussions to resolve this lawsuit. Alizadeh was well aware that the negotiations were with respect to resolving this litigation and he negotiated several proposals with Elia in an attempt to settle it. Those proposals - which were complex, involved many parties and related to crediting the amounts owed to Elia as a contribution to an equity interest in property with the possibility of further investment by Elia. and took place over the course of years - were made on the premise that Elia hold this lawsuit in abeyance. Shulman's evidence is that he became involved in the negotiations on the basis that Elia and Alizadeh mutually understood and agreed that they would try to settle. otherwise Elia would continue with the 2001 Action.”

[108] At his cross-examination, Shulman provided further evidence on this point at questions 120 and 135:

“When I first met both of them together, when I had been asked to assist them, I spoke to them and suggested to them that I was prepared to assist in the settlement, if they wished; on the understanding that I would try to assist them in settling this matter and, while I was doing so, that they would hold their lawsuit in abeyance.

I suggested to them that they would hold the litigation in abeyance because there's no use me trying to do a settlement while they were still in litigation -- in the sense of active litigation - in order to see if a reasonable settlement can be reached without spending a great deal of money in litigation. We all know that lawyers are not cheap, and they were fully aware of that and they accepted that suggestion on the basis that I would assist them.”

[109] The plaintiffs assert there are numerous email references to a possible settlement from time to time. For example, Mr Shulman’s affidavit recounts that in November 2007, Mr Alizadeh wrote an email to Shulman, confirming that it was his “intent to bring the matter to an amiable resolution”. Alizadeh also acknowledged that “we had hoped to complete something quickly, but this case has after all dragged on nearly ten years”.

[110] Relying upon the Shulman affidavit and the cross examination of Mr Alizadeh the Plaintiffs set forth these observations and assertions:

“16. The evidence also demonstrates that quite contrary to Alizadeh ' s assertion in his motion materials, the discussions resulted in serious proposals involving third parties. Thus, in August 2008 in accordance with settlement discussions between Alizadeh and Elia, a partner of Alizadeh’s emailed to Shulman and Alizadeh a draft shareholders' agreement for a new partnership. This partnership was intended as a business solution to the current litigation as it reflects a value commensurate with the amounts owing under the promissory notes.”

[111] Relying upon questions and answers given on Mr Alizadeh’s cross-examination these assertions are also made by the responding parties:

“17. Although Alizadeh alleges that in August 2007 he advised Shulman that he considered the lawsuit dead, he continued to negotiate with Shulman and Elia with respect to its settlement. He also admits that he did not confirm in writing at any point that he considered the lawsuit dead and that he was continuing to negotiate with Elia for a purpose other than to resolve this lawsuit. Moreover, as part of any resolution, Elia was going to get credit for a significant part of the amount he claims to have loaned to Alizadeh.”

[112] My colleague Master Muir in Lazaris v. Computer Logistics Inc., 2013 ONSC 4757; 2013 CarswellOnt 12743 refused to dismiss that action for delay; holding that a party cannot be faulted for attempting to settle the action. In that case, as in this action, the evidence showed that there were joint efforts made by both parties to resolve the underlying dispute over an extended period. Master Muir comments:

However,the evidence shows that joint efforts were being made to reach a settlement of this matter during most of that time period. The email communications produced by the plaintiff indicate ongoing efforts to reach a settlement. It appears that those efforts were hampered somewhat by the schedules of the parties and by the fact that the plaintiff was living in Thunder Bay. I do not fault the plaintiff for attempting to settle this action. However. I do agree with the defendants that it would have been prudent for the plaintiffs lawyer to have advised the defendants' lawyer of the plaintiff's ongoing intentions with respect to this claim.

[113] Such a form of written confirmation would similarly have been prudent in this case and might well have made this motion unnecessary.

[114] In Lazaris the Court found the plaintiff had done everything required by Rule 24.01. All defendants were served with the statement of claim within the time prescribed by the Rules. This action was set down for trial approximately three months after the close of pleadings. The action was never struck from the trial list. Master Muir determined that the power of the court to dismiss an action on the basis of Rule 24.01 arose from the court's inherent jurisdiction to control its own process. A Master did not have inherent jurisdiction and could not exercise his or her discretion to dismiss an action for delay outside of the parameters of Rule 24.01. In this regard Mater Muir reasoned:

26 The defendants argued that this court nevertheless has discretion to dismiss this action for delay despite the fact that none of the requirements of Rule 24.01 have been met. There is authority for the proposition that where an action cannot be dismissed under Rule 24.01, it can properly be dismissed as an abuse of process. See Convay v. Marsulex Inc., [2002] O.J. No. 4655 (C.A.) at paragraph 3. However, it is my view that the power of the court to dismiss an action on this basis arises from the court's inherent jurisdiction to control its own process or perhaps on the basis of Rule 21.01(3)(d). See Housser v. Savin Canada Inc., 2005 CanLII 35779 (ON SC), [2005] O.J. No. 4217 (S.C.J.) at paragraphs 9 and 44-45. In either scenario, a master does not have jurisdiction to make such an order. A master does not have inherent jurisdiction. Everything a master does must be authorized by the Rules or by statute. See Ontario (Attorney General) v. Victoria Medical Building Ltd., 1959 CanLII 20 (SCC), [1959] S.C.J. No. 70 at pages 7-8. As for Rule 21, the provisions of that Rule specifically require that such motions be brought before a judge.

[115] I agree with my colleague that there is no general proposition that a master can exercise his or her discretion to dismiss an action for delay outside of the parameters of Rule 24.01. He also noted in the matter before him that in the notices of motion no reference was “made to the inherent jurisdiction of the court or abuse of process as a basis for the relief they are seeking.”

[116] The Notice of Motion before me relies upon “Rules 24.01, 48.15(6) and 57” and makes no reference to any inherent jurisdiction of the court.

IX. Returning to Litigation

[117] Clearly the parties have different viewpoints on what was going on between them (if anything). I make no determination as to what settlements may have been canvassed and for what reasons. Suffice it to say that based on the following arguments by the plaintiff’s I am satisfied that they did not regard their 2001 claim as “dead’ and the actions of the defendant Alizadeh were at least sufficiently ambiguous to lend credence to the position of the plaintiff’s that they reasonably believed they were working towards an out of court settlement.

[118] I am satisfied that it is arguable that there is sufficient “default” by the plaintiff to open the door for the Defendants motion.

[119] The plaintiffs have satisfied me that they did not abandon their action and that there exists a plausible explanation for the delay to date. Their arguments in the following paragraphs from their factum summarize the position which I found persuasive:

“18. In his motion materials, however, Alizadeh now alleges that the more reasonable explanation for the negotiations between him, Shulman, Elia and numerous third party businesspeople and associates (and the delay in the litigation) was that it was an effort to rebuild his friendship with Elia. One of his "friendship restoration" proposals was that he transfer his 25% interest in a building to Elia, in exchange for nothing. Alizadeh admits that this proposal was worth between $250.000 and $300.000 (including approximately $100.000 in cash that Alizadeh offered to pay Elia). Alizadeh explains that he made this offer not to resolve litigation but to:

Maintain a friendship that he [Elia] felt that he had been sort of - he was a partner in one of the businesses. The business didn't do well. I felt a sense of - he had reached out to me through Shulman and I felt I was in a financial position that I didn't need to worry about, you know, a couple hundred thousand dollars. I said, "Fine. If this is going to repair our friendship why not go for it."

19. Contrary to Alizadehs claims, rather than to mend fences, these negotiations were intended to resolve the 2001 Action and to compensate Elia for the monies owed to him by the Moving Defendants on the promissory notes. In fact, in reference to his December 2007 proposal, Alizadeh wrote that in exchange for the proposed payments. he and Elia would provide "full and final mutual settlements [sic] of all claims with respect to their business dealings both personally and corporately [sic]". At his cross-examination, Alizadeh explained this reference to settlement as having nothing to do with this lawsuit. The more reasonable interpretation, however, is that the parties spent years negotiating in the hopes that the issues underlying this dispute (payment of the promissory note debt) would be resolved and the 2001 Action eventually dismissed.

20. The settlement discussions ultimately broke down in or about October 2012. Six months later, after having retained new counsel. the plaintiffs' new lawyers demanded a defence to the 2001 Action and a timetable for its next steps.”

X. Have the Defendants Suffered Prejudice as Alleged?

[120] The Moving Defendants allege that they have suffered the following prejudice as a result of the delay in the 2001 Action:

(a) 997 stopped operating in 2000. King Parliament and Downtown Auto stopped operating in 2002. Over the years, many of the records of these companies have been lost or disposed of.

(b) Kayshap Rach, the controller of 997 at the relevant times, passed away in 2005 or 2006.

[121] In response, the plaintiffs assert that Alizadeh has not pointed to particular documents that have been destroyed, which are relevant to this action.

[122] In answer to a question taken under advisement, Mr Alizadeh notes that the following documents were provided to his former counsel with respect to the defence of the 2001 Action:

(a) Financial statement of Downtown Automotive Inc. dated December 31, 2000.

(b) Letter from King Toyota Inc. to Soberman Isenbaum & Colomby LLP dated March 5, 200l.

(c) Letter from Soberman Isenbaum & Colomby LLP to Furl Automotive Inc. dated March 14, 1995.

(d) Reconciliation of payments made by Downtown Automotive Inc. and King Parliament Automotive Inc. to Furl Investments Inc.

(e) Copies of 12 Promissory Notes from 1990-1993.

(f) Spreadsheet prepared by Paul Elia in 1996.

[123] On behalf of the Plaintiffs it is pointed out that , Elia has produced the following in response to this motion:

“(a) copies of the promissory notes;

(b) copies of spreadsheets indicating payments made by the Moving Defendants;

(c) copies of spreadsheets indicating payments made to the Moving Defendants;

(d) copies of spreadsheets tabulating pre-judgment interest;

(e) copies of cancelled cheques supporting the promissory note payments; and

(f) copies of dozens of emails between the parties, documenting their protracted settlement negotiations.”

[124] I am not satisfied that he Moving Defendants have put forward meaningful evidence that important evidence relating to the primary amount in dispute has been lost. Mr Elia’s evidence has been that he has retained all relevant documents. including the promissory notes and a history of payments thereon and interest owing. The Moving Defendants have raised the spectre of potential prejudice but have not alleged or demonstrated anyactual prejudice or when it was incurred.

[125] In particular, the plaintiffs respond to the the Moving Defendants reliance on the death of the controller of 997 as evidence of actual prejudice. I accept the argument that:

“…There is no evidence that 997's controller had any evidence that is relevant to or necessary for the Moving Defendants to conduct their defence. Elia has produced copies of payments made by the Moving Defendants on the promissory notes. He has produced copies of cheques with respect to payments made both by his companies and Alizadeh’s companies. … The Moving Defendants have not demonstrated or in any way supported the assertion that without the controller's evidence, there is substantial risk to their having a fair trial.

[126] It appears to me that both Elia and Alizadeh are witnesses who have demonstrated they are capable of giving testimony, as was evidenced by their filing affidavits and attending cross-examinations on this motion. As Elia and Alizadeh were the principal parties to the loans and the signatories to the transactions giving rise to the promissory notes, their evidence and testimony may well be likely to be all that is required at trial. There is no evidence that these witnesses are in any way compromised or unable to testify at trial.

[127] Based on the foregoing analysis contained in these reasons, I am satisfied that the plaintiff has adequately rebutted the presumption of prejudice in this case.

[128] The moving defendants also point out, however, is that prejudice to the defendant is to be considered relative to the time the case will likely be reached for trial if permitted to proceed. They argue that given that “the 2001 Action has not progressed passed the pleadings stage, many more years will likely pass before it reaches trial.”

[129] Given that this to a large extent may well be a document case I am not satisfied that there needs to be a long delay prior to trial, assuming a discovery plan and case timetable is implemented,

[130] Trials of less than 10 days are now being scheduled within six months of their being set down. Given the competence of counsel on both sides in this case, I would expect them to be able to narrow the issues to achieve a focused trial, keeping in mind the dictates of the Rules requiring attention to proportionality.

XI. The Test on a Motion to Dismiss For Delay: Recapitulation

[131] Subject to the live issue of my jurisdiction as a Master (discussed in detail above),I agree that on a motion to dismiss an action for delay, the action should be dismissed if:

a. The delay is intentional and contumelious; or

b. The plaintiff is responsible for an inexcusable delay that gives rise to a substantial risk that a fair trial might not now be possible.

[132] I am satisfied that the relationship between the main protagonists and the apparent mutual desire from time to time to resolve matters so as to “repair their friendship” explains much of the cumulative delay in this case.

[133] The moving parties assert that Settlement discussions are not a satisfactory explanation for a significant delay in prosecuting an action. In support of their position that plaintiff is required to take steps to move the action forward despite contemporaneous settlement discussions. They rely upon Kissin (by her Attorney in Fact) v. Kissin, 2004 CarswellOnt 457 at para 18

[134] That was a Judge’s decision by Herman, J., in a very acrimonious intra-family dispute where key family members were deceased and others were suffering from progressive dementia.

[135] That is not this case. There, no reason for failing to progress the action was established. Here I am satisfied that an explanation has been given.

[136] Is that explanation strong enough?

XII. Beyond Improbable

[137] Justice LaForme provides a helpful outline for determining the answer to that question in De Marco v. Mascitelli, [2001] O.J. No. 3582, 14 C.P.C.(5th) 384; 2001 CarswellOnt 3137:

“22 Pursuant to R. 24.01 the plaintiff has the onus to move an action along in an expeditious fashion. And, although a defendant is encouraged to take steps to progress the litigation, it is not fatal to a motion to dismiss where it has not done so. To succeed on a motion to dismiss for delay a defendant must satisfy a court that one or other of the following exists:

1. That the delay on the part of the plaintiff is intentional and contumelious. I take this to mean that the plaintiff has acted in an intentionally disdainful or disrespectful fashion; or

2. That the delay is inexcusable and is such that it gives rise to a substantial risk that a fair trial of the issues in the litigation will not be possible. That is, there is no "reasonable and cogent" excuse for the delay and the delay is such that it prejudices the right to a fair trial.

23 I find that after applying the above tests to the within motion, the Defendants have not established to any satisfactory degree that the Plaintiffs delay was occasioned by "intentional and disrespectful" conduct. It may be that the Plaintiffs' delay can be said to have been somewhat intentional but the evidence and circumstances presented to me fall far short of identifying them as disrespectful, arrogant or contumelious. The Plaintiffs may be said to have vacillated in moving the action along, but they did not do so in a fashion that showed a contempt for the action, the process or the Defendants. [my emphasis]

[138] Considering this test I am not convinced that the plaintiffs have shown a contempt for the action, the process or the Defendants.

[139] Turning to the issue of prejudice, the Defendants assert that there is both a presumed prejudice and a real one. They argue that the length of the delay is sufficient for this court to infer that there must be prejudice to a fair trial. Considering this element Justice LaForme observed:

“26 In my opinion, this test under delay has several components that the Defendants must satisfy the court on:

i) First, they must show that there has been a sufficient period of delay;

ii) Second, they must show that the Plaintiffs cannot account for the delay through reasons that are both "reasonable and cogent" or sensible and persuasive; and

iii) Third, the Defendants must satisfy the court that the delay has resulted in a "substantial risk" that a fair trial has been prejudiced. Or, that there exists a real danger that a fair trial cannot occur because of the unexplained or inadequately explained delay.

27 Some examples of prejudice include: (i) the death of a witness; (ii) the inability to locate a witness; (iii) the inability of a witness to recall important facts; and (iv) the loss of important evidence. And, each case will turn on and be decided on its own particular facts and circumstances.

28 In my judgment the Defendants in the within case have established that there has been a delay that is longer than one would ordinarily hope. Although the Plaintiffs herein did not strenuously argue the point, I believe the delay, in the circumstances of this case is really borderline. It is no doubt longer than it should have been but it is not so long as to immediately assume that it must be prejudicial to a fair trial. Indeed, I was not presented with any evidence that suggests that evidence for trial has been lost, forgotten or that there is any other impediment to the delivery of the relevant evidence at trial….” [my emphasis throughout]

[140] I find (as Justice LaForme found in DeMarco) that this is not a proper case where the length of delay by itself will give rise to a presumption that there is a substantial risk to a fair trial. LaForme J. concluded on this issue:

30 As for the reasons for the delay, although they may well not be persuasive or rational in other circumstances, I find they are on the facts of this case. The issues and circumstances of this case involve family members and business relationships that are interwoven. In the circumstances it is not that unreasonable that the various parties to the litigation might wrongly conclude that the litigation has been suspended, or indeed discontinued through their interpretation of family activities. The excuses offered by the Plaintiffs might well be weak and not that persuasive, but they are not so unreasonable as to be irrational.

[141] In my view the excuses offered by the plaintiffs in the present case are even stronger. I find them persuasive. However, even if I am wrong in that assessment I am quite satisfied that they are a long way from being “so unreasonable as to be irrational.”

[142] Notwithstanding these findings are the Moving Defendants able to have the action dismissed at this point as being statute barred ab initio? Again the Notice of Motion does not raise the Limitation issue other than by the usual request for “such further and other relief”.

[143] Nevertheless for the sake of completeness I turn to the arguments of both counsel and my analysis.

XIII. Limitations Act (1990)

[144] In this case, the earlier 1999 action was commenced with respect loans said to have been made between July 1990 and September 1994. The Moving Defendants submit that under the former Limitations Act, R.S.O. 1990, c L.15 ("1990 Act"), a demand note matures for all purposes as soon as it is delivered. Where a loan is repayable on demand, s. 45(1)(g) of the 1990 Act applies to bar an action unless commenced within 6 years of the funds being advanced.

[145] Shortly after the coming into force of the Limitations Act, 2002, the The Ontario Court of Appeal addressed this issue in Hare v, Hare, 2006 CanLII 41650 (ON CA), 218 O.A.C. 164 ; 2006 CarswellOnt 7859, [2006] O.J. No. 4955, 218 O.A.C. 164, 24 B.L.R. (4th) 230, 277 D.L.R. (4th) 236, 83 O.R. (3d) 766. At Paragraph 11 of her reasons, Justice Gillese, writing for the majority observed:

11. If the former Limitations Act applies, the limitation period expired before the action was commenced. I agree with the motion judge who explained this result as follows:

In my view, this situation is governed by clear and binding authorities, including the Ontario Court of Appeal's decision in Royal Bank v. Hogg, 1929 CanLII 417 (ON CA), [1930] 2 D.L.R. 488, and other cases to the effect that (p. 490) "a demand note matures for all purposes as soon as it is delivered". See also: Royal Bank v. Dwigans, 1933 CanLII 286 (AB SCAD), [1933] 1 W.W.R. 672 (Alta. C.A.) at p. 675 and p. 677. In these circumstances, where the loan is repayable on demand, s. 45(1)(g) of the Limitations Act, R.S.O. 1990, C. L.15 applies to bar an action unless commenced with[in] 6 years of the funds being advanced; Wilkosz v. Amato, [1999] O.J. No. 1958, at paras. 49 and 50, and Spencer Investments Ltd. v. Hansford (1974), 1974 CanLII 1173 (AB SCTD), 48 D.L.R. (3d) 474, at para. 6. Here, the limitation period was started afresh by reason of the last payment [on October 26, 1998]: St. Hillaire et al. v. Kravacek et al. (1979), 1979 CanLII 1705 (ON CA), 26 O.R. (2d) 499 (Ont. C.A.). See also Montreal Trust Co. of Canada v. Vanness Estate, [2005] O.J. No. 594 (C.A.) at para. 2. Thus, the effective limitation period by which this action had to have commenced was October 26, 2004. Accordingly, this action commenced February 17, 2005 is statute barred. [my emphasis throughout]

[146] Relying upon this decision the Moving Defendants submit that in this action, the plaintiffs seek to enforce promissory alleqedly issued between July 1990 and September 1994. The claims were thus statute barred as at the time that the 2001 Action was commenced.

[147] However, following the decision in Hare the relevant provisions of the Limitations Act,2002 were amended by the legislature. In noting up Hare I located a useful analysis of the impact of the amendments in the decision of P.B. Hockin J. in Shaw v. Anderson, 2010 ONSC 1164, [2010] O.J. No. 708; 2010 ONSC 1164; 99 O.R. (3d) 775. There the plaintiff suing on promises to pay asserted that the limitation period began to run against the claim on July 10, 2009 when the demand for payment was made and so the action is well within time.

[148] The reasons of Justice Hockin (with my emphasis) contain this “Disposition”:

12 Whether this action is out of time or not turns on whether the note is a note payable on demand or a note where time for payment is expressed. On the face of the note, it is clearly the latter. The defendant's promise was a promise to pay 84 equal monthly instalments beginning October 30, 2002 but on the shared assumption and expression on the face of the note that indulgences could be extended but without prejudice to Shaw's ability to sue for the full amount of the note and interest when he wished. Thus, the parties included in the note a waiver of any defence based upon an indulgence and importantly that "any default in payment on an instalment due hereunder shall, at the option of the lender, accelerate the balance of the note, which in such event shall become due and payable in full".

13 This was a commercially practical approach for the parties. It allowed the defendant to carry on as a part owner without the worry of a payment each month when there was nothing to pay with. At the same time, it was understood that the consideration was, in part, a note for $41,000 which had to be paid at some point.

14 There is this definition of a bill payable on demand from the Bills of Exchange Act, R.S.C. 1985, Chap B-4, section 22 (1) as follows:

22.(1) A bill is payable on demand

(a) that is expressed to be payable on demand or on presentation; or

(b) in which no time for payment is expressed.

15 In the case of this note, a time for payment is expressed. The note was not a demand note.

[149] His Honour then focuses on the earlier decision of the Court of Appeal and the impact of the statutory amendments subsequently made:

16 The defendant argued that the case of Hare v. Hare, (2006) 2006 CanLII 41650 (ON CA), 83 O.R. (3d) 766 (O.C.A.) applied to the facts of this case. In Hare, Gillese J.A. confirmed the common law view that for a demand note the time runs from the time of delivery of the note. In this case, the note was delivered in September, 2002 and therefore fell out of time, it was argued, in September or the end of October, 2008. This statement of the law, however, does not apply where there is a repayment period specified. She made it clear at para. 50 of her reasons that the time of delivery of the note is the starting point only where "there is no repayment period specified". That is not this case; a repayment period is specified.

17 In any event, the Limitations Act, 2002 was amended on November 27, 2008 to change Hare. Sections 5(3) and (4) set out the amendments. These sections provide:

Demand Obligations

5.(3) For the purposes of subclause (1)(a)(i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made.

Same

(4) Subsection (3) applies in respect of every demand obligation created on or after January 1, 2004.

18 In other words, the demand is the event which triggers the start of the limitation period. …”

[150] It would seem that the obligations in the present dispute were clearly created prior to January 1, 2004 but the nature of any demands made and the nuances to be drawn from the terms of the notes (and the timing of and demands or payment made etc.) are beyond the scope of this motion.

[151] For example, the plaintiffs assert that pursuant to the 2002 order of Mr. Justice Then, this action was permitted to continue and that his Honour found that the 2001 Action "incorporates" the first action while adding further claims and parties.

[152] I accept that it is clearly arguable that the six-year limitation period had not expired at the time the 2001 Action had commenced and that earlier claims may well have been sheltered by the 1999 Action.

[153] In my view a determination of this issue is not appropriate on a motion of this nature. Instead a motion for summary judgment might be contemplated after the defendants have met the necessary precondition under Rule 20.01(3) of delivering their still undelivered Statements of Defence in this action.

XIV. Disposition

[154] In the result the Moving Defendants’ motion is dismissed.

[155] The Court of Appeal in Mader v. Hunter, 2004 CanLII 17834 (ON CA), [2004] O.J. No. 748; 183 O.A.C. 294; 44 C.P.C. (5th) 83 reiterated the observation that the court “is always reluctant to dismiss a potentially meritorious claim on grounds that do not address its merits.” Their decision indicated that unless the defendant can demonstrate prejudice in the sense that to grant the plaintiff the indulgence he or she seeks will prejudice the defendant's ability to defend the claim, the indulgence will usually be granted on appropriate terms.

[156] I feel it is appropriate on a motion of this nature for the court to attempt to ensure that on a go-forward basis there will be no more delays in getting the case to trial.

[157] Rule 48.14(1) now provides in part:

Unless the court orders otherwise, the registrar shall dismiss an action for delay in either of the following circumstances, subject to subrules (4) to (8):

1. The action has not been set down for trial or terminated by any means by the later of the fifth anniversary of the commencement of the action and January 1, 2017.

[158] I am therefore ordering ”otherwise” and directing that the parties treat this action as governed by new Rule 48.14 on the basis that the potential dismissal date referred to in Rule 48.14(1) ,rather than January 1, 2017, shall now be established, and treated as reading, July 31, 2015 (a date slightly more than 90 days from the date of the release of these reasons).

[159] The parties will therefore be subject to the new sub rules in Rule 48.14:

(4) Subrule (1) does not apply if, at least 30 days before the expiry of the applicable period referred to in that subrule, a party files the following documents:

1. A timetable, signed by all the parties, that,

i. identifies the steps to be completed before the action may be set down for trial or restored to a trial list, as the case may be,

ii. shows the date or dates by which the steps will be completed, and

iii. shows a date, which shall be no more than two years after the day the applicable period referred to in subrule (1) expires, before which the action shall be set down for trial or restored to a trial list.

2. A draft order establishing the timetable.

[160] In the unlikely event counsel cannot agree, I will convene a Status Hearing in accord with sub rules (5) through (7). Under those new provisions the court now clearly has the ability to “set deadlines for the completion of the remaining steps necessary to have the action set down for trial or restored to a trial list, as the case may be”.

XV. Costs

[161] The plaintiffs have been successful on this motion, but they were certainly partly responsible for the situation that gave rise to this motion. The plaintiffs are clearly being given a significant indulgence. I am therefore not prepared to make a final disposition as costs of this motion at this time.

[162] If the parties cannot work out a reasonable resolution costs amongst themselves, based on the foregoing description of their case, I will schedule a costs hearing for a date either after the July 31, 2015 date established above or at any necessary Status Hearing.

Released: March 16, 2015

Master D. E. Short

DS/ R.91