SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: B224/96 and 98-BK-002118
DATE: 20151109

RE: Planon Systems Inc. and Douglas Verkaik, Plaintiffs

AND:

Norman Wade Company Limited, Richard Clare Jackson, Richard Norman Wade, Alfred Comrie Buckley, Betty M. Wade, Keith Reginald Draycott, Douglas Howard Norris, Ronald John Hicks, Cyril Richard McCarthur, Thomas Albert Ronaldson, Etna Design Inc. and Michael Morand, Defendants

BEFORE: Penny J.

COUNSEL:
Robert S. Whitmore and Ceili Andrew for Etna and Morand (Moving Defendants)
David Lees for the Plaintiffs

HEARD: November 2, 2015

ENDORSEMENT

Overview

[1] This is a motion under Rule 24.01(c) for an order dismissing the action for delay. The principle issues are whether the delay has been inordinate and inexcusable and, if yes, whether the plaintiff has rebutted the presumption of prejudice to the defendants.

[2] For the reasons that follow, I find that the plaintiffs are responsible for some 25 years of delay involved in this case and that the delay is inordinate and inexcusable. The plaintiffs have not rebutted the presumption of prejudice resulting from that delay. There is, in any event, evidence of actual prejudice. The action is therefore dismissed.

Background

[3] The plaintiffs’ action against the moving defendants was commenced in 1987.

[4] Michel Morand is an industrial designer. He carried on business through his corporation, Etna Design Inc. Etna did some work for the Planon in 1985.

[5] In general, the claim concerns the misuse by Wade Ltd. of confidential information obtained from Planon to manufacture specialized filing systems for use by architects and engineers which were sold by Wade Ltd. in competition with Planon.

[6] In this action, Etna is sued for breach of an alleged implied term of its design contract with Planon to the effect that copyright in any drawings would belong to Planon (paras. 30 and 33). Etna is also sued for breach of fiduciary duty arising from the alleged misuse of confidential information said to have been provided by Planon to Etna (para. 39) and for conspiracy to cause the plaintiff to become insolvent (para. 40).

[7] Morand is sued personally for “causing” Etna to infringe the plaintiff’s copyright and to use the plaintiff’s confidential information, which is alleged to have constituted a “conspiracy” to injure the plaintiff through unlawful means as well as an “interference in the contractual relationships” the plaintiff had with Wade Ltd. and Etna (para. 42).

The Legal Framework

[8] There is a strong public interest in promoting the timely resolution of disputes in our civil justice system, Wallace v. Crate Marine Sales Ltd., [2013] O.J. No. 5668 (S.C.J.).

[9] It is well settled that it is the plaintiff that has a positive responsibility to move the action forward and that doing so is not the responsibility of the defendant, Alexander v. Rosedale United Church, 2010 ONSC 4224; Wallace v. Crate Marine Sales Ltd., supra.

[10] An order dismissing an action for delay is, however, obviously a severe remedy. The plaintiff is denied its adjudication on the merits. Equally however, inordinate delay impairs the integrity of the civil justice process and can lead to a hearing that is unfair to the defendant. Thus, the remedy may be granted where inexcusable delay for which the plaintiff is responsible gives rise to a substantial risk that a fair trial of the issues in the litigation will no longer be possible.

[11] There are essentially three basic elements to be considered before an order can be made on a motion under Rule 24.01(c):

(1) the delay must be inordinate, measured by the length of time since commencement of the action;

(2) the delay must be inexcusable in the sense that there is no adequate explanation for the delay; and

(3) the delay must give rise to a substantial risk that a fair trial of the issues in the action will not be possible because of the delay. Memories fade, witnesses become unavailable. The longer the delay, the stronger the inference of prejudice,

Langenecker v. Sauve, 2011 ONCA 803 at paras. 5 to 11.

[12] The analytical framework for the analysis of a motion to dismiss for delay was helpfully summarized by Master Dash in Woodheath Developments Ltd. v. Goldman (2001), 2001 28019 (ON SC), 56 O.R. (3dD) 658:

(a) there must be an inordinate and inexcusable delay in the litigation for which the plaintiff or his solicitors are responsible

(b) the delay must give rise to prejudice to the defendant, in the sense that there is a substantial risk that a fair trial will not be possible at the time that the action will likely go to trial

(c) inordinate delay since the cause of action arose will give rise to a presumption of prejudice. It will be presumed that the memories of witness will fade over time

(d) undue delay following the passing of the limitation period will also give rise to a presumption of prejudice

(e) if there is a presumption of prejudice there is no onus on the defendant to prove actual prejudice. The plaintiff must lead satisfactory evidence to rebut the presumption of prejudice, failing which the action may be dismissed

(f) the presumption of prejudice may be displaced by evidence that the issues in the lawsuit do not depend on the recollection of witnesses for their resolution, or that all necessary witnesses are available and they recall their testimony in detail, and that all documentary evidence has been preserved

(g) if the presumption is rebutted, the onus shifts to the defendant to lead convincing evidence of actual prejudice.

[13] There is no controversy between the parties about the applicable legal principles. Where the parties differ is in the application of these principles to the facts.

Analysis

Inordinate Delay

[14] The plaintiffs argue that the delay, although significant, has not been inordinate due to the complexity of the litigation. In particular, the plaintiffs rely on the following facts:

(a) Planon went into receivership in 1991 and filed a proposal in 1994;

(b) extensive examinations for discovery were required, which took place in 1996;

(c) a motion for security for costs was brought by the defendants;

(a) the action against Wade Ltd. was stayed when Wade Ltd. sought bankruptcy protection under the Companies Creditors’ Arrangement Act in 1997.

(b) there was a claims trial before Spence J. in 1998 within the CCAA proceeding lasting 18 days which resulted in a finding of liability against Wade Ltd. for breach of a duty of confidentiality. Spence J.’s reasons were released in 1998;

(c) Wade Ltd. ultimately became bankrupt;

(d) the plaintiffs brought a motion for summary judgment against Etna and Morand, based on findings made by Spence J. in 2005;

(e) the motion, while initially successful, was dismissed by the Court of Appeal for Ontario in 2005 on the basis that Etna and Morand were not parties to the CCAA trial and there could be no issue estoppel operating against them on the basis of Spence J.’s findings; and

(f) there were settlement discussions in 2010 and 2011 which did not result in any resolution.

[15] As the Court of Appeal has said, litigation does not necessarily move at a quick pace. As well, some types of litigation move more slowly than others. However, most of the reasons for the delay argued by the plaintiffs fall into the category of “ordinary hurdles” of litigation. Even allowing for the twists and turns of this particular proceeding, there can be no doubt that a delay of over 25 years from commencement in 1987 to the plaintiffs’ stated intention to set the matter down for trial in 2013 (and 30 years from the relevant events to today) is inordinate.

Inexcusable Delay

[16] The plaintiffs’ maintain that the same factors listed above constitute “reasonable and cogent” or “sensible and persuasive” explanations that excuse the delay. I am unable to agree.

[17] There is simply no explanation for why nothing happened from 1987 to 1991. While the CCAA proceedings represented a setback from a timing point of view, there is no explanation for why the plaintiffs could not have proceeded against Etna and Morand after 1994 in this action in parallel with the claim against Wade Ltd. in the CCAA proceedings.

[18] Indeed, the inference to be drawn from what actually happened is that the plaintiffs decided to put their eggs in the “CCAA basket” and sought to rely on a favourable result in those proceedings to bootstrap a claim against Etna and Morand by way of motion for summary judgment brought in 2005, based on the findings of Spence J. in the CCAA claims trial. Although this strategy met with initial success, that judgment was, predictably in my view, overturned by the Court of Appeal on the basis that although Morand had been called as a witness, Etna and Moran were not parties to the CCAA trial proceedings and that no issue estoppel could operate against them for that reason.

[19] There is also no explanation for why it took the plaintiffs from 1998 to 2005 to bring the ultimately unsuccessful motion for summary judgment against Etna and Morand.

[20] Most importantly, there is no adequate explanation for why, upon the dismissal of the plaintiffs’ motion for summary judgment by the Court of Appeal in 2005, the plaintiffs did not immediately set the action against Etna and Morand down for trial.

[21] Mr. Verkaik’s says that he had “financial concerns” after the Court of Appeal overturned the summary judgment and awarded costs of the motion and the appeal against him. He also says that he was busy with litigation against a former employee and with matrimonial proceedings against his former spouse.

[22] No specific evidence was advance as to the nature of these “financial concerns.” There is no evidence, for example, to support the proposition that the plaintiffs could not afford to prosecute their claim.

[23] It is important to remember, as well, that these constraints, to the extent they were constraints at all, did not result from and had nothing to do with the defendants. There has been no explanation why the plaintiffs could not have prosecuted their claims against Etna and Morand at the same time as these other proceedings.

[24] While it is true that the defendants changed their counsel in 2012, there is no evidence, beyond a simple acknowledgment that Mr. Whitmore required a bit of time to “get up to speed,” that this resulted in any material constraint or delay in the ability of the plaintiffs’ to prosecute their claim.

[25] The plaintiffs also argue that settlement discussions took place in 2010 and 2011. I do not think any credibility can be placed upon this as a legitimate excuse for inordinate delay. There is no evidence that the defendants sought, as a condition of any settlement negotiations, that the plaintiffs suspend their proceedings. Indeed, it is commonly recognized that active prosecution of a claim promotes, rather than discourages, settlement.

Presumption of Prejudice

[26] It is well-established that prejudice is inherent in long delays. Memories fade and fail, witnesses become unavailable and documents and other potential exhibits are lost. The longer the delay, the stronger the inference of prejudice to the defendants following from that delay, Tanguay v. Brouse 2010 ONCA 73, para.2; Langenecker, supra, para. 11.

[27] It is equally not in controversy that when inordinate and inexcusable delay is shown, there is a presumption of prejudice. The defendant need not show actual prejudice.

[28] The presumption is, of course, rebuttable. The onus is on the plaintiff to rebut the presumed prejudice by showing that, due to the particular circumstances of the case, the delay has not prejudiced the defendant’s right to a fair trial.

[29] If the plaintiff successfully rebuts the presumption, the onus then shifts to the defendant to show actual prejudice.

[30] I pause here to note that while the defendants rely on the presumed prejudice, they also assert actual prejudice. Two material witnesses are no longer available. The whereabouts of Richard Wade, the president of Wade Ltd. from 1985 to 1998, (Wade Ltd. was the main defendant and alleged co-conspirator with Etna) is unknown. Alfred Buckley, the chief operating officer of Wade Ltd. during the same period, died in 2010. These are, I find, material witnesses to the events and circumstances surrounding the claims against Etna and Morand.

[31] Whether the plaintiffs are able to rebut the presumption of prejudice is the issue in this case. The plaintiffs raise essentially three arguments:

(1) the claim is largely dependent on documents and design drawings, not viva voce evidence. These documents are available;

(2) the recollection of witnesses will be assisted not only by the documents, but transcripts from examinations for discovery taken in 1996 (including Morand) and transcripts from the CCAA trial conducted in 1997/1998, in which Morand testified as a witness.; and

(3) Richard Wade and Alfred Buckley, although no longer available to testify, were both examined for discovery and were examined in chief and cross-examined at the CCAA trial.

[32] I do not agree that the case is so document reliant as the plaintiffs claim. The central plea against Etna is based on the allegation that it was an “implied term” of its contract with Planon that copyright in all drawings belonged to Planon. This is at the heart of Planon’s copyright infringement and breach of confidence claims. I need hardly add that the allegations of conspiracy are almost entirely based on behavior and inferences, not documents. I also note that the trial before Spence J. went for 18 days and involved at least nine witnesses. This is not suggestive of a case in which viva voce testimony is of little moment.

[33] The implication of terms is preeminently a situation which calls for evidence of factual matrix or surrounding circumstances, Sattva Capital Corp. v. Creston Moly Corp. 2014 SCC 53. The full and fair exploration of that factual matrix is unlikely to result from a review of documents alone. Further, evidence of relevant factual matrix, and of the implied terms alleged in this claim, was not canvassed in the earlier CCAA proceedings simply because Etna and Morand were not parties.

[34] I am also not persuaded that the availability of 1996 discovery transcripts is any answer to the presumed prejudice resulting from over 25 years of delay. The purpose and conduct of oral examinations for discovery is very different from viva voce evidence given at trial. Experience shows that discovery transcripts are a poor substitute for live evidence and cross examination.

[35] Nor are the trial transcripts any answer to the presumed prejudice. I say this because neither Etna nor Morand were parties to the CCAA hearing. Spence J. specifically commented on this problem in his reasons, when he expressed concern over the nature of the evidence and findings concerning Etna and Morand. He wrote:

…there are some troubling procedural considerations. While there are, I understand, other proceedings underway by Planon against the alleged conspirators other than Wade (i.e. outside these CCAA proceedings), none of those persons is a party in these proceedings. Mr. Morand gave evidence in the trial, as did Mr. Bishop. While submissions were made about their conduct, these submissions were made by counsel for the two parties in this case and not by any counsel purporting to represent Mr. Morand or Mr. Bishop.

[36] More importantly, while it is possible that the trial evidence of Morand might qualify as a prior statement for impeachment purposes, the transcripts from the CCAA trial cannot, of themselves, constitute any evidence in a trial seeking relief against Etna and Morand directly. The Court of Appeal has already ruled that the doctrine of res judicata cannot apply. Etna and Moran and were not parties to the CCAA proceedings. Nor were they privies in interest to the defendants that were parties. There was no sufficiency of interest or identity between Etna and Morand and the parties to the CCAA proceedings. Etna and Morand did not participate in those proceedings on their own behalf. Morand was only there as a witness on behalf of Planon. Etna and Morand did not have counsel and did not advance or have their defences fairly or fully considered in that proceeding.

[37] For the same reason, it would be grossly unfair to restrict Etna and Morand to the trial transcripts, even assuming they were admissible, of Richard Wade and Alfred Buckley. The examinations of those witnesses at the CCAA hearing were directed to the liability of Wade Ltd., not Etna or Morand. Etna and Morand were not permitted to examine or cross-examine those witnesses. Nor were Etna or Morand permitted to make submissions of any kind about the nature or admissibility of the evidence of Richard Wade or Alfred Buckley.

[38] Finally, the policy of timely resolution of disputes which should underpin the operation of the entire civil justice system, including the conduct of the participants, has been seriously undermined in this case. Etna and Morand are responsible for none of the 25 years’ delay. It would be grossly unfair to force them into a trial in the present circumstances.

[39] For these reasons, I do not think the plaintiffs have adequately discharged their onus of overcoming the presumed prejudice resulting from the 25 year delay for which they are responsible in this case. I find that the delay must be presumed to have prejudiced Etna and Morand’s defence and ability to have a fair trial. Further, the fact that neither Richard Wade nor Alfred Buckley are available to testify constitutes material, actual prejudice which is a direct result of the delay.

[40] As a result, the motion is granted. The action is dismissed.

Costs

[41] The moving parties sought $18,500 partial indemnity costs for this motion. Had they been successful, the plaintiffs would have sought $11,300 in partial indemnity costs. In all the circumstances, I find that partial indemnity costs of $15,000, inclusive of all fees, disbursements and HST, shall be payable by the plaintiffs to the defendants forthwith.

Penny J.

Date: November 9, 2015