Oakville Mini Storage Inc. v. 1674861 Ontario Ltd., 2016 ONSC 2383
COURT FILE NO.: CV-15-520808
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Oakville Mini Storage Inc. And Oakville Mini Storage Limited Partnership
v. 1674861 Ontario Ltd., Carlos De Faria, Riina De Faria, et al.
BEFORE: Master Lou Ann M. Pope
COUNSEL: Joseph Blinick, Bennett Jones LLP, Lawyer for the Plaintiffs
Fax: 416-863-1716
Martin Bufton, David J.M. Rendeiro, Lawyer for the Defendants, Carlos De Faria and Riina De Faria
Fax: 416-588-8002
HEARD: April 6, 2016
REASONS FOR ENDORSEMENT
[1] The issue to be determined on this motion is whether service of the statement of claim on the defendants, Carlos and Riina De Faria (“these defendants”), ought to be validated, or alternatively, whether the time for service of the claim ought to be extended.
Background
[2] The statement of claim was issued on January 28, 2015. The deadline for serving the claim under rule 14.08 was July 28, 2015.
[3] The plaintiffs allege that contaminants migrated from the defendants’ neighbouring properties to the plaintiffs’ property and that the defendants are liable for damages on the basis of negligence, trespass and strict liability. There are some 50 individual and corporate defendants in this action who are, for the most part, past and present owners of the properties.
[4] These defendants own four units in a complex with 41 units at the subject property located at 2857 Sherwood Heights Drive, Oakville, Ontario, which they have owned for over 25 years. They are also retired lawyers who practiced law in Toronto for many years.
[5] Notice of the claim was allegedly given to these defendants by letter dated June 24, 2014 which was hand delivered to each of the units at the Sherwood Heights property and mailed to these defendants’ Dundas Street law office. I note that the letter makes reference to a previous letter sent by plaintiffs’ counsel dated May 2, 2014, which is not included in the evidence. The June 24th letter indicates that an action would be commenced and a copy of the draft statement of claim was enclosed.
[6] The tenants at the Sherwood Heights property formed a Tenants’ Committee at some point. Several defendants retained lawyer, Richard Butler (“Butler”), at Willms and Shier LLP.
[7] Plaintiffs’ counsel, Len Griffiths (“Griffiths”) and Butler agreed that the statement of claim would not be served immediately in order to permit environmental investigations to occur. Griffiths provided Butler with a courtesy copy of the statement of claim on January 30, 2015 as Butler was not formally accepting service on behalf of his clients.
[8] After discussions broke down in May 2015, plaintiffs’ counsel made attempts to serve the defendants with the statement of claim starting in early July 2015. The majority of the defendants were served the week of July 13-17, 2015 at the Sherwood Heights property.
[9] Attempts were made to serve these defendants at the Sherwood Heights property then at their Dundas Street law office to no avail. These defendants had closed their law office on June l, 2015 as they retired.
[10] Subsequently, plaintiffs’ counsel conducted searches and made inquiries to locate these defendants.
[11] On July 17, 2015, plaintiffs’ counsel received a letter from Mandy Liu, Casualty Claims representative at Intact Insurance. Ms. Liu indicated that Intact was the insurance company “representing” these defendants. Further, she acknowledged receipt of the statement of claim issued on January 28, 2015 “served to our insured”. Along with requesting a copy of the affidavit of service, she sought a waiver of defence. The subject line of her letter set out that the “date of loss” was July 15, 2015. Subsequently, Griffiths provided a waiver of defence until September 14, 2015 to Ms. Lei as well as to any defendant who sought it.
[12] These defendants retained Butler in August 2015 with respect to this matter. They were concerned that they would be noted in default and they wanted their interests protected.
Law
[13] The plaintiffs rely on Rule 16.08 which provides that where a document has been served in a manner other than one authorized by these rules or an order, the court may make an order validating service where the court is satisfied that the document came to the notice of the person to be served, or the document was served in such a manner that it would have come to the notice of the person to be served, except for the person’s own attempts to evade service.
[14] There are three general Rules that apply.
[15] Rule 1.04 sets out the general principle in interpreting the Rules. They shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. Courts, in general, favour the determination of a proceeding on its merits rather than the matter being dismissed based on a technicality.
[16] Rule 2 deals with non-compliance with the Rules. Rule 2.01 provides that failure to comply with the Rules is an irregularity not a nullity, and the court has discretion to grant all necessary relief, on such terms as are just, to secure the just determination of the real matters in dispute.
[17] Rule 3 gives the court discretion to extend or abridge any time prescribed by the rules or an order on such terms as are just.
[18] The decision to validate service is discretionary given the language of rule 16.08.
[19] The law is clear that the overarching consideration of the court is if the other party has been prejudiced. (Chiarelli v. Weins 2000 3904 (ON CA), [2000] O.J. No. 296 (O.C.A); King v. Kohut, (1980) 31 O.R. (2d) (H.C.J.)) The principles to be considered are set out at paragraphs 14 to 17 of the Chiarelli decision and can be summarized as follows:
a) the court should not extend the time for service is to do so would prejudice the defendant;
b) the plaintiff bears the onus of demonstrating that the defendant would not be prejudiced by the extension;
c) the defendant has an evidentiary obligation to provide some details of prejudice to him or her which would flow from an extension of time for service;
d) the defendant cannot create prejudice by the failure to do something that he or she reasonably could have or ought to have done; and
e) prejudice that will defeat an extension of time for service must be caused by the delay.
Analysis and Findings
[20] Given that there are some 50 named defendants and that the allegations date back many years, in my view, it was reasonable for plaintiffs’ counsel to agree to delay serving the claim while the defendants, through their Tenants Committee and counsel, investigated the claims. The plaintiffs’ evidence is that once discussions broke down in May 2015, they commenced efforts to serve the defendants and the majority of them were served by mid-July 2015. However, they were unable to serve these defendants personally at the Sherwood Heights property or their law office at that time. These defendants closed their law office on June 1, 2015. Thereafter, plaintiffs’ counsel performed searches to locate these defendants to no avail. These searches were followed by communications with Butler regarding proper service and when plaintiffs’ counsel learned from Butler, as set out in his email of November 3, 2015, that he was taking the position that these defendants must be served personally, the plaintiffs scheduled this motion shortly thereafter.
[21] For those reasons, I cannot conclude from the evidence that this action languished without efforts to locate and serve these defendants personally.
[22] However, I am critical of the plaintiffs’ attempts to search for an address to serve these defendants for the oral reasons submitted by defence counsel and as set out in their material. In my view, there were numerous obvious searches that ought to have been performed and had they been performed, they would likely have been able to serve these defendants personally within the prescribed timeline. However, for the foregoing reasons, it was obvious that these defendants had been in possession of a copy of the statement of claim for some time, they had put their insurer on notice of the claim and they had retained legal counsel. Furthermore, there is no evidence of discussions between counsel to discontinue the action against these defendants.
[23] Notwithstanding my criticism of the plaintiffs’ efforts, or lack of, to locate these defendants, I find on the evidence that the plaintiffs demonstrated a continued intention to pursue the defendants.
[24] These defendants do not specifically deny receiving plaintiffs counsel’s notice letter, including a copy of the draft statement of claim, which was mailed to their Dundas Street law office in June 2014, approximately seven months before the claim was issued. In paragraph 13 of Carlos De Faria’s affidavit, he states that “[Neither] my wife nor I recall receiving or seeing any draft Plaintiffs’ claim in 2014 as alleged. We recall however, being aware of contamination allegations being made by the Plaintiffs against the complex where our units are located.” He fails to state when and how they became aware of the contamination allegations. In my view, it is reasonable to conclude that these defendants were aware of the contamination allegations because they either received the notice letter or they learned of them from other owners or tenants of the other units in June 2014.
[25] For those reasons, I find that these defendants had notice of this claim in June 2014, prior to the action being commenced.
[26] Butler emailed plaintiffs’ counsel on November 3, 2015. Paragraph 2 states clearly that the statement of claim “first came to the DeFarias’ attention in January, 2015, when you sent me a copy”. Butler goes on to state that he provided a copy of the statement of claim to the Tenant Committee and they circulated same to all Owners and Tenants. The plaintiffs’ evidence is that Griffiths provided Butler with a copy of the issued statement of claim in late January 2015.
[27] For those reasons, I find that these defendants were in possession of a copy of the issued statement of claim on or about January 31, 2015.
[28] It is evident from Intact’s letter of September 10, 2015 that these defendants sought coverage of this claim from their insurer. The subject line of the letter references the title of proceedings in this action. It is reasonable to conclude therefore that these defendants notified their insurer of this claim on or about July 17, 2015 given Ms. Liu’s letter of that date.
[29] For the foregoing reasons, I find that the claim came to the notice of these defendants as early as June 24, 2014, prior to the action being commenced. Further, I find that the issued statement of claim came to their notice by late January or early February 2015, well within the six-month timeline for service required by rule 14.08.
[30] It is these defendants’ position that they will be prejudiced if the motion is granted because they shredded their “old rental files” that contained their former tenants’ application forms and copies of tenants’ insurance policies with coverage specific to their business activity over the 25-year period that this claim covers. The evidence is that they closed their law office on June 1, 2015 and sold it sometime that month. They moved their client files to their home at that time. They ran out of storage space at their home therefore in October 2015, Riina De Faria started “sorting and shredding” their personal files. When Riina left for Florida in late October, Carlos De Faria continued shredding the remaining files. His evidence is that he was unaware that he was shredding lease files along with all the other files.
[31] One of the principles that a court will consider on the issue of prejudice as enunciated in Chairelli is that the defendant cannot create prejudice by the failure to do something that he or she reasonably could have or ought to have done. Here, on their own evidence, these defendants stated that they retained legal counsel in August 2015 to “look after our interests as we were afraid that we might be noted in default in error.” Further, I found that they had notice of the issued statement of claim as far back as late January 2015, and that they had notice of the claim in June 2014. Moreover, they gave notice of the claim to their insurer and asked whether they had coverage for this claim, to which the insurer responded in July 2015. One additional important fact is that these defendants are experienced lawyers who ought to have known of the importance to maintain all relevant documents to this claim and failed to do so.
[32] For the foregoing reasons, and given my finding that these defendants had notice of this claim well in advance of the shredding of their old tenant files, having retained legal counsel to advise them on the issues, and having given notice of the claim to their insurer, I find that in destroying their old tenant files these defendants have created the precise prejudice they now assert to oppose this motion.
[33] Therefore, I find that these defendants have not met their evidentiary obligation to show prejudice to them should this motion be granted.
[34] In summary for the foregoing reasons, I am satisfied that the issued statement of claim came to these defendants’ notice on or about January 31, 2015 and that these defendants will not be prejudiced if this motion is granted.
[35] Therefore, the plaintiffs’ motion is granted. Service of the statement of claim on these defendants is hereby validated as of January 31, 2015.
Costs
[36] Ordinarily the successful party is entitled to costs. Here, the plaintiffs are asking the court for an indulgence for not serving the statement of claim on these defendants personally as required by the Rules. I have been critical of the plaintiffs’ attempts to locate and serve these defendants personally. They never did serve them personally having stopped their attempts to locate them and instead brought this motion. However, had they located and served them personally, service would likely have occurred after July 28, 2015, being the six-month timeline under the Rules. Thus, they would have had to bring a motion to validate service after the timeline and would likely have been faced with similar opposition by these defendants.
[37] It is also my view that given the strong evidence that favoured validating service, this motion should not have been opposed.
[38] Therefore, I find that the plaintiffs are entitled to their costs. In fixing the amount of costs, I have reduced the amount sought to take into consideration the plaintiffs’ lack of effort to locate and serve these defendants personally and the fact that they would have had to bring this motion in any event. The plaintiffs seek partial indemnity costs of approximately $6,700 inclusive. Although a factums and briefs of authority were filed, no cross-examinations were held. This was not a complex motion and the case law is well-settled in this area. Therefore, I fix costs on a partial indemnity basis in the amount of $2,500 inclusive of fees, taxes and disbursements.
[39] However, the plaintiffs made an offer to settle the motion which was delivered to defence counsel by fax on March 4, 2016. The offer was to validate service as sought on this motion without costs. I find that the offer is a valid Rule 49 offer. These defendants did not accept the offer. Therefore, the plaintiffs are entitled to increased costs as set out in Rule 49.10(1). In particular, the plaintiffs are entitled to partial indemnity costs to the date of the offer to settle being March 4, 2016, and substantial indemnity costs from that date to the hearing on April 6, 2016. Upon review of the plaintiffs’ Costs Outline, the steps taken after March 4, 2016 were confirming the motion, preparing for the motion and attending to argue the motion which involved approximately three hours on April 6, 2016. Therefore, I fix the plaintiffs’ costs in the amount of $3,500 inclusive of fees, taxes and disbursements, payable within 30 days.
__Original Signed _
Master Lou Ann M. Pope
DATE: April 7, 2016