Court File and Parties

COURT FILE NO.: 04-CV-280211CM2 DATE: 20160513 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: PANTHER FILM SERVICES INC. AND: HSBC BANK CANADA

BEFORE: Justice Goldstein

COUNSEL: Lorne Honickman, for the Plaintiff/Responding Party, Panther Film Services Inc. Mark Sheeley, for the Defendant/Moving Party, HSBC Bank Canada

HEARD: May 3, 2016

Endorsement

[1] Panther had a bank account with HSBC. In October 2004 there was a balance of $226,724.90. HSBC was concerned that Panther was using its account as part of a fraudulent cheque kiting scheme with RKR Financing Inc. RKR had a bank account with the Bank of Montreal, or BMO as it is known. HSBC froze the funds and closed the account. HSBC remitted the funds to BMO, who holds the funds to this day.

[2] Panther launched this action against HSBC in 2004. Panther pleaded negligence, breach of contract, and breach of fiduciary duty. Panther asked for damages of $1,000,000.00 with punitive damages for $100,000. HSBC filed a defence and Panther filed a reply. Pleadings closed in February 2005.

[3] Panther also launched in action against RKR and cross-claimed against BMO. RKR defended the action and filed a counterclaim against BMO. In 2007, Master Brott, on a motion by HSBC, ordered that the actions be tried together or tried one after the other as the trial judge may direct. In 2008, Master Brott stayed both actions on the grounds that Panther had failed to meet its statutory filing requirements. Panther filed the necessary returns, and in January 2010 Master Brott lifted the stay. Panther was required to pay security for costs, which it did. Since that time, Panther has taken no steps to prosecute the action.

[4] HSBC now moves to dismiss this action for delay. Panther brings a cross-motion to restore the action to the trial list.

[5] Rule 24.01(1) of the Rules of Civil Procedure permits a court to dismiss an action for delay. Both parties are in agreement that the test for dismissal for delay is set out in the judgment of Doherty J.A. in Langenecker v. Sauve, 2011 ONCA 803 at para. 7:

The second type of case that will justify an order dismissing for delay has three characteristics. The delay must be inordinate, inexcusable and such that it gives rise to a substantial risk that a fair trial of the issues in the litigation will not be possible because of the delay: see De Marco, at paras. 22, 26; Armstrong, at paras. 11-12.

[6] I turn to an evaluation of the three factors:

(a) Was the delay inordinate?

[7] Mr. Honickman concedes that the delay was inordinate. Given that the action has been outstanding for 12 years, that is a reasonable concession. I do not need to deal with this factor.

(b) Was the delay inexcusable?

[8] Panther’s counsel, Mr. Honickman, argues that the delay is excusable for two reasons. First, he says that HSBC is at least partially responsible for the delay itself. Second, at least four years of the delay were spent while Panther tried to negotiate a settlement with RKR.

[9] I disagree. The delay was inexcusable. I will deal with each of Mr. Honickman’s points in turn.

[10] I disagree that because HSBC moved to have the actions heard together or one after the other that makes HSBC partially responsible for the delay. It is certainly true that the RKR action was at an earlier stage of proceedings when HSBC brought the motion, but that was in 2007. It is now 2016, nine years later. It cannot be that HSBC is now automatically tied to the dilatory behaviour of other parties. I rather doubt that HSBC expected the RKR action to drag on quite this long.

[11] Panther argues that where the responsibility for the delay is shared, the delay becomes excusable: Attorney General of Canada v. Boeing, [1996] O.J. No. 1793, 1996 CarswellOnt 2167 (Gen.Div.). In that case, the Forget J. found that where that happens the plaintiff should not be denied his or her right to have the case tried on the merits.

[12] While the principle is undoubtedly correct, I do not think it applies. In that case, Forget J. reviewed the correspondence of years and found that both parties shared responsibility for the delay. That is distinguishable from this case.

[13] I also disagree with the second reason. It is certainly correct that the parties cannot be faulted for attempting to settle the action: Elia v. Alizadeh, 2015 ONSC 1539, 22 C.B.R. (6th) 167 (Ont.Master). Again, while the principle is obviously correct, that case is distinguishable. The settlement negotiations were between the parties, not between a party and a third party, as in this case. I cannot agree that HSBC can be held hostage to the negotiating process of different parties.

[14] Furthermore, the settlement negotiations never proceeded with any kind of urgency. Discussions first began in 2011. Ms. Freitas, the Panther affiant, indicates that negotiations were ongoing but based on her affidavit, it appears that nothing of substance happened between early 2011 and July 2015, a period of some four years. If there was a pace to the negotiations, it could best be described as glacial. In order for the settlement “excuse” to apply, something must be done – even a letter to HSBC’s counsel stating that settlement negotiations were ongoing. Panther’s counsel did not write a letter, make a phone call, or send an email to HSBC’s counsel.

[15] Furthermore, Panther’s attitude toward the action can best be seen by the fact that it failed to make the requisite filings and allowed its status to lapse. In fact, a settlement between Panther and RKR could not be completed because funds could not be paid out – Panther had no status. While it is true that Panther has now filed (and as a result HSBC’s counsel agrees that the action need not be dismissed on the ground that Panther has no corporate capacity), to my mind it demonstrates that prosecution of the action was not exactly top of mind.

(c) Is there a substantial risk that a fair trial of the issues will not be possible because of the delay?

[16] Mr. Sheeley, for HSBC, argues that the lengthy delay gives rise to a presumption of prejudice. He says that Panther has failed to rebut the presumption.

[17] I agree that there is a presumption of prejudice. The length of the delay alone generates that presumption. I disagree, however, that Panther has failed to rebut it.

[18] Doherty J.A. set out the proper approach in Langenecker at paras. 23-25: a lengthy delay generates a presumption (or at least an inference) that the defendants will not be able to fully defend the allegations. Once that presumption (or inference) has been established, the defendant must be able to show that the delay has not caused a substantial risk to a fair trial on the merits.

[19] In Ali v. Fruci, 2014 ONCA 596, the Court of Appeal recently noted that there are two sorts of prejudice: presumed prejudice which is inherent in a long delay, and actual prejudice. HSBC essentially relies on the presumed prejudice inherent in the lengthy delay. It is that prejudice which is rebuttable.

[20] In Armstrong v. McCall (2006), 213 O.A.C. 229, [2006] O.J. No. 2055, 2006 CarswellOnt 3134 (C.A.) the Court of Appeal adopted an earlier statement of the law describing how the presumption can be rebutted. Essentially, the presumption can be rebutted where there is evidence that the documentary evidence has been preserved and the issues do not depend on the recollection of the witnesses or that the witnesses recall the events.

[21] I agree with Mr. Honickman that the affidavit of Ms. Freitas sets out a sufficient basis to show that the documents have been preserved. The parties have exchanged affidavits of documents. Ms. Freitas’s unchallenged evidence is that the documents are in existence. All of Panther’s key witnesses are available. Notwithstanding the availability of witnesses, it is her position that this is primarily a documents case.

[22] There is some evidence to support that view. HSBC’s representative was examined for discovery in 2006. She did not have first-hand knowledge of the facts or the allegations. It therefore seems a reasonable inference that HSBC agreed that a trial will be primarily document driven.

Disposition

[23] The motion to dismiss for delay is dismissed and the cross-motion to restore the action to the trial list is granted.

[24] I agree with Mr. Sheeley that given Panther’s precarious regulatory history, further security for costs should be ordered. HSBC may have failed in this motion but it does not completely give up its rights in litigation. Panther may have the right to continue the action on the merits, but HSBC surely has a right to some security in light of Panther’s past behaviour.

[25] As I indicated at the hearing of the motion, HSBC will 15 days from the date of this judgment to file submissions of no more than five pages regarding the amount of security for costs that are sought. Panther will then have 15 days to file submissions of no more than five pages in response.

Costs

[26] At the same time counsel file their submissions as to the proper amount of security for costs, they may each also file a costs outline and submissions of no more than two pages.

Goldstein, J Date: May 13, 2016