COURT FILE NO.: CV-15-520298
CITATION: 683153 Ontario Limited v. Manufacturers Life, 2017 ONSC 6024
DATE: 2017/10/11
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 683153 Ontario Limited et al. v. The Manufacturers Life Insurance Company et al. (Court file no. CV-15-520298)
BEFORE: Master A. Graham
HEARD: May 30, 2017
APPEARANCES: A. Esterbauer and S. Hodge for the plaintiffs (moving parties) D. Ward for the defendants
REASONS FOR DECISION
(Motion for a status hearing)
[1] Between 1987 and 1997, the plaintiffs entered into a series of mortgages with the defendant Manufacturers Life Insurance Company (“Manulife”) on 10 apartment buildings in London, Ontario. Six of the properties were on Kipps Lane and the other four were on Wonderland Road. In 1997, owing to the plaintiffs’ failure to make their payments, the mortgages went into default and Manulife took possession of the properties. Manulife remained in possession of and operated the buildings through the defendant property managers Larlyn Property Management (Kipps Lane) and ICORR London Inc. (Wonderland Road) until 2001 and 2002 when the plaintiffs redeemed the mortgages and recovered possession.
[2] The plaintiffs now allege that the defendants, while in possession of and operating the properties, mismanaged them and as a result increased the plaintiffs’ mortgage debt. They claim an accounting by Manulife of its possession of the properties and payment of amounts found due to them. Manulife’s position is that at the time that it took possession, the properties were in a serious state of disrepair and had high vacancy rates; the repair costs were added to the balance owing on the mortgages and the repairs were to the benefit of the plaintiffs when they sold the properties after regaining possession.
[3] This action has a lengthy and complex procedural history. Although the action before the court has a 2015 file number, it is a consolidation of five proceedings, one commenced in 2000, three commenced in 2001 and one commenced in 2007.
[4] The five original actions, all commenced in Newmarket, are as follows:
Action no. 56156/00: The owners of all of the properties claimed damages arising out of Manulife’s alleged failure to provide partial discharges and Manulife’s conduct that prevented them from bringing the mortgages back into good standing.
Action no. 61640/01: This action was for an accounting by Manulife in respect of its possession of 760 Wonderland Road.
Action no. 61641/01: This action was for an accounting by Manulife in respect of its possession of the other three Wonderland Road properties. On March 26, 2002, Mullins J. ordered both in this action and in 61640/01 that the accounting be conducted by way of references to a Master in Toronto. No references were ever scheduled.
Action no. 61736/01: One of the building owners sought a declaration that it was entitled to possession of 750 Kipps Lane along with an accounting in respect of that property. Manulife submits that after the pleadings closed in this action, the plaintiff did nothing to advance the action. The plaintiffs submit that the issue of possession became academic after the mortgage was redeemed in July, 2002. Regardless, the claim for an accounting would still be pending.
Action no. CV-07-086587: According to the plaintiffs, this action was intended to be a consolidation of the other four actions, although it both repeated the claims in the other actions and raised causes of action not previously advanced. The defendants appear to acknowledge that this action raised all of the claims in the four previous actions.
[5] On July 20, 2012, Mullins J. ordered that these actions be consolidated into action 56156/00 and tried in Toronto and on October 6, 2014, she ordered that the consolidated action be transferred to Toronto. On November 26, 2014, as required by the practice direction relating to the transfer of actions between regions, R.S.J. Fuerst authorized the transfer. The action was then transferred and given the 2015 action number in Toronto. Manulife delivered its statement of defence to this 2015 consolidated action in February, 2015.
[6] Mullins J.’s order of July 20, 2012 includes a term that “the statement of claim in the Consolidated Action shall be in the form of the statement of claim in Newmarket court file number CV-07-086587”. Accordingly, notwithstanding the 2012 consolidation order, the plaintiffs’ current pleading was finalized in 2007.
[7] The plaintiffs now bring a motion for a status hearing under rule 48.14(5), so that they may show cause why the action should not be dismissed for delay, and for an order establishing a timetable for the completion of further steps in the action. For the reasons set out below, I have concluded that the plaintiffs have failed to show cause and the action should be dismissed.
The law
[8] Under rule 48.14(1), the registrar was to dismiss the action for delay in the event that the action was not set down for trial by January 1, 2017:
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):
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.
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.
[9] As this action has not been set down for trial, the potential dismissal of the action would be under rule 48.14(1)1..
[10] Under, rule 48.14(4), the dismissal contemplated by rule 48.14(1) can be avoided if the parties consent to a timetable setting deadlines for further steps in the action, including the setting down of the action. In this case, no such timetable was agreed to, so subrules 48.14(5) – (7) apply:
48.14(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. [emphasis added]
[11] In considering whether a plaintiff has shown cause why the action should not be dismissed for delay, the court is guided by the following case law:
The onus is on the plaintiff to demonstrate why the action should not be dismissed for delay. The test requires the plaintiff to demonstrate both that there was an acceptable explanation for the delay and that, if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice. (See: Khan v. Sun Life Assurance Co. of Canada, 2011 ONCA 650, and Faris v. Eftimovski, 2013 ONCA 360, [2013] O.J. No. 2551 at para. 32)
The test is conjunctive, not disjunctive. Even if the plaintiff can provide a satisfactory explanation for the delay, the action will be dismissed if there would be prejudice to the defendant. And if the plaintiff is not able to provide a satisfactory explanation for the delay, it is still open to the court to dismiss the action, even if there is no proof of actual prejudice to the defendant. (See: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 at para. 33)
The responsibility to move the action along lies chiefly with the plaintiff. (See: Faris, supra, at para. 33) However, the conduct of a defendant is also a factor to be considered in determining whether the action should be dismissed for delay or allowed to proceed. (See: Carioca’s Import & Export Inc. v. Canadian Pacific Railway, 2015 ONCA 592 at para. 53)
The possible dismissal of an action for delay involves a careful balancing between the interests of the parties and society in timely and efficient justice on one hand and in the resolution of disputes on their merits, on the other. (See: Kara v. Arnold, 2014 ONCA 871 at para. 9)
It is reasonable to approach the plaintiff’s explanation for the delay in an action on the basis that “the longer the delay, the more cogent the explanation must be”. (See: Kara, supra at para. 17)
There is little to be gained in debating whether there is a bright line between the “contextual approach” applicable to motions to set aside registrar’s dismissal orders (per Scaini v. Prochinicki, 2007 ONCA 63 at para. 23) and the approach taken in Faris, supra to status hearings. In considering the reasonableness of any explanation for delay, the status hearing court will almost invariably engage in a weighing of all relevant factors in order to reach a just result. (See: Kara, supra, at para. 13)
Settlement discussions can constitute a reasonable explanation for litigation delay. A party should not be penalized for not pursuing the costly steps of litigation while engaged in a settlement process that was ultimately unsuccessful. (See: Apotex Inc. v. Relle, 2012 ONSC 3291 at paras. 7, 50 and 51)
The prejudice at issue is to the defendant’s ability to defend the action as a result of the plaintiff’s delay, not as a result of the sheer passage of time. (See: MDM Plastics Ltd. v. Vincor International Inc., 2015 ONCA 28 and Carioca’s Import & Export Inc., supra at para. 57)
A defendant’s lack of display of any sense of urgency undercuts any claim of actual prejudice. (See: Aguas v. Rivard Estate, 2011 ONCA 494 at para. 19 and H. B. Fuller Co. v. Rogers, 2015 ONCA 173 at para. 42)
The issue
[12] The issue on this status hearing is whether the plaintiff can both provide an acceptable explanation for the delay in the action and demonstrate that, if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice.
Have the plaintiffs provided an acceptable explanation for the litigation delay?
[13] The first statement of claim in the various actions that were eventually consolidated into the current action was issued in 2000. The notice of motion for this status hearing in the consolidated action was filed on December 29, 2016. The court must determine what period or periods during these 17 years can be adequately explained by the plaintiffs.
[14] The plaintiffs submit that much of the delay relates to their counsel’s efforts to obtain, review and catalogue the documents in the possession of the defendant property managers with respect to their management of the subject apartment buildings between October, 1997 and July, 2002. According to the plaintiffs, there are approximately 250,000 documents contained in more than 90 bankers’ boxes.
[15] The plaintiffs submit that they first requested the documents at the examination for discovery of Manulife on October 21, 2001 and subsequently pursuant to Justice Mullins’ judgments of reference in 2002. They then brought a motion for production of the documents returnable April 3, 2003 at which point Manulife agreed to make the documents available for inspection. Counsel for the plaintiff attended to inspect the documents on June 2, 3 and 4, 2003 and again in August, 2003 when further materials were produced.
[16] The plaintiffs submit that their inspection of the documents revealed that a surplus amount of $159,741.87 had not been returned to them by the property managers after they relinquished possession of the buildings. Owing to this apparent impropriety, the plaintiffs decided to have the property management records reviewed by a forensic accounting firm. For this assignment, they selected Grant Thornton, which selected Merlon Consulting (“Merlon”) to scan the documents so that they could create a searchable data base. The parties reached an agreement for the scanning of the documents on October 21, 2003. The documents were to be transported from the property managers in London and taken to Toronto where they would be scanned by Merlon under the supervision of Grant Thornton. The scanning commenced in late 2003.
[17] The plaintiffs agreed that Manulife’s lawyers would be provided with an electronic copy of the scans with an index and in a format compatible with the Summation litigation documents database, free of charge. As set out in further detail below, following the initial delivery of the scanned documents in April, 2010, it became necessary to redo the entire scanning and indexing process.
[18] The initial estimate was that the scanning would take about three months. On June 7, 2004, Manulife’s counsel called to enquire as to the progress of the scanning and was told that it was not completed and that it was taking longer than expected. Plaintiffs’ counsel submits that there was no further communication from Manulife’s counsel for about three years.
[19] In the spring of 2005, the plaintiffs were informed by Grant Thornton that their projected costs for their analysis of the Manulife documents had escalated from $200,000.00 to $500,000.00. During the last half of 2005 and into early 2006, the plaintiffs consulted with other advisors and expert witnesses looking for a more efficient and cost-effective means of analysing the documents. The plaintiffs determined that their counsel should undertake this task rather than wait for an expert to do it. Then, in November, 2007, the plaintiffs issued the fresh statement of claim that essentially consolidated the other existing actions and also asserted some additional claims. According to the plaintiffs’ own chronology of the action, the defendants defended this new action in May, 2008.
[20] In December, 2009, Manulife’s counsel expressed the intention to bring a motion for a variety of relief, including delivery of electronic copies of the scanned documents. The plaintiffs submit that in the six years that had passed since Manulife had required that they be provided with an electronic copy of the scanned documents, this was the first occasion on which they requested a copy. This does not constitute an explanation for the delay as it was incumbent on the plaintiffs to keep the defendants informed of the progress of the scanning process that was undertaken at their request and that was under their control.
[21] The plaintiffs delivered the electronic copies of the scanned documents to Manulife’s counsel on April 30, 2010, 6.5 years after the parties had first reached the agreement for the scanning of the documents on October 21, 2003. Manulife’s counsel confirmed very shortly thereafter that an index was missing from the scanned materials and that they were not in a version compatible with Summation.
[22] The plaintiffs explain the delay between December 29, 2009, when Manulife served its motion for various heads of relief, and August 13, 2013 on the basis of the following:
Manulife’s deponent for the motion was initially not available for cross-examination other than in the evening, and that individual had little personal knowledge of what transpired on the file;
After the motion was argued on May 1, 2012, Mullins J.’s decision was not released until July 20, 2012;
Manulife then sought leave to appeal to the Divisional Court and refused to approve the draft order;
The leave motion was not abandoned until March 7, 2013 and the order was not settled until August 13, 2013.
[23] Mullins J.’s order of July 20, 2012, in addition to consolidating the five Newmarket actions and ordering that the consolidated statement of claim be in the form of the 2007 statement of claim, required that the plaintiffs post security for costs of $50,000.00 to the end of the pre-trial conference.
[24] Commencing May 10, 2013, the plaintiffs tried to move the consolidated action forward to examinations for discovery. No date having been reached, on September 11, 2013, plaintiff’s counsel booked a motion returnable January 9, 2014 to get discovery dates. The response of Manulife’s counsel, on December 10, 2013, was that they needed a discovery plan.
[25] Then, according to plaintiffs’ counsel, on December 19, 2013, more than 3.5 years after the scanned documents were provided on April 30, 2010, Manulife’s counsel stated that the documents did not contain an index and also stated that the multi-page documents were saved as separate documents for each page. Further, according to his firm’s e-discovery manager, the documents “are not organized in any recognizable manner, and they have not been able to load them into Summation”.
[26] At the plaintiffs’ motion for discovery dates and the defendants’ cross-motion for a discovery plan, argued January 3, 2014, McKelvey J. determined that as the consolidated action was “in effect a new action” and was complex with a large volume of documents, there should be a discovery plan. I accept McKelvey J.’s comment that the consolidated action was in effect a new action to the extent that it raised issues not raised in the original four actions. However, as reflected in Mullins J.’s July 20, 2012 order, the new consolidated action was essentially the same as the action issued on November 19, 2007.
[27] The motion commenced before McKelvey J. in January, 2014 continued before Mullins J. on October 6, 2014. At this time, Mullins J. ordered that the action be transferred to Toronto but, contrary to the request of the defendants, did not order that the discovery plan include an e-discovery plan. Manulife delivered its defence to the consolidated action on February 23, 2015.
[28] Because the document scans provided April 30, 2010 were neither indexed nor Summation compatible, it was necessary for the plaintiffs to redo the scanning and then to code and index the documents. Plaintiffs’ counsel undertook to do this. This further scanning process required about 3,500 hours of plaintiffs’ counsel’s time. The plaintiffs delivered the Summation compatible databases for the Kipps Lane properties in August, 2015 and for the Wonderland Road properties in September, 2016. Plaintiffs’ counsel then sent Manulife’s lawyers an updated timetable and a month later, Manulife’s lawyers stated that they would not agree to a timetable. The plaintiffs then brought this motion.
[29] Plaintiffs’ counsel submits that it was not until December, 2013 that Manulife took the position that the scans had to be Summation compatible and that if Manulife had taken this position in May, 2010, when the original scans were first provided, the Summation compatible scans could have been completed by 2012. On this basis, the plaintiffs attribute the delay from January, 2014 to September, 2016 to Manulife.
[30] The plaintiffs also submit that the fact that Manulife did not deliver a statement of defence in the consolidated action until February 20, 2015 meant that Manulife was satisfied with the pace of the litigation. This submission neglects to consider that it was Manulife and not the plaintiffs that moved to consolidate the actions in the first place.
[31] On the issue of delay, Manulife submits that the actions have languished for 17 years, since the first action was commenced in 2000, and this consolidated action should be dismissed. They submit that the case was delayed for the following reasons:
The plaintiffs’ efforts to advance the action were sporadic, such that the case was “let sit” for a total of five and a half years, with no activity.
The plaintiffs assigned the scanning of documents to individuals incapable of completing the task within a reasonable time.
Plaintiffs’ counsel (not counsel on the motion) acknowledged during his cross-examination that he was occupied with other unrelated matters.
The plaintiffs made tactical decisions to commence multiple proceedings which had the effect of broadening rather than narrowing issues.
[32] The defendants submit that because the plaintiffs had regained possession of all of the properties by July, 2002, any alleged damages had crystallized by that point and they were free to proceed with the litigation. The defendants further submit, and as indicated above I accept, that despite McKelvey J.’s comment in 2014 that the consolidated action before him was “a new action”, the action pending before him was in substance commenced in November, 2007.
[33] The defendants also comment that subsequent to March 26, 2002, when Molloy J. ordered an accounting by way of references to a Master in Toronto in actions 61640/01 and 61641/01, the plaintiffs took no steps to schedule any references.
[34] Manulife submits that the single greatest cause of delay in the action is the plaintiffs’ slow scanning and indexing of documents, a delay to which Manulife did not contribute. Manulife agreed to provide its property managers’ files for scanning by the plaintiffs’ service provider, and did so by November 26, 2003. Manulife made available the documents for scanning by the plaintiffs on the basis confirmed in Manulife’s counsel’s letter of October 21, 2003:
“Based upon your letters dated October 15 and 21, 2003, and on the basis that you will provide the index and document images in a format that can be used with Summation software, I am content to provide the documents from ICORR and Larlyn [i.e. the property managers].” [emphasis added]
[35] Manulife therefore made it clear from the outset that the scanned documents provided to it must be indexed and Summation compatible.
[36] As indicated above, plaintiffs’ counsel in the action advised (in September, 2003) that he intended to use Merlon Consulting Corp. to do the scanning. As Manulife’s counsel had never heard of Merlon, he suggested in writing on September 12, 2003 that the plaintiffs use Commonwealth Legal, a recognized service provider. The plaintiffs declined this suggestion.
[37] Manulife submits that between November 26, 2003 and April 30, 2010, a period of six years and five months, the plaintiffs never updated Manulife’s counsel as to the progress of the scanning of the documents.
[38] The evidence of Manulife’s counsel is that based on his experience in other cases involving large volumes of documents, it should take a qualified litigation support firm between two and three weeks to scan the quantity of documents made available by Manulife in this case. The evidence of plaintiffs’ counsel is that he had no previous experience with a case involving a similar quantity of documents. Manulife submits that given plaintiffs’ counsel’s inexperience in this regard, he should have heeded the suggestion of Manulife’s counsel as to the choice of scanning service provider.
[39] Manulife’s counsel deposes that, after hearing nothing from plaintiffs’ counsel after November, 2003, he closed his file on November 1, 2004. Manulife’s counsel acknowledges some uncertainty as to whether a member of his firm contacted plaintiffs’ counsel on June 7, 2004 to enquire as to the status of the scanning of the documents. In any event, even assuming that this contact occurred, there was no subsequent contact between counsel until October 29, 2007, three years and four months later, when plaintiffs’ counsel proposed pleadings amendments to one of the actions.
[40] Then, after Manulife defended the action commenced in November, 2007, the plaintiffs did nothing until October, 2009, when they served a trial record in one of the earlier actions. Manulife then responded on December 29, 2009 by serving its motion for various relief, that ultimately concluded with Mullins J.’s order of July 20, 2012.
[41] On April 30, 2010, plaintiffs’ counsel delivered to Manulife’s counsel three DVDs containing what counsel represented to be full copies of the scanned documents from Manulife’s property managers in accordance with the agreement. Manulife’s counsel then informed plaintiffs’ counsel by letter of May 5, 2010 as follows:
“Unfortunately, we do not see an index of the documents on the DVDs, and therefore, we cannot add them to our Summation database. Please advise if the documents are in any version of Summation and if not, advise us what program you are using. If you are using Summation, we require a load file in SBF briefcase so we can load and view the index as well as the images.”
[42] Plaintiffs’ counsel responded immediately, on May 6, 2010 as follows:
“Unfortunately, there is no index. The documents are not in any version of Summation. I believe a program called Supertext may have been involved.” [emphasis added]
[43] Manulife’s counsel responded on June 3, 2010:
“I have significant difficulty believing that there is no index of the documents that were scanned. All modern litigation support software is built around the concept of a document list, which is then linked to individual document images.
Would you please provide me with the name of the company that scanned the documents (as well as the person responsible) so that I can contact such individual to determine what type of indexing system exists?”
[44] Plaintiffs’ counsel responded on July 5, 2010:
“In reply to your letter of June 3, 2010, I too would like to have an index, but I do not see one. This project was running way over the quoted price and was discontinued by the client. It is possible an index was not constructed”.
[45] Based on the scanning agreement reached in October, 2003 and counsels’ exchange of correspondence 6.5 years later in 2010, Manulife submits that the electronic copies of the documents provided by plaintiffs’ counsel on April 30, 2010 were not in accordance with the scanning agreement. I agree.
[46] When cross-examined on the 2010 correspondence, plaintiffs’ counsel testified that despite the contents of the letter of May 5, 2010 from Manulife’s counsel to the effect that the DVDs of the documents did not include an index and enquiring whether they were in any version of Summation, he did not interpret the letter as saying that he had failed to comply with the scanning agreement. However, plaintiffs’ counsel’s evidence to this effect appears disingenuous when considered in the context of his own letter sent the next day, May 6, 2010, in which he clearly stated “the documents are not in any version of Summation”. He knew both that he had agreed to provide scanned documents that were indexed and compatible with Summation and that he failed to do so.
[47] In October, 2003, Manulife’s counsel clearly agreed to allow plaintiffs’ counsel to take the documents and copy them on the basis that the electronic copies of the documents would be indexed and useable with Summation. It was plaintiffs’ counsel’s responsibility to ensure that this was done and the delay arising out of his failure to do so is delay that has not been properly explained by the plaintiff. Similarly, Manulife’s counsel’s correspondence of May 5, 2010 is clear that the documents could not be viewed and searched in Summation and plaintiffs’ counsel acknowledged this fact the next day. The subsequent delay in having the documents scanned properly, which was not completed until September, 2016, is also delay that has not been sufficiently explained by the plaintiffs.
[48] Even allowing the plaintiff a full year to scan the documents, from November, 2003 until the end of 2004, results in delay from January, 2005 until September, 2016, a period approaching 12 years.
[49] For the purpose of this analysis, the court accepts that the delay between December 29, 2009 and March 7, 2013 was attributable to Manulife’s motion and its appeal of Mullin J.’s decision of July 12, 2012. The court also accepts that the subsequent delay until Mullins J.’s order of October 6, 2014 arose from the motions for discovery dates and a discovery plan. However, the plaintiffs must still explain five years of delay from January, 2005 to December, 2009 and another two years of delay from October, 2014 to September, 2016, a total of seven years.
[50] As stated in Kara v. Arnold, supra, the longer the delay in a proceeding, “the more cogent the explanation must be”. The plaintiffs elected to have over 90 boxes of documents scanned by an inexperienced service in the face of both a warning from Manulife’s counsel that they were not familiar with the service and the same counsel’s recommendation with respect to a reputable service. Manulife consented to the plaintiffs’ review and scanning of their property managers’ documents on the basis that they be provided with indexed electronic copies of the documents that could be viewed in Summation. The plaintiffs did not provide even the initial deficient electronic copies of the documents for 6.5 years (from October, 2003 to April, 2010). The explanation that this delay resulted from the inexperience of the service used and then from problems with the accounting expert that retained that service falls far short of the “cogent explanation” required.
[51] On being informed that the documents were neither properly indexed nor Summation compatible, plaintiffs’ counsel took another 6.5 years (from May, 2010 to September, 2016) to provide electronic copies in the proper form. As indicated above, I accept the plaintiffs’ explanation for the delay from January, 2010 to October, 2014, so the further period of delay to September, 2016 to be explained by the plaintiffs is two years. Plaintiffs’ counsel’s explanation for this second period of delay is that he did not realize that the documents did not meet the terms of the October, 2003 scanning agreement until December, 2013. As indicated above, it should have been clear to plaintiffs’ counsel from the letter from Manulife’s counsel dated May 5, 2010 that the electronic version of the documents was neither properly indexed nor Summation compatible and plaintiffs’ counsel essentially acknowledged this in his correspondence of May 6, 2010. Accordingly, I do not accept plaintiffs’ counsel’s explanation for the further two years of delay.
[52] The plaintiffs submit that Manulife never made any complaint about the time that the scanning was taking. This cannot be construed as Manulife contributing to the delay and it certainly does not constitute an explanation for the delay. Further, there is no evidence that the plaintiffs would have proceeded more expeditiously in the event that Manulife had complained about the delay.
[53] For these reasons, I conclude that the plaintiffs have failed to provide an acceptable explanation for at least seven years of delay in the action. This inadequately explained delay is so egregious as to be in itself sufficient grounds for dismissal of the action. As the test on the status hearing requires the plaintiffs to satisfy both parts of the conjunctive test and they have failed to do so, the action must be dismissed.
Have the plaintiffs established that, if the action were allowed to proceed, the defendants would suffer no non-compensable prejudice?
[54] Even though the inadequately explained delay in the matter is in itself sufficient to warrant a dismissal of this action, I will also consider the issue of whether there would be prejudice to the defendant if the action were allowed to proceed.
[55] Given the passage of 17 years since the first of the plaintiffs’ actions was commenced and the inadequately explained delay of at least seven years in the plaintiffs providing scanned copies of the documents that they elected to review, there is a strong presumption of prejudice to the defendants. The issues are whether the plaintiffs have provided evidence that would rebut the presumption of prejudice and if so, whether Manulife has provided evidence of actual prejudice.
[56] For prejudice to be fatal to the action, any prejudice to the defendants’ ability to defend the action must result from the plaintiffs’ delay, and not merely from the passage of time. (See: Carioca’s Import, supra)
[57] In attempting to rebut the presumption of prejudice, the plaintiff submits that, despite the passage of time since the period between 1997 and 2002 when Manulife was in possession of the plaintiffs’ properties, the defendants knew during that period of time that litigation was likely and consequently, were aware of the need to preserve evidence. The defendants do not dispute that they were aware of the prospect of litigation and further, do not suggest that they are prejudiced by any destruction or lack of availability of relevant documents.
[58] Rather, the defendants submit that in addition to the significant presumed prejudice resulting from the passage of time since the events giving rise to the action, they have suffered actual, demonstrable prejudice arising from the fact that potential witnesses have died or are no longer available. The witnesses in question are identified in the responding affidavit of John Birch.
[59] The witnesses Lorne Down and John Gleason died in 2003 and 2004 respectively. As concluded above, the unexplained delay arising from the plaintiffs’ failure to complete the scanning of the property managers’ documents in a reasonable time and in accordance with the parties’ agreement did not commence until January, 2005. Accordingly, any prejudice arising from the deaths of Down and Gleason in 2003 and 2004 is not attributable to any unexplained delay.
[60] The witness Art Brighton was the Director of Maintenance with the property manager Larlyn while Manulife was in possession of the Kipps Lane properties and “had a heavy role in managing and overseeing the repairs” to those properties. He suffered a stroke in 2011 and died in 2015. Birch deposes that Brighton’s evidence “would have been important to show the poor state of the properties at the time that Manulife took possession and to justify the extensive work that needed to be done to get the buildings into a rentable state and reduce the high vacancy rate that existed during the time that the plaintiffs operated the Properties”.
[61] The plaintiffs submit that the condition of the buildings can be established from the property management documentation so Brighton’s evidence would not have been essential. While the documents will be the source of some evidence in this regard, Brighton’s evidence with respect to both the condition of the buildings and the management of the repairs would clearly be relevant. Absent the five years of unexplained delay between January, 2005 and December, 2009, this action would have been tried by 2011 and Brighton would have been able to testify. Brighton’s death therefore constitutes prejudice arising from the unexplained delay.
[62] Neither Manulife nor its counsel have been able to locate potential witnesses John Van Dongen, Gary Giles and John Shed.
[63] John Van Dongen administered the mortgages on the subject properties. However, as it appears that his involvement ceased in 1993, before Manulife went into possession of the properties, I cannot conclude that his unavailability is prejudicial to the defendants.
[64] Gary Giles was the person to whom Manulife’s discovery representative reported. However, there is no evidence as to what knowledge he would have regarding the issues in the action and therefore no basis on which to conclude that the defendants’ inability to locate his is prejudicial to them.
[65] John Shed was vice president of Manulife’s Special Accounts Management Unit. Although, as submitted by the plaintiffs, he appears to have received only three memos in September, 1997, the uncontradicted evidence that he provided instructions for how the properties were to be managed while Manulife was in possession means that he would have relevant evidence to give regarding Manulife’s decisions in relation to the properties. He left Manulife in 2013 and, absent the delay, would have been available for trial. His unavailability is prejudicial to the defendants and the prejudice arises from the delay.
[66] Rick Alguire was an employee in Manulife’s special accounts department and, commencing in 2000, oversaw the properties while Manulife was in possession. He is no longer employed with Manulife and now “spends a great deal of time in South America assisting local indigenous peoples”. Manulife’s counsel attempted unsuccessfully to contact him at his last known telephone number but was not able to reach him or even to ascertain that the number was correct or current.
[67] Although, as submitted by the plaintiffs, Manulife has provided no details of what evidence Rick Alguire would give, the fact that he oversaw the properties during Manulife’s period of possession means that he has knowledge of Manulife’s actions during that period. The fact that he cannot now be contacted arises from the delay and is prejudicial to the defendants.
[68] Sue Martin was a senior property manager at Larlyn. Although Mr. Birch deposed that he was informed by another Larlyn employee that she had retired and was experiencing “health issues”, he subsequently spoke with her and provided no further evidence as to how or why any health issues would prevent her from giving evidence now. Accordingly, Manulife has located Ms. Martin and there is no evidence as to why she could not give evidence.
[69] Finally, David Connolly was a senior property manager at Larlyn who succeeded Ms. Martin in the management of the Kipps Lane properties while Manulife was in possession. Manulife simply states that he went to work for another employer called Viscount Properties but neither Manulife nor Larlyn was able to provide current contact information. There is no explanation of whether any efforts were made to contact Connolly through Viscount Properties and although he would likely have relevant evidence to give, I am not satisfied that he is unavailable.
[70] To summarize, I accept that the stroke suffered by Art Brighton in 2011 and his death in 2015, and the fact that John Shed and Rick Alguire cannot be located, give rise to actual prejudice to the defendants arising from the plaintiffs’ unexplained delay in the matter. This prejudice to the defendants also warrants a dismissal of the action.
Can the action be dismissed notwithstanding Mullins J.’s orders for references?
[71] The plaintiffs submit that the fact that Mullins J. signed judgments ordering references in actions 61640/01 and 61641/01 precludes the dismissal of those actions or of the consolidated action now embodying those actions. The plaintiffs argue that dismissing those actions or the claims originally contained in those actions would amount to varying the final order of a judge. The plaintiffs also submit that there is no limitation period for a proceeding to enforce an order of the court and consequently no basis for a dismissal of the claims giving rise to the orders for delay.
[72] The defendants submit that the orders of Mullins J. did not finally determine any issues in the action but simply referred certain issues to a Master. No parties’ rights are affected until the Master hears the reference, delivers a report and the report is confirmed. There is therefore no final order in the matter disposing of any of the parties’ substantive rights. It would also be inconsistent with the concept of dismissal for delay to permit a plaintiff to obtain orders for references in 2002 and then fail to proceed with the references for 15 years.
[73] The judgments of reference are not orders of the court that could be subject to enforcement proceedings. It was incumbent on the plaintiffs to request the appointment of a Master to conduct the references and they simply failed to do so. The fact that references were ordered does not insulate the plaintiffs from the obligation to proceed without unreasonable delay. The actions in which the references were ordered and the consolidated action including those references became the subject of a status hearing because of the passage of time. The plaintiffs were not relieved of their obligations in respect of the status hearing by the fact that references had been ordered and the judgments of reference are therefore not a bar to the dismissal of the actions for delay on this status hearing.
[74] Further, the plaintiffs have provided no evidence explaining their delay in scheduling the references. One could plausibly speculate that the delay in that regard was attributable to the scanning delay, given that at least some of the scanned documents from the property managers would be necessary for the references. However, where, as concluded above, there is sufficient unexplained delay and associated prejudice to warrant dismissal of the action or actions, the delay and prejudice also appropriately deprive the plaintiffs of their right to proceed with the references.
Conclusion
[75] For the reasons set out above, I conclude that the plaintiffs have not shown cause why the action should not be dismissed for delay and it is hereby dismissed. If the parties cannot agree on costs, they may contact my ATC to schedule a case conference to arrange to resolve the issue.
MASTER A. GRAHAM
DATE: October 11, 2017