Postmedia Network Inc. v. Meltwater Holding B.V., 2017 ONSC 6036

CITATION: Postmedia Network Inc. v. Meltwater Holding B.V., 2017 ONSC 6036

COURT FILE NO.: CV-11-428135

DATE: 20171012

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Postmedia Network Inc., The Globe and Mail Inc., Toronto Star Newspapers Limited, Metroland Media Group Ltd., Sun Media Corporation, The Halifax Herald Limited, Transcontinental Inc., Le Devoir Inc., and Cedrom-SNi Inc.

AND:

Meltwater Holding B.V., 4494202 Canada Inc. c.o.b. Meltwater News Canada, Meltwater US Holdings Inc. and Meltwater News US Inc.

BEFORE: Madam Justice J.T. Akbarali

COUNSEL: William Richardson and Mike Rubinger for the Appellants/Defendants

Alex Cameron and Nora Kharouba for the Respondents/Plaintiffs

HEARD: October 6, 2017

ENDORSEMENT

Introduction

[1] This is an appeal from a decision of Master Graham dated May 31, 2017, arising out of a status hearing under r. 48.14(1) in which he found that the respondents/plaintiffs had shown cause why the action should not be dismissed for delay and allowed the action to proceed.

[2] The appellants/defendants argue that the master erred in law by considering only the prejudice that accrued to them during the period of delay for which the respondents could be faulted. They argue that as a result of his error of law, the Master misdirected himself as to the relevant evidence of prejudice and made palpable and overriding errors of fact in concluding that the appellants have suffered no non-compensable prejudice.

[3] For the reasons that follow, I dismiss the appeal.

Background

[4] The respondent Cedrom-SNi Inc. is an exclusive licensee for the content of the respondent publishers Halifax Herald Limited, Transcontinental Inc. and Le Devoir Inc. In this action, the respondents allege that the appellants, without authorization, copy the content of the publishers’ websites and make the content available to the appellants’ subscribers for a fee. The respondents seek substantial damages for breach of copyright and breach of contract.

[5] Master Graham sets out a detailed chronology of this action in para. 8 of his reasons: 2017 ONSC 3387. In summary of that chronology I note that this action was commenced on June 7, 2011. Until the summer of 2013, the parties were actively engaged with preliminary issues about whether particulars were required. A motion for particulars was brought but the hearing was not completed. The parties agreed to attend a mediation which took place in September 2013. The mediation did not succeed, but for about the next two years, the parties engaged in ongoing, good faith settlement discussions which came close to resulting in a resolution. Ultimately, the settlement discussions failed in October 2015.

[6] Between November 2015 and April 2016, the respondents consulted and retained new counsel, and then made a further offer to settle in May, 2016. Thereafter, the appellants served a statement of defence and counterclaim in May 2016. In quick succession the respondents served a reply and defence to counterclaim and then an amended claim. In June 2016 the parties dealt with further preliminary issues, including another demand for particulars. Further settlement discussions took place between July and October 2016 but the matter remained unresolved.

[7] In November 2016 the respondents proposed a timetable. The appellants refused to consent and required the respondents to show cause why the claim should not be dismissed for delay. Further settlement negotiations took place thereafter. By late December 2016, the respondents served their notice of motion for a status hearing.

The Master’s Decision

[8] Before the master, the appellants denied that the ongoing settlement discussions were a good explanation for the delay. They argued that the delay caused them to suffer non-compensable prejudice because documentary evidence and witnesses may be unavailable, the limitation period for certain works over which the respondents claim copyright has expired, and the delay has occasioned a growth of the claims for which the respondents seek recovery, because each day Meltwater collects more articles from the publishers’ websites.

[9] The master determined that the action should be allowed to proceed. He found that the settlement discussions excused most of the delay. Settlement discussions did not explain the period of delay between November 2015 and April 2016, but some of this delay was explained by the respondents’ decision to consult and retain new counsel. What remained was only a few months of delay. The master noted that the appellants, too, had failed to take any steps to move the matter forward, which could have included renewing their motion for particulars which had never been finally determined, or serving a statement of defence. The appellants’ inaction mitigated the unexplained period of delay.

[10] The master determined that the relevant prejudice to consider is that related to the delay for which the respondents are at fault – in this case, a period of a few months. He accepted the respondents’ evidence that Cedrom’s database, which contains documents relating to the publishers’ websites and content, has been maintained. He found that if any of the individual creators of the works at issue were unavailable, it would not prejudice the appellants and may, in fact, benefit them. He found that the appellants have been aware of and participated in the action from its inception and have been in a position to preserve all relevant documents. He concluded that the respondents demonstrated that any unexplained delay has not resulted in any prejudice to the appellants. In the result, he determined that the action should proceed, and ordered a timetable.

Issues

[11] In oral argument, the appellants relied principally on their argument that the master erred in law in determining that only the prejudice that accrued during period of delay for which the respondents were at fault was relevant to the motion, and on their argument that the master erred in assessing prejudice. However, they indicated they were relying on all the arguments advanced in their factum. Accordingly, this motion requires me to determine:

a. whether the master applied the correct test to determine if an action should be allowed to proceed or be dismissed for delay under the new rule 48.14;

b. whether the master made palpable and overriding errors in assessing the respondents’ justification for the delay. In particular, whether the master erred:

i. in concluding that ongoing settlement negotiations were a reasonable explanation for the delay;

ii. in considering the appellants’ conduct when considering the unexplained delay; or

iii. in failing to consider whether the respondents had a genuine interest in prosecuting the action;

c. whether the master erred in law in concluding that the test under r. 48.14(1) requires the court to consider only the prejudice that accrues to the defendant during the period of delay for which the plaintiff is at fault, and not the prejudice accruing since the inception of the action; and

d. whether the master made palpable and overriding errors in concluding that the appellants had suffered no non-compensable prejudice, including by:

i. failing to find that the absence of evidence from the respondent publishers left the respondents unable to establish that there was no non-compensable prejudice;

ii. failing to consider that the action is only at the pleadings stage; and

iii. blaming the appellants for any prejudice that has accrued.

Standard of Review

[12] The parties agree that the master’s decision was a discretionary one and is entitled to deference. It may be set aside if made on an erroneous legal principle or where the master has made a palpable and overriding error of fact: Carioca’s Import & Export Inc. v. Canadian Pacific Railway Limited, 2015 ONCA 592 at para. 4.

What is the test under r. 48.14?

[13] In their factum, the appellants argue that the change in r. 48.14 to extend the time to allow a plaintiff five years to set an action down for trial, as opposed to the two years provided for in the former rule, means that a more cogent justification for delay is required.

[14] During oral argument, appellants’ counsel acknowledged that the legal test under the new rule 48.14 remains the same as that under the old rule. A plaintiff must show (i) there is an acceptable explanation for the litigation delay; and (ii) if the action were allowed to proceed, the defendant will not suffer non-compensable prejudice: Faris v. Eftimovski 2013 ONCA 360 at para. 32. However, the appellants argue that r. 48.14 is more draconian because the threshold is higher. “A plaintiff will have more explaining to do after five years”: Marrello v. Naccarato, 2017 ONSC 757 at para. 34.

[15] In my view, the test under the new rule has not changed. The comments of the court in Marrello do no more than recognize the practical reality that five years of delay will be harder to explain than two years. The master applied the existing test and in doing so, noted that a delay of five and a half years since the commencement of the action “requires a cogent explanation”. The master made no error of law in identifying the test.

Did the master make palpable and overriding errors in assessing the respondents’ justification for the delay?

[16] In my view, the master made no reversible error in assessing the respondents’ justification for the delay.

[17] The appellants’ argument concentrates principally on whether the master erred in finding that the settlement discussions were a justification for delay.

[18] The master properly directed himself to Apotex v. Relle, 2012 ONSC 3291, wherein Master Glustein, as he then was, found that settlement discussions can be the basis to find a reasonable explanation for litigation delay. Parties should be encouraged to participate in settlement discussions without having to incur the costs associated with the litigation which may make settlement more difficult.

[19] The master then considered the evidence of settlement discussions in this case. He noted that good faith discussions were ongoing for over two years, and that the appellants’ own evidence was that the parties were entirely focused on those settlement talks. He concluded that, on the facts of this case, the settlement discussions were a reasonable explanation for much of the delay in this action. This conclusion that was open to him on the record.

[20] Nor did the master err by considering the appellants’ conduct when he considered the justification for the delay. After concluding that the unexplained delay was at most a few months, he noted that the appellants could have moved the action forward by serving their defence or returning their motion for particulars. The master properly directed himself to Carioca at para. 53 where the Court of Appeal held that defendants’ conduct is a relevant factor.

[21] Finally, I find no error in the master’s failure to conclude that the respondents had no genuine intention to prosecute the action. The evidence from Cedrom was that the matters in the action were of great importance to it. The chronology of the action is largely characterized by periods of activity in the litigation or serious, good faith settlement discussions. The evidence of the appellants’ representative that it has been evident to him that Cedrom had no genuine intention of pursuing the litigation does not demand a conclusion that the respondents did not intend to pursue the litigation.

Did the master err in law in concluding that the test under r. 48.14(1) requires consideration of only the prejudice that accrues to the defendant during the period of delay for which the plaintiff is at fault?

[22] The master, in reliance on Carioca, found that for prejudice to be fatal to an action, the prejudice to the defendants’ ability to defend the action must result from the plaintiffs’ delay, and not merely the passage of time. The appellants state that this finding amounts to an error of law, arguing that Carioca and the cases upon which it relies were decided under r. 48.14(1)2, which applies where an action is struck off a trial list. An action may be struck off a trial list for many reasons, and the delay considered in such cases is the delay between the action being struck and the motion under r. 48.14 being brought. Thus, these cases are distinguishable.

[23] The respondents argue that the master made no error in considering prejudice arising from the delay for which they could be faulted. They note that prejudice in the context of a motion to dismiss for delay is limited to prejudice resulting from the delay for which the plaintiff is at fault: Labelle v. Canada (Border Services Agency), 2016 ONCA 187 at para. 23; Kupets v. Bonavista Pools Limited, 2015 ONSC 7348 at para. 3.

[24] While counsel could point me to no case exactly on point, I see no reason to adopt a different view of prejudice in the context of status hearings when the five year period has passed than is employed when an action is struck from the trial list, or when a party moves to dismiss an action for delay. Considering only the delay for which the plaintiff is at fault ensures, for example, that the plaintiff is not penalized as a result of delay caused by the defence, where that delay is the cause of non-compensable prejudice.

[25] In my view, the master did not err in law in finding that only prejudice occurring during the period of delay for which the respondents were at fault is relevant when making a determination under r. 48.14(1).

Did the master make palpable and overriding errors when concluding that the appellants suffered no non-compensable prejudice?

[26] I find that the master made no palpable and overriding errors when concluding that the appellants suffered no non-compensable prejudice as a result of the delay for which the respondents were at fault.

[27] In their written argument, the appellants alleged the master made a number of errors, some of which depend on a finding that the master should have considered the delay over the entire period of the action. These include alleging that the master erred by failing to consider that the application is only at the pleadings stage, and failing to find that the delay caused prejudice over the entire life of the action. It is not necessary for me to consider those errors given my finding that the master did not err in law in finding that it was only the period of delay for which the respondents were responsible that is relevant to the enquiry into prejudice. The several months of delay for which the master found the respondents were at fault are not sufficient to create the prejudice the appellants allege on the basis of these arguments.

[28] The appellants allege that the delay has led to prejudice in that it has resulted in an expansion of the claims against them because with every day that passes, more works are collected by Meltworks from the publishers’ websites. This is not prejudice related to the appellants’ ability to defend the action. It is not relevant.

[29] Much of the appellants’ argument was focused on what they allege is the lack of evidence of documentary preservation and witness availability.

[30] The master found that Cedrom had preserved relevant documents. Cedrom’s documents include all the publishers’ documents that are alleged to have been taken by Meltwater, because Cedrom is the exclusive licensee of the publishers’ content. Thus, I note that the absence of evidence from the publishers is not an issue.

[31] Moreover, Meltwater has been involved in this action since the outset and received a preservation letter either with or close in time to service of the statement of claim. The master found it should have known to preserve its documents and keep track of its witnesses. I note that there is no evidence Meltwater has destroyed any of its documents, and as the respondents point out, it is Meltwater’s business to keep the content it has acquired to make it available to its subscribers. Moreover, Meltwater’s processes are largely automated and it has witnesses, including its founder, who can speak to those processes.

[32] I disagree that the master “blamed” the appellants for any prejudice that has accrued. Rather, the master considered that, on the evidence as a whole, the respondents’ documents had been preserved and any lost witnesses would be to the respondents’ detriment. If Meltwater no longer has relevant documents that it should have preserved – and there is no evidence that any documents have been destroyed – it should have known to preserve them, and its failure to do so (if such failure exists) is not a basis to dismiss the respondents’ action.

[33] The appellants argue that there was no evidence that the individual creators of the works over which copyright is alleged remain available. The master accepted the respondents’ argument that if any creators of works were no longer available, it would be to the respondents’ prejudice, not the appellants’. It was not an error to so conclude. Without the individual creators, the respondents may have would difficulty establishing copyright. The appellants allege the absence of these creators of works could prejudice them, but without any particulars as to how that might occur.

[34] Thus, in my view, the master did not err in finding that the delay caused no prejudice to the appellants’ ability to defend the action as a result of lost documentation or witnesses.

[35] The appellants argue that the master erred by failing to consider the expiry of limitation period for copyright and contract claims, alleging a failure on the part of the respondents to provide necessary particulars. They argue that a claim without particulars is a claim that has effectively not been brought, and the limitation period has expired in respect of those claims.

[36] The limitation period issue was not fully argued before me. Among other things, such a conclusion would be dependent on a finding that particulars were required and not provided. The appellants did not pursue their motion for particulars, and subsequently particulars have been demanded and received. Whether the particulars are sufficient or whether there is a limitation period issue is not a matter that could properly be determined on the motion before the master or on this appeal. I thus conclude the master made no error in not considering it.

[37] The master concluded by finding that most significant was the fact that the blameworthy delay was only a few months, and no prejudice could be attributed to this limited period of time. This was a conclusion that was open to him on the evidence.

[38] Accordingly, I find that the master made no error in determining that the appellants suffered no non-compensable prejudice as a result of the delay in the action for which the respondents were at fault.

Costs

[39] The parties agree that partial indemnity costs should follow the event. The parties’ costs outlines disclose partial indemnity costs that are remarkably similar. In the circumstances, based on the principle of indemnity and the reasonable expectations of the appellants as disclosed by their costs outline, I find that the respondents’ partial indemnity costs of $22,853.12 are fair and reasonable. The appellants are to pay this amount to the respondents within thirty days.

[40] Finally, I thank counsel for their able submissions which were very helpful to me.

J. T. Akbarali J.

Date: October 12, 2017