COURT FILE NO.: CV-10-411312
MOTION HEARD: 20170912
REASONS RELEASED: 20171207
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
1482241 ONTARIO LIMITED
Plaintiff
- and-
CLEAR CUSTOMS BROKERS LTD.
Defendant
BEFORE: MASTER M.P. McGRAW
COUNSEL: C. Stanek
Email: christopher.stanek@gowlingwlg.com
-Counsel for the Plaintiff
K. McCulloch
Email: kathryn.mcculloch@dentons.com
-Counsel for the Defendant
REASONS RELEASED: December 7, 2017
Reasons for Endorsement
I. Overview
[1] This is a motion by the Plaintiff, 1482241 Ontario Limited (the “Plaintiff” or “148”) under Rule 48.14 for a status hearing and an order setting a timetable for the remaining steps in this action. The Defendant, Clear Customs Brokers Ltd. (the “Defendant” or “CCB”) opposes this motion and seeks the dismissal of this action.
[2] This action arises from an alleged breach of a commercial lease. Over 7 years since this action was commenced, examinations for discovery have not been completed, both parties are on their third counsel, and this is the second status hearing.
II. History of the Proceedings, First Status Hearing and Post-Status Hearing
[3] The Plaintiff commenced this action by Statement of Claim issued on September 28, 2010. The Plaintiff claims approximately $410,000 arising from the alleged breach of a lease agreement dated August 28, 2003 (the “Lease”) pursuant to which CCB leased commercial space in a building owned by 148 in Toronto, Ontario (the “Premises”).
[4] The Defendant delivered its Statement of Defence and Counterclaim on November 22, 2010 claiming a fundamental breach and damages for failure to maintain the Premises. The Plaintiff delivered its Defence to Counterclaim on March 21, 2012. The Defendant was, at the time, represented by Feldman Lawyers (“Feldman”). In April 2017, the Defendant retained Camp Advocacy Professional Corporation then retained Dentons Canada LLP shortly thereafter in May 2017.
[5] The Plaintiff was initially represented by Timothy Deeth. Mr. Deeth joined the Firm Devry Smith Frank LLP (“Devry”) and on April 8, 2011 Mr. Viet Nguyen of Devry assumed carriage of this matter.
[6] Between September 2011 and March 21, 2012, Devry corresponded with Feldman with respect to scheduling the Plaintiff’s summary judgment motion. The parties attended at motions scheduling court where a timetable was set and the summary judgment motion was scheduled for July 11, 2012. However, the Plaintiff did not serve any motion materials and the motion did not proceed. It appears that Mr. Nguyen did not advise 148’s President and client contact Alain Checroune that the motion did not proceed.
[7] On December 3, 2012, the Registrar issued a Status Notice which was delivered to Devry. Devry took no steps to address the Status Notice before the dismissal deadline and on March 13, 2013, the Registrar issued an order dismissing this action (the “Dismissal Order”) which again was delivered to Devry. The Plaintiff was not advised of the Status Notice or the Dismissal Order until June 2014 when Mr. Nguyen left Devry and Larry Keown of Devry located them while reviewing the file. Mr. Checroune instructed Mr. Keown to bring a motion to set aside the Dismissal Order.
First Status Hearing
[8] The motion for the status hearing and to set aside the Dismissal Order proceeded before Master McAfee on April 16, 2015. By Order and Endorsement dated April 30, 2015 (the “Timetable Order”), Master McAfee ordered a timetable requiring this action to be dismissed for delay by the Registrar if it was not set down for trial by January 1, 2017 (the “Deadline”).
[9] In her Endorsement, Master McAfee was not satisfied that there was an acceptable explanation for “the majority of the delay” and found that the motion was not brought promptly. However, applying a contextual approach, she was of the view that it was just in all of the circumstances that the Dismissal Order be set aside finding that there was inadvertence in missing the set down deadline and that there was no actual prejudice to the Defendant. In light of the indulgence granted, the Plaintiff was ordered to pay costs fixed in the amount of $4,000.
Post-Status Hearing
[10] Mr. Checroune states that after the granting of the Timetable Order, he met with Mr. Keown every 2-3 weeks to inquire into the status of numerous other files and repeatedly advised Mr. Keown to move this action forward by scheduling the Plaintiff’s summary judgment motion. In the months following the granting of the Timetable Order, there was ongoing correspondence between Mr. Keown and Feldman with respect to scheduling the Plaintiff’s summary judgment motion and examinations for discovery.
[11] Examinations for discovery were scheduled for July 8, 2015 then rescheduled for August 12-13, 2015. However, on August 11, 2015, Sheldon Clarfield, CCB’s deponent, Vice-President and one of its principals, underwent heart surgery and was unable to attend. There were numerous complications during surgery and, as a result, Mr. Clarfield, now 82, has suffered from ongoing health and cognitive issues. Feldman advised Devry that Mr. Clarfield would require 6 weeks of recovery time. Flora Poon of Devry advised that she would follow up in October 2015.
[12] There is no evidence that Devry ever followed up again with Feldman. With no discoveries and no summary judgment motion scheduled, in May 2016, the Plaintiff retained Richard Quance of Himelfarb Proszanski (“Himelfarb”). Mr. Checroune states that he advised Mr. Quance to schedule the summary judgment motion on numerous occasions.
[13] Himelfarb requested the release of the Plaintiff’s files but Devry refused. Devry advised that it was asserting a solicitor’s lien as a result of unpaid fees. Himelfarb also advised Mr. Checroune that it sent correspondence to Feldman in an attempt to schedule the summary judgment motion. However, Himelfarb received no response. The Defendant disputes this and states that Himelfarb never contacted Feldman.
[14] The Plaintiff retained its current counsel, Gowling WLG (Canada) LLP (“Gowlings”) on October 20, 2016 who was instructed to move this action forward by whatever means necessary. Gowlings requested the Plaintiff’s files, however, Devry again refused to turn over the Plaintiff’s file, citing its solicitor’s lien, which it continues to assert. The Plaintiff has brought a motion compelling Devry to produce the Plaintiff’s files.
[15] Gowlings ordered a copy of the court file and with the Deadline of January 1, 2017 imminent, requested the consent of Defendant’s counsel on November 28, 2016 to file a timetable on consent to avoid the dismissal of this action. The Defendant refused, and the Plaintiff brought this motion on December 3, 2016.
III. The Law and Analysis
[16] Rule 48.14 provides as follows:
(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.
[17] The test on a motion for a status hearing under Rule 48.14 is two-fold and conjunctive: the plaintiff has the onus of demonstrating that i.) there is an acceptable explanation for the delay; and ii.) if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice (Faris v. Eftimovski, 2013 ONCA 360 at para. 32). While Rule 48 provides a mechanism to control the pace of litigation and promote the timely resolution of disputes, the court must balance the competing plaintiff’s interest in having a hearing on the merits and the defendant’s interest in having the matter resolved in an expedient and time-efficient manner (Faris at paras. 24 and 29).
[18] While the courts do not take a rigid or purely formalistic and mechanical approach to the application of timelines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits, Rule 48.14 “was designed to have some teeth” (Faris at para. 10). All circumstances of the case must be considered in order to arrive at a just result (H.B. Fuller Company et al. v. Rogers (Rogers Law Office), 2015 ONCA 173 at para. 23). The plaintiff is not required to rigidly satisfy both aspects of the tests but the factors, explanation for the delay and absence of prejudice, must be considered together with any other relevant factors on a contextual basis (Koepcke v. Webster, 2012 ONSC 357, 2012 CarswellOnt 578 at para. 18).
[19] In 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544, the Court of Appeal held that the focus of the inquiry on a status hearing is on the conduct of the plaintiff who, as the party who commenced the proceeding, bears primary responsibility for its progress. This includes an examination of the entire history of delay even before any previous indulgences granted by the court (1196158 Ontario at paras. 25 and 28). The conduct of a defendant may be relevant, especially where a plaintiff who tries to move an action along is faced with some resistance or tactics that are not consistent with a willingness to see a relatively straightforward case proceed expeditiously (1196158 Ontario at para. 29).
[20] The Court of Appeal has also made clear the preference that, in the absence of non-compensable prejudice, matters should be resolved on their merits. At para. 34 of Marché d'Alimentation Denis Thériault Ltée. v. Giant Tiger Stores Ltd. (2007), 2007 ONCA 695, 87 O.R. (3d) 660 (O.C.A.), Sharpe J.A. stated:
“Expeditious justice must be balanced with the public interest in having disputes determined on their merits. Where, despite the delay, the defendant would not be unfairly prejudiced should the matter proceed for resolution on the merits, according the plaintiff an indulgence is generally favoured.”
[21] In H.B. Fuller at paragraph 27, the Court of Appeal further emphasized the preference for deciding matters on their merits in cases where the delay has resulted from an error by counsel:
“The court's preference for deciding matters on their merits is all the more pronounced where delay results from an error committed by counsel. As the court stated in Habib, at para. 7, "[O]n a motion to set aside a dismissal order, the court should be concerned primarily with the rights of the litigants, not with the conduct of their counsel." In Marché, Sharpe J.A. stated, at para. 28, "The law will not ordinarily allow an innocent client to suffer the irrevocable loss of the right to proceed by reason of the inadvertence of his or her solicitor" (citations omitted).”
[22] In Goldman v. Pace 2017 ONSC 1797, applying Faris, Master Muir held that, although the progress of the plaintiff’s action had not been perfect or ideal, the plaintiff had discharged his onus of providing an acceptable explanation for the delay by pointing to documentary evidence showing various efforts to deal with the defendant. Master Muir concluded that the action had not been ignored and forgotten and that there was no evidence of an intention on the part of the plaintiff to abandon the action.
[23] In Giant Tiger and MDM Plastics Limited v. Vincor International Inc., 2015 ONCA 28, the Court of Appeal held that the principle of finality is relevant such that when an action has been disposed of in a party’s favour, even as a result of delay and not on the merits, the party’s entitlement to rely on the finality principle grows stronger as the years pass. Even where the party relying on the order could still defend itself despite the delay, at some point the interest in finality must trump the plaintiff’s request for an indulgence (see MDM Plastics, para. 27).
[24] I have also considered and applied Rule 1.04(1) which provides that the Rules of Civil Procedure shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits and Rule 1.04(1.1) which requires the court to make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
[25] Turning to the first part of the Faris test, the Plaintiff must demonstrate that it has an acceptable explanation for the delay in moving this action forward. In this regard, I must consider the entirety of the delay, including the delay leading up to the Timetable Order granted at the first status hearing and the subsequent delay which has given rise to this motion and second status hearing.
[26] In my view, much of the delay throughout the entirety of these proceedings can be attributed to the Plaintiff’s counsel. Devry failed to move this matter forward or do anything about the Status Notice which resulted in the Dismissal Order, which it did not bring to the Plaintiff’s attention until after the fact. After Devry was successful in obtaining the Timetable Order, initial efforts were made to move this action forward as discoveries were scheduled, only to be postponed as a result of Mr. Clarfeld’s surgery and complications. However, Devry then appears to have failed to follow up regarding the re-scheduling of discoveries.
[27] The Defendant submits that the Plaintiff should bear the responsibility for Devry’s delays, Devry’s assertion of a solicitor’s lien and the inability of Himelfarb and Gowlings to obtain the Plaintiff’s files from Devry. Specifically, the Defendant cites the fact that Devry has commenced an action against the Plaintiff for payment of its fees and that Himelfarb also commenced an action against the Plaintiff in respect of 8 actions prior to its replacement by Gowlings. The Defendant also argues that the Plaintiff had the ability to obtain the release of its files by simply paying the outstanding fees demanded by Devry and that as a sophisticated litigant with numerous different proceedings ongoing at one time, Mr. Checroune should have known what he personally needed to do to move this action forward.
[28] In my view, it would be inconsistent with the direction of the Court of Appeal for the Plaintiff to bear full responsibility for the conduct of its counsel in these circumstances. The delays caused by Devry’s failure to advance this action and subsequent refusal to turn over the Plaintiff’s file resulted in significant delays including substantially all of the delay since the Timetable Order. In my view, this should not be attributed to the Plaintiff particularly where the evidence before me demonstrates that the Plaintiff regularly instructed its counsel to schedule the summary judgment motion but was not kept updated with respect to the progress of its action, including the previous dismissal for delay and failure to schedule the motion.
[29] Further, the periods of delay at issue have not been long enough to support the conclusion that the Plaintiff abandoned or forgot about this action or did not intend to pursue it. In this respect, there is sufficient evidence of effort on the Plaintiff’s part to instruct its counsel to move this action forward, including the scheduling of discoveries in August 2015 and the Plaintiff’s follow ups with counsel followed by changing counsel twice in the period after the Timetable Order in an effort to move it forward. These efforts were largely unsuccessful as a result of Devry’s inaction and refusal to release the Plaintiff’s file.
[30] Even as a sophisticated litigant, Mr. Checroune was represented by counsel and was entitled to rely on assurances and his understanding that counsel was carrying out his instructions. Absent evidence that the Plaintiff gave instructions to not pursue this action or otherwise abandoned or forgot about it, counsel’s inaction should not be visited on the Plaintiff. Regardless of the how the conduct of Plaintiff’s former counsel is characterized, it was ultimately beyond the control of the Plaintiff, who should not be penalized for it, particularly in a manner which would lead to the loss of the right to have its action heard on its merits.
[31] The Defendant’s position also presumes that there is some merit to Devry’s claim for outstanding fees and a basis for its refusal to release the Plaintiff’s files. However, the release of the Plaintiff’s file is the subject of a production motion and the fees the subject of an action, both of which have not yet been decided by the court. In my view, it would be unfair and contrary to the appellate jurisprudence to draw negative inferences from the Plaintiff’s refusal to pay disputed legal fees to previous counsel to obtain the release of its files which Devry may have no legal basis to withhold in order to avoid the irrevocable loss of its right to proceed. In my view, to require the Plaintiff to give up rights against previous counsel would be to unfairly punish the Plaintiff and in my view, the law does not impose this requirement upon them..
[32] The Defendant submits that, as in 1196158 Ontario, the Plaintiff has already received a “lifeline” from the court and has failed to take any steps to move this action forward. While the Timetable Order represented an indulgence of the court, the present case is not like 1196158 Ontario where the plaintiff did nothing to move the action along for an additional 18 months after the court granted an indulgence allowing the action to proceed. Similarly, this case is also distinguishable from my decision in Williams Medical Technologies Inc. v. Source Medical Corp., 2017 ONSC 2645, also relied on by the Defendant, where neither the plaintiff nor its counsel took any steps for approximately 10 years to move the action forward other than minimal efforts to resolve a fee dispute, largely ignoring the action for the better part of a decade.
[33] Having considered all of the relevant circumstances and factors and applying a contextual approach, I conclude that the Plaintiff has provided an acceptable explanation for the delay in moving this action forward. Although the conduct of this litigation has not been ideal, there is sufficient evidence that the Plaintiff intended to move this action forward and did not abandon it, but that it has been delayed largely as a result of counsel inaction and the inability to obtain its files.
[34] Under the second part of the Faris test, the Plaintiff must demonstrate that the Defendant would not suffer any actual or non-compensable prejudice if this action is allowed to proceed. Examples of actual prejudice include the inability of a witness to recall important facts and the loss of important evidence, including documents (1196158 Ontario at paras. 31-33). The Defendant submits that it would suffer actual prejudice if this action proceeds as a result of Mr. Clarfield’s ongoing health issues which the Defendant submits precludes his continued participation in this litigation and the loss of documents.
[35] The Defendant has filed medical evidence demonstrating that since his surgery in August 2015, Mr. Clarfield has experienced mild cognitive impairment including memory loss, reduced attention and executive function with a concern about Alzheimer’s disease. The Defendant submits that Mr. Clarfield had all material dealings with the Plaintiff and that essential evidence in support of the Plaintiff’s case must come from Mr. Clarfield’s now compromised memory, including: a retainer with an agent to sublet the Premises; the Plaintiff’s dealings with potential sub-lessees; the Plaintiff’s alleged interference in sublet efforts; and the Plaintiff’s efforts to mitigate its losses.
[36] The Defendant submits that the loss of Mr. Clarfield’s evidence is even more pronounced and prejudicial to its case given that in or about December 2013, approximately 9 months after the Dismissal Order, the Defendant destroyed files containing documents regarding the agent, efforts to re-let the Premises, potential sub-lessees, a video and police report regarding an incident between Mr. Clarfield and Mr. Checroune and documents from trades and janitorial services. The Defendant claims that without these documents and Mr. Clarfield’s direct evidence or as a result of his failing memory, its ability to defend itself and advance its counterclaim are fundamentally compromised such that a fair trial is no longer possible.
[37] In his affidavit sworn May 30, 2017 and on cross-examination, David Martin, the other principal and President of CCB states that he had no direct dealings with the Plaintiff with respect to the matters at issue in this action. Mr. Martin has always been responsible for the technical side of CCB’s import and export business with Mr. Clarfield responsible for the balance of CCB’s corporate operations.
[38] Mr. Martin also confirmed that notwithstanding Mr. Clarfield’s ongoing health and cognitive issues and less frequent trips to the office, Mr. Clarfield largely continues to exercise his same responsibilities for the management of CCB, assisted only by a bookkeeper. Mr. Clarfield is also still responsible for instructing the Defendant’s counsel in these proceedings including providing the evidence which formed the basis for the affidavits filed on this motion and making the two recent changes in counsel. Mr. Martin also advised that he is aware of the issues in this litigation having worked at the Premises while the issues were ongoing and that substantially all of CCB’s employees who worked there at the same time remain employed by CCB.
[39] While I accept that Mr. Clarfield’s health has deteriorated and that he has suffered from a degree of cognitive impairment, I do not accept that he cannot, with accommodations, participate in this litigation. He is still running CCB’s operations and providing instructions and evidence in these proceedings. This appears consistent with the medical evidence filed on this motion. The Plaintiff confirmed during submissions that it would agree to conduct Mr. Clarfield’s examination for discovery in writing. Further, the matters at issue in these proceedings are largely straightforward and based on documents which have been preserved. Together with documentary evidence and the evidence of Mr. Martin, other CCB employees and other witnesses, I am satisfied that it would not result in actual prejudice to the Defendant and is consistent with the principles of efficiency and proportionality in Rule 1.04.
[40] With respect to the Defendant’s destruction of its own documents, this was fully canvassed by Master McAfee in her Endorsement in which she concluded, among other things, that the Defendant would not suffer any serious prejudice as a result of the loss of these documents. The status of these documents has not changed. The documents which are material to the claims and defences in these proceedings, including those with respect to the Lease, the alleged breaches, maintenance, renovations, the state of repair of the Premises and the hiring of the agent have been preserved by the Plaintiff and/or the Defendant and police reports, newspaper listing and other documents are available through third parties or publicly. In all, I conclude that the Defendant would not suffer actual prejudice as a result of the loss of these documents.
[41] The court is also entitled to consider the Defendant’s conduct. In this regard, the hearing of this motion took place almost 11 months after Gowlings first requested that the Defendant consent to a timetable largely because it took the Defendant 6 months to deliver responding motion materials. I point this out because, as set out above, the Defendant submits that if this action is allowed to proceed it will suffer serious prejudice because Mr. Clarfield’s cognitive issues have continued to deteriorate over these last 11 months. Similar to the Court of Appeal’s conclusions in H.B. Fuller, the Defendant’s submission that it would suffer serious prejudice as a result of Mr. Clarfield’s deteriorating cognitive condition is undercut somewhat by its own passivity and lack of urgency in taking steps to preserve his evidence or respond to this motion in a timely manner.
[42] I further conclude that since this action was not administratively dismissed after the Timetable Order was granted, the finality principle does not apply in these circumstances.
[43] Based on my review and consideration of the factors and circumstances above, and applying a contextual approach, I conclude that the Plaintiff has rebutted its onus by demonstrating that the Defendant will not suffer actual prejudice if this action is permitted to proceed. To deprive the Plaintiff of its right to have this action heard on its merits in these circumstances would be also contrary to Rule 1.04. Specifically, it would not be fair, just or proportionate for the Plaintiff to have this action dismissed in these circumstances and in the absence of actual prejudice.
[44] Having considered and weighed all of the relevant factors and circumstances, although the situation is not ideal, I conclude that the most just result in the circumstances is that in the absence of serious prejudice, an indulgence to permit the Plaintiff’s claim to be tried on its merits is preferred and appropriate. The Plaintiff should understand that this second indulgence of the court is not to be taken lightly and that steps must be taken immediately to move this action forward in a timely and efficient manner.
IV. Disposition
[45] Order to go granting the Plaintiff’s motion. If the parties are unable to agree on a new timetable for this action, including a new deadline to set this matter down for trial, they may contact me through the Masters’ Administration Office to arrange for a telephone case conference. If the parties cannot agree on the costs of this motion, a process for the filing of written costs submissions can be spoken at that case conference or one may be arranged for this purpose.
Released: December 7, 2017
Master M.P. McGraw