CITATION: Marrello v. Naccarato, 2017 ONSC 757
COURT FILE NO.: 25356 / 11
DATE: 20170131
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Frank Marrello, Plaintiff (Moving Party)
AND:
Frank Naccarato, 1704608 Ontario Inc. and William R. Scott, Defendants (Responding Parties)
BEFORE: Mr. Justice Calum U.C. MacLeod
COUNSEL: Richard A. Pharand, Q.C. for the Plaintiff (Moving Party)
Daniel C. Sirois, for the defendant William R. Scott
C. Bruce Willson, for the defendants Frank Naccarato and 1704608 Ontario Inc.
HEARD: January 30, 2017 (in Sault Ste. Marie)
ENDORSEMENT
[1] This is a motion which came before me on January 30, 2017 in Sault Ste. Marie. It is a motion to set aside a Registrar’s dismissal order dated February 3, 2014. It was launched on May 5, 2016 but for various reasons, including cross-examination and the need to schedule the motion before an out-of-town judge, it was not heard until this date. I reserved briefly to give written reasons.
[2] The order in question was made under Rule 48.14 prior to the January 2015 rule amendments. The action was dismissed in February of 2014 because the plaintiff had failed to set the action down for trial by the deadline established at a status hearing before the Honourable Mr. Justice McMillan on July 4, 2013.
[3] In considering the justice of setting aside an administrative dismissal, the court is to consider all relevant factors including the four Reid factors.[^1] These include the age of the litigation and explanation for the delay, whether missing the deadline was inadvertent, whether the motion to set aside dismissal was launched promptly and prejudice to the defendant. Other factors are also relevant. For example in this case there has been a status hearing and the dismissal was pursuant to a judge’s order and a timetable to which the plaintiff had consented. The changed landscape as a result of recent rule amendments might also be a consideration.
[4] This is a simple piece of litigation over a relatively modest sum of money. The plaintiff has failed to pursue it diligently and has been in breach of his obligations to answer discovery undertakings for years. The plaintiff cannot show the absence of prejudice nor displace the presumption that now arises. The motion is dismissed.
[5] I will elaborate briefly.
Background
[6] The litigation relates to a real estate transaction and an agreement to purchase a factory built home that was to be installed on property owned by the plaintiff. Although many of the facts are in dispute, it appears the plaintiff had arranged with the defendant Naccarato to sell three lots owned by the plaintiff and to use the net proceeds of sale towards the purchase of the home. He sold the three parcels of land to the defendant numbered company (owned or controlled by the defendant Naccarato) in January of 2009 and the net proceeds of sale of amounted to $47,305.07. For some reason the purchase of the factory built home was not concluded and pursuant to the agreement the defendants purported to forfeit the $47,305.07 as liquidated damages.
Conduct of the Action
[7] The plaintiff commenced the action in January of 2011. He sued both the purchaser corporation and Mr. Naccarato personally and he also sued William R. Scott who is a lawyer who acted for him on the real estate transaction. The plaintiff alleges that he originally had an agreement with Mr. Naccarato and he did not realize he was signing a new agreement with the numbered company that contained a forfeiture provision. In any event he claims that he was always willing to accept delivery of the new home and denies any basis for forfeiture.
[8] The claim is not complex. The plaintiff simply sought the return of his $47,305.57 together with interest and costs. He also sought a declaration that the forfeiture clause was unenforceable but was simply a means to recover the funds. The action could have been brought under the simplified procedure in Rule 76 but it was not.
[9] All parties defended the action and there were cross-claims between Mr. Scott and the Naccarato defendants. The plaintiff was represented by the late Mr. Augusto Palombi and the defendants have been represented throughout the proceeding by Mr. Sirois (for Mr. Scott) and Mr. Willson (for the Naccarato defendants).
[10] It appears that examinations for discovery took place in October of 2011 at which time the plaintiff gave eight specific and important undertakings. It was anticipated there would be further examination of the plaintiff once the undertakings were fulfilled and that the plaintiff would then examine the defendants.
[11] Over the next six months counsel for the defendant Scott wrote at least five letters demanding answers to undertakings but only one undertaking was answered. There was a further round of discoveries in June of 2012. This included examination of the plaintiff by counsel for the Naccarato defendants and discovery of Mr. Naccarato on the cross-claim.
[12] It should be noted that there were deficiencies in the Naccarato productions which were also the subject of complaints and demands from the defendant Scott. As of August, 2012 the Marrello undertakings remained unfulfilled and there was an outstanding demand (by Mr. Sirois) for a further and better affidavit of documents from Mr. Naccarato. Because these productions remained outstanding, discoveries were scheduled and then cancelled by agreement between counsel.
[13] On behalf of the plaintiff, Mr. Palombi acknowledged the outstanding undertakings and, on behalf of the Naccarato defendants, Mr. Willson acknowledged the need for a further and better affidavit of documents. Thus at the end of 2012 there were undertakings that had been outstanding for more than a year on the part of the plaintiff and Mr. Scott was still seeking documents from Mr. Naccarato.
[14] Let me pause to observe that Mr. Naccarato in many ways has behaved no better than the plaintiff and if the motion were simply a contest between the plaintiff and the Naccarato defendants, the outcome of the motion might be different. A defendant cannot complain about delay if the defendant is also in default of its obligations but in this case there is a co‑defendant who is stuck in the middle of the dispute. The evidence is clear that counsel for Mr. Scott has consistently and persistently demanded that the plaintiff fulfil his obligations while at the same time granting reasonable requests for extensions.
[15] On March 4, 2013 the Registrar issued a status notice pursuant to what was then Rule 48.14(1) and a status hearing was convened before Justice McMillan in July of 2013. Prior to the status hearing counsel had agreed on a timetable. The timetable provided that the outstanding undertakings were to be answered by the end of August 2013; that the Naccarato defendants provide a complete affidavit of documents by the same date; that discoveries be completed by the end of November 2013; and the action be set down for trial by the end of January 2014. The plaintiff was well aware of these dates. In fact it was Mr. Palombi who attended the status hearing on behalf of all three counsel.
[16] Setting an action down for trial is not an empty formality. In passing the record, the plaintiff is certifying that the action is ready for trial. Pursuant to Rule 48.04(1) the party setting the action down for trial is precluded from initiating or continuing any form of motion or discovery after that step has been taken. Thus in setting a deadline for setting the action down for trial, the intention is that the plaintiff has actually taken all necessary pre-trial steps and is ready to proceed.
[17] In fact the evidence discloses the plaintiff took no steps after the status hearing. The undertakings were never answered. The discovery did not take place. The action was not set down for trial. On February 3, 2014, pursuant to Rule 48.14(5) as it read at the time, the Registrar dismissed the action.
[18] What happened then is important. On February 3, 2014 counsel for the plaintiff purported to serve a trial record and he advised he would be bringing a motion on February 20, 2014 to set aside the Registrar’s order. He asked counsel for the defendants if they would consent to such an order. Counsel for Scott advised that he still did not have the answers to undertakings but would seek instructions. On February 12, 2014 he advised that his instructions were to oppose the motion if any such motion was brought because the delay was both inexcusable and unexplained. A similar letter was sent by counsel for the Naccarato defendants advising on February 24, 2014 that he too was instructed to oppose the motion. No such motion was brought.
[19] The evidence is also clear that Mr. Palombi advised the plaintiff that the action had been dismissed. He copied him with his letter stating his intention to bring the necessary motion on February 24. Equally importantly, the plaintiff knew that the defendants would oppose such a motion by the end of February, 2014.
[20] There is no evidence as to why Mr. Palombi did not launch the motion. The defendants suggest there was a fee dispute while the plaintiff suggests not launching the motion was a result of inadvertence. I agree with counsel for the defendants there is inadequate evidence to make a finding of inadvertence. It seems Mr. Palombi simply failed to bring the motion. In the meantime, the plaintiff was well aware of his outstanding undertakings and when he was cross examined on his affidavit he acknowledged that he never provided the necessary information to Mr. Palombi. Whether or not he was providing Mr. Palombi with instructions, he knew or ought to have known that those undertakings were required. He also knew that the February 24, 2014 date had come and gone without a motion.
[21] In November of 2015 the plaintiff retained Mr. Pharand. Mr. Pharand did not launch this motion right away. On November 25, 2015 he commenced an action against Mr. Palombi. Thereafter there were apparently discussions between Mr. Pharand and LawPro to determine if LawPro was going to bring a motion to revive this action. Ultimately he was advised that it would not be doing so. In fact it appears that LawPro denied coverage to Mr. Palombi or to his estate. Mr. Polombi passed away suddenly in January of 2016.
[22] Mr. Palombi is not the only lawyer involved in this matter who is now deceased. Prior to retaining Mr. Scott, Mr. Marrello was represented by Mr. Mantello. Mr. Mantello is also deceased and while it is possible his files exist, it does not appear that other information such as his diaries have been preserved.
[23] Mr. Naccarato has advised his counsel that at the time of the real estate transaction and at the time of his discoveries, there was a business relationship between 1704608 Ontario Inc., of which he was a director, and Guildcrest Homes, which was involved with the factory-built homes. Apparently that business relationship is no longer in effect and so Mr. Naccarato does not have ready access to documents belonging to Guildcrest. Mr. Naccarato has also advised his lawyer that he destroyed his personal file in early 2016 because he believed this litigation was at an end.
[24] That Mr. Naccarato no longer has documents may or may not be accurate. He did not swear an affidavit himself. The affidavit was sworn by Lindsay Marshall on information and belief and if he did destroy documents it may not have been prudent for him to do so. On the other hand, the action had been dismissed since January of 2014 and this motion was only launched in May of 2016. The inability to access the Naccarato documents which Mr. Scott’s counsel had been demanding for several years certainly is likely to be prejudicial to Mr. Scott’s ability to defend against this action.
[25] The Court of Appeal has endorsed the “finality principle” and once there is a final order disposing of an action, a party is entitled to the security of the legal position gained by such an order. The longer a party has the benefit of an order without notice that a party intends to move to set aside the order, the stronger the inference that it should not be disturbed.[^2] Thus while this factor is not determinative and one might look askance at Mr. Naccarato’s decision to dispose of his documents, it is at least understandable that he might do so when two years had passed since the order was made and nothing had been heard from the plaintiff after Mr. Palombi’s threatened motion in February of 2014.
Analysis
[26] In reaching a decision I am obliged to consider the totality of the evidence and examine all relevant factors in context. I have summarized some of the critical milestones in the outline of the facts given above but I have carefully reviewed all of the affidavit material and the authorities which the parties have submitted.
[27] In my view, given the relatively simple nature of the litigation and the amount in issue, there is really no explanation provided by the plaintiff for the overall delay in this litigation. It will not do to simply blame the late Mr. Palombi because the plaintiff was well aware of the need to answer his undertakings. His lawyer could not do so unless the plaintiff provided him with the information and in any event a client has some obligation to take an active role in moving the action forward.
[28] The plaintiff was also aware of the timetable agreed at the status hearing. He was aware that the action was dismissed for delay. He was aware that a motion was required and he should have been aware that it had not been brought. He was certainly aware that the defendants would oppose the motion. Measured against the history of delay up to that point in time, waiting two years to launch the motion is not moving expeditiously to set the order aside.
[29] In addition, the evidence discloses prejudice to the defendant Scott who has been diligent in pushing the matter forwards. There is also prejudice to the defendant Naccarato based upon his reliance on the final order.
[30] None of these factors standing alone would justify dismissal of the motion but taken together I think that they do. Litigation delay, delay in bringing the motion and prejudice to the defendants justify this result.
[31] There are two other factors I take into account. Firstly, this is not an automatic administrative dismissal order by the registrar. This is dismissal for failing to meet the extended deadline granted by a judge at a status hearing. The fact that it was a consent order does not detract from that. In fact by consenting, the plaintiff should have been fully aware of the enormity of the possible consequence if he failed to meet the deadline. The Court of Appeal has recognized that the “lifeline” provided at a status hearing does not provide the plaintiff with a “clean slate”. The plaintiff is under an obligation to use the lifeline effectively.[^3]
[32] The second consideration has to do with the recent rule amendments and the philosophy behind them. Mr. Pharand argued that if this action had been subject to the new Rule 48.14, which came into force on January 1, 2015, the plaintiff would not have been required to set the action down for trial until five years after it was commenced. That would have been January 17, 2016 or because of the transition rule, Rule 48.14(1)1, January 1, 2017.
[33] I disagree with that analysis. Firstly, it is a hypothetical which does not apply. The actions that were extended to January 1, 2017 were actions in which status notices had not been sent or in which status notices had been sent but no status hearing scheduled. That would have applied to a very small subset of actions and could never have applied to this action. Secondly, the revisions to Rule 48.14 cannot be construed as a policy decision that actions should generally be allowed more than five years to be trial ready.
[34] The amendments to Rule 48.14 have the effect of reducing the number of automatic administrative dismissals but they also have the effect of eliminating status notices or the complexity of the old Rule 48.14. The new Rule is more draconian. There will be an automatic dismissal without notice – except that is for the warning on new statements of claim. And it remains to be seen whether motions to set aside administrative dismissal under the new rule will be granted with the frequency they were granted when the limit was two years. Presumably a plaintiff will have more explaining to do after five years.
[35] Equally importantly, there has been a series of other rule amendments which give tools to the parties and the court to enforce time limits and to create and enforce timetables. A nonexclusive list is as follows. There is an enhanced case conference power under Rule 50.13 which permits the court to impose a timetable on any action anywhere in the province and not just in those counties where Rule 77 is in effect. Rule 3.04(4) provides that parties may face sanctions including loss of rights for breaching a timetable whether imposed by the court or by agreement between the parties. Rule 24 was amended to provide that if a defendant moves to dismiss an action for delay and more than five years have passed since the action was commenced, there is a presumption of prejudice to the defendant. The amendments to Rule 48.14 were not designed to promote delay but simply to reduce the administrative burden on the court of numerous automatic dismissals followed by numerous motions to reinstate the action.
[36] In the case at bar, there is no reasonable explanation for the litigation delay; the plaintiff was given a new deadline following a status hearing; there is no reasonable explanation for missing the second deadline; the plaintiff did not move expeditiously after he knew of the dismissal order; and finally the plaintiff is unable to demonstrate that the defendants will not be prejudiced if the order is set aside.
[37] For these reasons it appears unjust to revive this action eight years after the events in question. I decline to do so and I dismiss the motion.
[38] The parties may either agree on costs or they may provide me with written submissions of no more than 2 pages each within the next 30 days.
Mr. Justice C. MacLeod
Date: January 31, 2017
CITATION: Marrello v. Naccarato, 2017 ONSC 757
COURT FILE NO.: 25356 / 11
DATE: 20170131
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Frank Marrello, Plaintiff
AND
Frank Naccarato, 1704608 Ontario Inc. and William R. Scott, Defendants (Responding Parties)
BEFORE: Mr. Justice C. MacLeod
COUNSEL: Richard A. Pharand, Q.C. for the Plaintiff (Moving Party)
Daniel C. Sirois, for the Defendant (Responding Party) William R. Scott
C. Bruce Willson, for the Defendants (Responding Parties) Frank Naccarato and 1704608 Ontario Inc.
ENDORSEMENT
C. MacLeod J.
Released: January 31, 2017
[^1]: See H.B. Fuller Co. v. Rogers, 2015 ONCA 173, 330 O.A.C. 378, and Labelle v. Canada Border Services Agency, 2016 ONCA 187, 346 O.A.C. 155.
[^2]: Marche D’Alimentation Denis Theriault Ltée v. Giant Tiger Stores Ltd. (2007), 2007 ONCA 695, 87 O.R. (3d) 660 (C.A.) at paras. 36-38.
[^3]: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544, 112 O.R. (3d) 67.