SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Perth Insurance Company v. Osler Rehabilitation Centre Inc., Andrew Greszczyszyn, Elana Silverman, Irina Roshchina, Assessment Direct Inc. and Rikardur “Rik” Lindal;
BEFORE: MASTER C. WIEBE
COUNSEL: Michael J. Huclack for Perth Insurance Company; Richard H. Shekter and Karina Wong for Osler Rehabilitation Center Inc., Andrew Greszczyszyn, Elana Silverman, Irina Roshchina, Assessment Direct Inc. and Rikardur “Rik” Lindal.
HEARD: February 21, 2018.
REASONS FOR DECISION
1Perth Insurance Company (“Perth”) brings this motion for an order varying the order of Master Graham dated November 12, 2015 by extending the deadline for setting this action down for trial from September 30, 2017 to March 31, 2018. The purpose for the requested extension is to allow for the mandatory mediation to take place and for the case to be set down for trial. Mr. Huclack confirmed that this motion does not include a request for an order for the mandatory mediation.
2All were in agreement that, if I do not grant the extension, the Registrar will be in a position to immediately dismiss the action for delay in accordance with Master Graham’s order. I agreed, at Mr. Huclack’s request, to prohibit the Registrar from doing so for at least seven days from the date of my order in that event in order to facilitate an appeal of my ruling.
Facts
3Based on the evidence presented, I find the following relevant facts.
4Perth insured one Beatrice Pokuaa under a policy that provided for statutory accident benefits in the event of an automobile accident. In early 2010 the defendants, who are two clinics, two chiropractors, one massage therapists and one psychologist, rendered invoices to Perth on account of alleged treatments they provided to Pokuaa due to a motor vehicle accident that occurred on January 27, 2010.
5On November 10, 2010 Perth commenced a simplified procedure action against the defendants alleging fraud, conspiracy and willful misrepresentation. Essentially, Perth claimed that the defendants did not provide the alleged services and fabricated the accounts, which Perth paid. The Statement of Claim did not provide specific information as to which accounts and documents were in issue. Perth claimed $50,000 in special damages and $50,000 in punitive damages. The defendants were served with the Statement of Claim on November 29, 2010, and retained counsel by mid-December, 2010.
6On February 17, 2011, the defendants delivered a Notice of Intent to Defend and a Demand for Particulars. Essentially, the defendants wanted detailed particulars of the alleged fraudulent acts. Perth had particulars, but refused to deliver them. The defendants brought a motion for the particulars. On April 14, 2011, Master Dash ordered that the particulars be provided in 60 days, and that Perth pay costs of $7,000 in 30 days.
7On June 1, 2011 Perth delivered its affidavit of documents. On July 13, 2011, Perth paid the ordered costs, namely two months late. On September 26, 2011, Perth examined Ms. Pokuaa in a different proceeding. On November 8, 2011, Perth delivered the ordered particulars, namely five months late. The particulars identified the specific documents in issue. There was then no activity in this action for the next 16 months.
8On March 7, 2013 a Notice of Status Hearing was served. Settlement discussion occurred. In letters, defendants counsel alerted Mr. Kirby that the defendants would be moving to strike plaintiff’s pleadings. A status hearing was convened before Master McAfee on May 30, 2013. On consent the Master ordered deadlines for the delivery of the statement of defence, affidavits of documents and discoveries, and required that the case be set down for trial by May 30, 2014.
9On October 13, 2013, the defendants moved before Justice C. Brown for an order striking the allegations of conspiracy from the Statement of Claim. On November 27, 2013 Her Honour ruled that the conspiracy allegations be struck and that the fraud allegations be amended. Her Honour ruled on May 12, 2014 that Perth pay costs of this motion in the amount of $8,000 forthwith.
10On June 3, 2014 the Registrar dismissed this action for delay as it had not been set down for trial in accordance with Master McAfee’s order.
11Other activity happened. On July 17, 2014, Perth paid the costs ordered by Justice Brown. On October 24, 2014, defendants’ counsel appeared before the Registrar to settle the Brown order. On April 21, 2015, Perth amended its pleading in accordance with the order, and served it.
12There were two aborted attempts to schedule the motion to set aside the dismissal order. Finally, a motion in this regard was brought before Master Graham on April 13, 2015. Master Graham found that there had been a period of 16 months of delay from November, 2011 to March, 2013 for which both parties were responsible. He also found that Perth was solely responsible for the delay in delivering the ordered particulars, the delay in responding to settlement offers in 2013, and the delay in delivering the ordered amended pleading prior to the dismissal order, which delays totaled 15 months. Master Graham, however, found no evidence of deliberate delay and no evidence of prejudice to the defendants if the action was reinstated. He also found that the motion had been brought promptly. He set the dismissal order aside, but ordered no costs as he described the order as an “indulgence” to Perth in light of its lengthy unexplained delays.
13On April 22, 2015, the defendants appealed the Graham order. Nevertheless, Perth insisted on a defence. On May 8, 2015, the defendants obtained an order from Master Short specifying that there was no requirement to defend while the appeal was pending. On July 31, 2015, the defendants abandoned the appeal. On August 10, 2015, the defendants delivered their statement of defence.
14On September 3, 2015 Perth delivered a draft discovery plan. On October 16, 2015 the defendants delivered an unsworn affidavit of documents promising to provide a sworn copy at discoveries. These discoveries have not happened.
15On October 15, 2015, the Registrar again dismissed this action for delay. This order was the result of an administrative error by the Registrar as no timeline had been breached. At the request of Mr. Kirby, a conference call with Master Graham was convened on November 12, 2015. Perth advised that it planned to move to amend its pleading. The Master acknowledged that he should have set a timetable on April 13, 2015. He set aside this second dismissal order and ordered that the action be set down for trial by September 30, 2017 “failing which it shall be dismissed for delay.” He required that the Perth motion to amend pleadings be argued no later than April 30, 2016.
16On December 1, 2016, Perth demanded a sworn defendants’ affidavit of documents. On December 4, 2015 Perth moved to amend its pleading. The motion was heard by Master Short on March 17, 2016. He dismissed the motion as he found that the new allegations were statute barred. He ordered that Perth pay $11,300 in costs in 60 days. The costs were paid on May 31, 2016, namely late.
17Nothing happened for 19 months after Master Short’s order. In Mr. Kirby’s affidavit in this motion he states that the associate with carriage of the file left the firm on March 8, 2016, and that he, Mr. Kirby, “reassumed” carriage of this matter at that time. Presumably, Mr. Kirby argued the motion before Master Short on March 17, 2016, although that is not clear. Mr. Kirby states that, “through inadvertence,” he did not follow up to schedule discoveries and a mediation. He states that he “did not turn my mind to this matter again until early October 2017.”
18By October, 2017 the new Practice Direction for Civil Actions was in place that required the completion of a mediation before an action could be set down for trial. On October 4, 2017, Mr Kirby’s office requisitioned the within motion to be heard in December, 2017, and served a Notice of Motion on October 11, 2017. This stopped the Registrar from issuing another dismissal order.
19On October 4, Mr. Kirby’s office contacted Mr. Shekter to arrange a mediation. On October 17, 2017, Mr. Shekter’s associate responded stating that a new motion date was required, that a mediation “was premature,” and that there were no instructions to agree to a mediation. Perth adjourned the motion to February 21, 2018. It served the motion record on February 5, 2018.
20At the motion, Perth presented one affidavit, that of Mr. Kirby sworn January 31, 2018. In this affidavit Mr. Kirby stated that Perth had always intended to move this matter forward to trial without delay. The defendants delivered their responding motion record on February 14, 2018. It contained the affidavits of Monica Gauthier, Mr. Shekter’s assistant, and the affidavits of the defendants, Yan Krivoruk, director of Assessment Direct Inc. (“Assessment”), Igor Estrah, director of Osler Rehabilitation Centre Inc. (“Osler”), Rikardur Lindal, Elana Siverman and Irina Roshchina. At the beginning of the motion argument, Mr. Shekter also filed an affidavit of Dr. Andrew Greszczyszyn.
21Mr. Huclack asked for an adjournment in order to obtain counsel for Mr. Kirby. I denied this request given the small amount of money at stake in this action, the motion material that had been prepared, the fact that this was a simplified procedure motion, and the time Mr. Kirby had had to get counsel since October, 2017. Mr. Huclack advised that Perth no longer required a discovery.
Test for the motion
22Mr. Huclack argued that the test on this motion was set by Rule 3.04(4) which specifies that where a party fails to comply with a timetable, the court may stay the proceeding, dismiss the proceeding or strike the defence, or “make such other order as is just.” Mr. Shekter argued that, given the explicit order by Master Graham to dismiss the action for delay if the September 30, 2017 set down deadline was missed, the appropriate test is the one for setting aside dismissal orders under Rule 48.14.
23I agree with Mr. Shekter. Had it not been for this hastily prepared motion, the Registrar would have dismissed this action in accordance with Master Graham’s order. The Registrar in fact stands ready to dismiss the action should this motion be dismissed. If I grant the motion, on the other hand, the effect will be to stop the Registrar from dismissing the action until March 31, 2018. Therefore, this motion is in effect one that stops or delays a dismissal order. It is, therefore, “just” that the test for setting aside a dismissal order be applied to this motion.
24The test for setting aside a dismissal order was aptly summarized by Master Muir in 744142 Ontario Ltd. v. Ticknor Estate, 2012 ONSC 1640, [2012] O.J. No. 1119 (Ont. Master) at paragraph 32. The court must consider and weigh all relevant factors, including the four factors set out in Reid v. Dow Corning Corp., [2001] O.J. No. 2365 (Ont. Master). [2002], which factors are not exhaustive. A contextual approach is required. Prejudice is the key factor. Prejudice to the defendant (if the action is reinstated) may be presumed if there is a lengthy period after the expiration of the limitation period, in which case, the plaintiff must lead evidence to rebut the presumption of prejudice. The party who commences the litigation has the primary responsibility to progress the action.
25However, this is a motion seeking in effect a second indulgence, namely a second avoidance of a dismissal of the action due to delay. As indicated by the Court of Appeal in Jadid v. Toronto Transit Commission, 2016 ONCA 936 (ONCA) at paragraph 10, in such a motion the court must also consider the length of the delay both pre- and post-order, and must apply a heightened scrutiny of the four Reid factors and the requirement for an explanation as to why the first lifeline was ignored. I will apply this test.
Explanation for the litigation delay
26The first Reid factor to be considered is whether Perth has adequately explained the delay in the progress of the litigation up to the set down deadline. The primary concern here is whether there is any evidence that the plaintiff deliberately decided not to pursue the litigation. If the plaintiff did so decide, the authorities are clear that the action should be dismissed.
27Counsel agreed that Master Graham’s order of April 13, 2015 binds me as to the question of delays and explanations for delays prior to that order. I agree, as otherwise the administration of justice would be brought into disrepute. Therefore, I reiterate Master Graham’s finding that Perth solely delayed the action for a period of 15 months, being the total of its delay in delivering the ordered particulars, its delay in responding to settlement offers in 2013, and its delay in delivering the ordered amended pleading prior to the dismissal order. I simply note that it took another 10 months after the dismissal order for Perth to actually deliver its amended pleading, but I will not consider this period as the motion to set aside the dismissal order was pending during the same period. I also reiterate Master Graham’s finding that both Perth and the defendants were responsible for the 16 months of delay from the delivery of the ordered particulars to the Status Notice. Finally, and most importantly, I note that Master Graham did not find that any of these delays indicated an intention by Perth at any time to abandon this action.
28The issue for me, therefore, is the delay that happened after the order of Master Graham on November 12, 2015 which set the set down deadline of September 30, 2017. There is a period of 19 months when nothing happened. The only explanation offered by Perth is the statement in Mr. Kirby’s affidavit that he took over carriage of this file from a departing junior in his firm in March, 2016 and, through “inadvertence,” simply did not turn his mind to this matter until October, 2017.
29There was no cross-examination of Mr. Kirby as to his alleged inadvertence. Is this evidence sufficient to meet the Reid test nevertheless? In Ticknor Estate Master Muir dealt with a bald statement of inadvertence from a lawyer. He criticized it for being insufficient, as it did not give particularity about the alleged inadvertence. Such required particularity, according to Master Muir, included whether the deadline had not been diarized as it should have been, or whether the affiant had been distracted by other matters, or whether the affiant had been distracted by a possible negligence claim arising from a limitation defence. He found as a result at paragraph 37 that there was insufficient evidence to rebut the inference that that deadline was “simply ignored.”
30In the motion before me, there was some semblance of particularity, namely the Kirby statement that “he did not turn my mind to this matter again until early October 2017.” Given the heightened scrutiny required on this motion as specified in Jabdid, this is not, in my view, sufficient particularity. Why did Mr. Kirby not turn his mind to this matter? Was there a breakdown in the firm’s reminder system? If so, what was it? Did the file get lost or misplaced? Did the departing associate take some of the file? Was there something about this file that caused Mr. Kirby to avoid it? These questions needed to be answered, and were not.
31What is also troubling about this explanation is that there is no evidence from Perth itself. Given the heightened scrutiny on a motion such as this, as specified in the Jadid decision, I would have thought that Perth would at least have filed an affidavit of the person at Perth who was instructing Mr. Kirby. Without such an affidavit, the court is left with important unanswered questions, such as whether Perth ever received notice of the timetable set by Master Graham, whether Perth also forgot about this case, or whether Perth decided, perhaps temporarily, not to pursue this case and did not contact Mr. Kirby for 19 months as a result while Mr. Kirby was allegedly laboring under his absent-mindedness. As Mr. Shekter pointed out, the evidence of the defendants on this motion was that the mere bringing of this action caused a detrimental effect on the livelihoods of the defendants. This may have been a sufficient result for Perth to cause it to abandon the case, at least temporarily. I am reminded that Perth is the one with the onus of proving the requisite Reid factors.
32For these reasons, I have concluded that the plaintiff has not adequately explained the 19 months of delay after Master Graham’s timetable order.
Inadvertence in missing deadline
33The second Reid factor is whether the plaintiff has proven that it always intended to conclude the mediation and set the action down for trial before September 30, 2017, the deadline in Master Graham’s timetable order, and failed to do so through inadvertence. In the circumstances of this case, this test ends up being much the same as the first Reid test. The Perth evidence of this inadvertence is the same, namely the affidavit statement of Mr. Kirby that Perth always intended to move this action forward to trial and that the failure to meet the September 30, 2017 deadline was due to Mr. Kirby’s inadvertence in failing to turn his mind to this matter until October, 2017.
34My concern about this evidence is the same, particularly given the heightened scrutiny required on such a motion as indicated in Jadid. I reiterate here my concern about the insufficiency of the evidence of inadvertence. More particularity is required. I also reiterate my concern here about Mr. Kirby’s statement of Perth’s intention, as there is no evidence from Perth on this motion. Furthermore, I echo the comments made by Master Birnbaum in Murphy v. Baroon [2008] O.J. No. 4976 (ONSC) at paragraph 14 that a failure to diarize a set down deadline after a dismissal order has been set aside is not “inadvertence” but recklessness. Similarly, the failure of Mr. Kirby to turn his mind to this file for 19 months after the initial dismissal order was set aside was indeed recklessness, not inadvertence.
35As a result, I am driven to the conclusion, and I do conclude, that Perth has not proven that it failed to meet the September 30, 2017 set down deadline through inadvertence.
Motion brought promptly
36The third Reid factor is whether the plaintiff has established that this motion was brought promptly after it became aware of the violation of the timetable order breach. There was no issue raised on this point. Perth brought this motion on as quickly as possible after Mr. Kirby realized that the timetable order had been breached. This speed in fact resulted in causing the Registrar to stop issuing the dismissal order. I find that the motion was brought promptly.
Prejudice
37The fourth Reid factor is whether the plaintiff has established that the delay in the litigation has not prejudiced the defendants in defending the action. In my view, this is the central issue in the motion.
38I note that Master Graham in his ruling on April 13, 2015 found at pages 7 and 8 of the transcript that, while the plaintiff had the onus of rebutting the presumption of prejudice that arises with the passage of time (particularly the passage of time after a limitation period), the court may rely on the evidence of the defendants with respect to prejudice, as the defendants are in the best position to know whether their ability to defend has been compromised due to the delay. I agree with that conclusion. This is also consistent with the statement made by the Court of Appeal in Chiarelli v. Wiens, 2000 CanLII 3904 (ON CA), 46 O.R. (3d) 780 (CA) at paragraph 14 about the need for the defendant to show evidence of actual prejudice.
39Master Graham went on to find that there was insufficient evidence of prejudice to the defendants as there was no evidence of unavailable relevant documents. He stated that “. . . certainly the Defendants have been aware of the action and would know to preserve relevant documents.” He also noted that, while the defendants complained that they had lost contact with witnesses, they did not name those lost witnesses or identify what their evidence will be. Based on this evidence, Master Graham did not find that the defendants would suffer prejudice by having the action reinstated.
40In determining the question of prejudice on this motion, I have reviewed the evidence presented by the defendants to determine whether they have answered the questions raised by Master Graham. I agree with Mr. Shekter that I should not be artificially confined in my review to the period of the 19 months of delay after the Graham timetable order, as Master Graham’s April 13, 2015 ruling on this point was based on the insufficiency of the evidence that was before him. Furthermore, I echo the statement made by Justice Miller in McLean v. Boettcher [2015] O.J. No. 4416 at paragraph 5 that I should canvass the totality of the litigation.
41There is the affidavit of Andrew Greszczyszn, a chiropractic doctor who worked at Osler. The affidavit reviews the history of the litigation, and asserts that there has been a “negative impact” on the doctor’s professional reputation. There are no particulars of this impact. The doctor stated he has lived “under the cloud of allegations of fraud and conspiracy for almost 8 years without recourse.” But this cloud of allegations is the same today was it was when the action was brought, and there is no evidence as to whether the litigation delays caused further damage to the reputation.
42As to witnesses, the affidavit generally asserts that witnesses have been lost due to the passage of time and the fact that the Osler ceased operation and laid off staff. Again, there is some particularity as to the lost staff that would have given relevant evidence. There is reference to “front desk staff” who would check out patients and “billing staff” who would prepare documents for submission to insurers and check invoices against services rendered. But no names are mentioned.
43Most importantly, however, there is no evidence of the steps the doctor took to collect and preserve this evidence in a timely way, if any. It is undisputed that the defendants were served with the Statement of Claim on November 29, 2010 and retained counsel by mid-December, 2010, namely well before Osler ceased operation in April, 2013. While the Statement of Claim did not contain sufficient particularity of the fraud allegations to plead properly in response, as determined by Master Dash, the pleading did identify the treatments given to Ms. Pokuaa concerning her January 27, 2010 motor vehicle accident as being the subject matter of the alleged fraud. In my view, that should have been sufficient to identify and preserve documents concerning the treatments given to Ms. Pokuaa after January 27, 2010 and to identify and interview staff who had contact with Ms. Pokuaa and her invoices after January 27, 2010. This could have been done as early as January or February, 2011, namely less than one year after the accident. In any event, the defendants obtained particularity in November, 2011, which again was well before Osler ceased operation.
44In Labelle v. Canada (Border Services Agency), 2016 ONCA 187 at paragraph 23, the Court of Appeal quoted from Chiarelli at paragraph 16 as follows: “The defence cannot create prejudice by its failure to do something that it reasonably could have or ought to have done . . .” The Court identified such failures to include the failure to interview witnesses, conduct surveillance and preserve relevant evidence. Mr. Shekter argued that the small amount of money that allegedly formed the fraud, which he argued was no more than $2,694.13 (a number with which Mr. Huclack disagreed), did not justify an “investigation” on the grounds of proportionality. I do not agree. The amount of money at stake is not a proper measure of the importance of this action. The evidence indicates that the allegations of fraud per se had a damaging effect on the professional reputations of the defendants. The defendants therefore should have taken timely steps to prepare their defence. If they did not, the resulting prejudice is not the fault of the plaintiff.
45The affidavits of the other defendants have many of the same qualities and deficiencies as the affidavit of Andrew Greszczyszn. Mr. Krivoruk, the director of Assessment, did identify a psychological assessment of Ms. Pokuaa that was made by one Sadet Yilmaz under the supervision of Dr. Lindal. But Mr. Krivoruk went on to state that neither he nor his employees have kept in contact with this witness “for several years.” This just begs the question: “Why not, given the gravity of the ongoing action?” Igor Estrah, the director of Osler, also identified specific witnesses, namely kinesiologist, Larysa Suslova, and adminstrators, Marina Ginsburg and Tatiana Nudel. He stated that “efforts were made to maintain contact with witnesses,” but alleged that this was not possible due to the delay in the litigation. No particulars of these efforts to maintain contact were given. Dr. Lindal, a psychologist who worked at Assessment, complained generally about having lost memory, about diminished reputation due to this action, about having lost contact with witnesses and about witnesses being adverse in any event for having lost their jobs at Assessment. No further particulars were given. The affidavits of the chiropractor, Elana Silverman, and massage therapist, Irina Roshchina, both of whom worked at Osler, contain similar general statements.
46The Court in Labelle at paragraph 23 made another point. It stated that prejudice to the defendants resulting from events for which the plaintiff is not responsible is not relevant to the motion. The cessation of operations of Assessment in August, 2011 and Osler in April, 2013 are potentially such third party events, as the evidence that the plaintiff caused these cessations was thin. Messrs. Krivoruk and Estrah simply stated that Osler and Assessment stopped being paid by insurance companies and stopped getting referrals. There was no statement that this led to the cessation of these two businesses. This needs to be born in mind. In addition, these cessations should have in any event caused the defendants to take steps to keep in contact with staff who had contact with Ms. Pokuaa and her invoices. There is no evidence that the defendants did so. Again, if they did not do so, that is not the fault of the plaintiff.
47In the end, I find that the defendants have not sufficiently answered the questions raised by Master Graham. I find that the defendants have not provided sufficient proof that they have been prejudiced by the substantial delays caused by Perth. Perth has, therefore, established for the purpose of this motion that its delays did not prejudice the defendants.
Contextual approach
48The authorities are clear that I must in the end apply a contextual approach to the determination of this motion. I have determined that, despite the lengthy unexplained delays caused by Perth (delays for which it is solely responsible totaling 34 months, and delays for which it is partially responsible totaling 16 months), and despite the absence of evidence from Perth of inadvertence in missing the set down deadline of September 30, 2017, this case should not be dismissed for delay. The prejudice resulting to the defendants from these delays is the key factor, and it weighs in favour of preserving the action.
49Furthermore, the nature of the allegations are such that there should be a determination on the merits. On the one hand, Perth should be given an opportunity to establish the alleged fraud and “root out” a course of conduct that is no doubt detrimental to the functioning of its business. On the other hand, the defendants should be given an opportunity to vindicate themselves, as there was evidence on this motion that their professional reputations have been damaged. To leave these issues hanging and undetermined is not, in my view, in the interest of justice. I am also aware of the general guidance given by the Court of Appeal on this issue, namely that the motions judge or master should, in weigh the two competing underlying policy considerations (determining issues in a timely way and determining issues on their merits), favour determining cases on their merits; see H. B. Fuller Company v. Rogers (Rogers Law Office), 2015 ONCA 173 at paragraphs 25, 26 and 27.
50Therefore, I have decided to grant the motion. Because of the time it has taken to release this decision, and in order not to prejudice Perth, I have also decided to extend the set down deadline to account for the time it has taken to complete this reserved decision, namely from the requested date of March 31, 2018 to April 16, 2018. I so order.
Costs
51Perth does not seek costs. The defendants filed a Costs Outline that shows a partial indemnity amount of $21,068 and a substantial indemnity amount of $39,483.61.
52I believe that this is a case where the “successful” party, Perth, should pay costs, and costs in a significant amount. Its conduct merits such a result. Perth has delayed this litigation without explanation for 34 months. It is partially responsible for further delays of 16 months. It did not provide adequate proof of the alleged “inadvertence” in breaching the latest set down deadline imposed by Master Graham, which itself was described by the Master as an “indulgence.” There was no evidence from Perth itself. Perth did not pay sufficient attention to this litigation after having been given a reprieve by Master Graham. For these reasons, the resistance by the defendants to this motion, and the work that the defendants put into resisting this motion, was more than reasonable. In the end, while I granted the motion, it was a “very close call” and a considerable further indulgence to Perth. But this time, it will have to pay for the indulgence.
53The quantum of the costs sought by the defendants seems reasonable. Counsel obtained seven affidavits and did considerable important research on this issue. It presented twenty authorities; Perth presented two. The amount of work and rates shown are reasonable. I will not make a deduction on account of the quantum claimed by the defendants. I will, however, make a deduction to account for the fact that Perth did “succeed” in the end.
54Therefore, I have decided that Perth must pay the defendants substantial indemnity costs of $30,000. This amount must be paid in 30 days.
DATE: March 7, 2018
MASTER C. WIEBE