Court File and Parties

2018 ONSC 5009

Court File Nos.: CV-07-84599 and CV-07-84600 Date: 20180911

Ontario Superior Court of Justice

Court File No.: CV-07-84599

Between: Papp Plastics & Distributing Ltd. Plaintiff – and – Unity Insurance Brokers (Windsor) Ltd. and Alan Paterson Defendants

Counsel: R.M. Godard, for the Plaintiff No one appearing, for the Defendants

And Between:

Court File No.: CV-07-84600

Papp Plastics & Distributing Ltd. Plaintiff – and – The Boiler Inspection and Insurance Company of Canada Defendant

Counsel: R.M. Godard, for the Plaintiff A. Ottaway, for the Defendant

Heard: June 8, 2018

Reasons for Decision

DE SA J.:

Overview

[1] Papp Plastics & Distributing Ltd. (“Papp”) has brought a motion for a status hearing under Rule 48.14(5). Rule 48.14(7) requires that Papp show cause why the action should not be dismissed for delay.

[2] The Boiler Inspection and Insurance Company of Canada (“BI&I”) has brought a cross-motion to dismiss the action for delay under Rule 24.01. Rule 24.01(2) incorporates the same test under rule 48.14(1). Rule 24.01 provides that the Court shall dismiss the action for delay unless the plaintiff demonstrates that dismissal of the action would be unjust.

[3] BI&I takes the position that the delay is inordinate and “inexcusable”. Papp cannot rebut the presumption of dismissal in the circumstances. Further, BI&I takes the position that Papp has repeatedly breached Court orders, justifying dismissal under Rule 60.12.

[4] Having considered the matter in full, I dismiss B&I’s motion for dismissal. The matter is to be consolidated with the Intact Action, and is to proceed in accordance with my directions below.

The Claim

[5] The action is about an alleged malfunction of a Battenfeld 1650 ton complete press (the “Press”) owned by Papp. The Press is a piece of injection molding equipment used to produce plastic components. It was acquired second-hand by Papp in 1999.

[6] Papp had a policy of insurance (the “Dominion Policy”) with The Dominion of Canada General Insurance Company (“Dominion”).

[7] BI&I reinsured Dominion for the boiler and machinery risks insured by the Dominion Policy. The reinsurance provided to Dominion by BI&I was in effect for the policy period beginning May 1, 2002 and ending May 1, 2003. Papp admits that BI&I was a reinsurer, and did not directly insure Papp (“the BI&I Reinsurance”).

[8] On or about December 4, 2002, the Press suffered damage, causing it to stop. A contractor hired by Papp, Romeo Machine Shop (“Romeo”) concluded that the ram was misaligned, that the hydraulic seal was leaking, and that main body required replacement.

[9] Papp retained Romeo to conduct the repairs (“2002 Romeo Repair”). The repair was conducted before Dominion and BI&I were able to inspect the Press.

[10] After the 2002 Romeo Repair was completed, BI&I paid Dominion for the costs of the 2002 Romeo Repair, which Dominion in turn paid Papp. The net amount recovered from BI&I (less the $50,000 deductible) was $20,939.92.

[11] The Press returned to operation on January 29, 2003. Papp continued to operate the Press after the 2002 Romeo Repair, from 2003 until at least 2009.

Papp’s Claims Against BI&I and Unity

[12] While the Press returned to operation after the 2002 Romeo Repair, Papp took the position that BI&I was required to pay for a new remanufactured piston for the Battenfeld Press by the terms of the Dominion Policy. A new piston was estimated to cost $101,800 plus $28,102 for installation and a seal kit (less the deductible of $50,000).

[13] In April 2003, BI&I refused to pay that amount and advised Papp that the Dominion Policy provided only for the lesser of the repair or replacement of the Press, which BI&I had already paid to Dominion.

[14] On October 18, 2004, Papp and B&I agreed to settle any claims for disruption of business/extra expenses, for an additional $30,000 net of deductible and further agreed that there would be no further claim for business interruption.

[15] On June 27, 2007, Papp issued a Statement of Claim against Unity and its broker, Alan Paterson, in the amount of $109,762.00. On June 27, 2007, Papp also issued a Statement of Claim against BI&I in the amount of $150,000 for breach of contract and $150,000 in punitive damages for breach of good faith in relation to the December 4, 2002 loss. The claim was served on July 3, 2007.

[16] BI&I served a Notice of Intent to Defend on July 13, 2007. Unity served its Statement of Defence on February 11, 2008. BI&I’s defence was served by February 15, 2008. On January 27, 2009, the Court consolidated the BI&I Action with the Unity Action.

[17] On July 28, 2009, BI&I were able to make arrangements to document the condition of the Press and the process of disassembling and repairing it. Further repairs were necessary and were carried out on September 9, 2009 as it took some time for the required parts to arrive and to find a date when BI&I’s expert would be available to observe.

[18] On February 22, 2010, the Court issued a Status Notice in the consolidated BI&I and Unity Actions. A status hearing was heard on January 11, 2011. On consent, Justice Brown granted a timetable Order dated January 11, 2011, which included a set down for trial by January 10, 2012.

[19] Papp served its Affidavit of Documents on February 28, 2012. The delays were largely attributable to a change in counsel.

[20] In April 2012, BI&I requested to inspect the Press again, this time in an operative state. BI&I wanted the inspection to take place in advance of examinations for discovery so that BI&I would have the benefit of any of the engineer’s findings. BI&I also requested additional documents from Papp. The parties agreed to amend Justice Brown’s timetable Order of January 11, 2011.

[21] Justice Quinlan granted a consent Order dated April 23, 2012 varying Justice Brown’s Order to extend the set down date to December 31, 2013 for the consolidated proceeding against Unity and BI&I. Justice Quinlan’s Order did not incorporate a timetable.

The Second Loss and Consolidation with Intact Action/Romeo Action

[22] In June, 2012, the Press broke down once again (the “Second Loss”). The Second Loss would become the subject of a separate action between Papp and their new insurer, Intact Insurance Company (“Intact Action”).

[23] On April 19, 2013, Papp notified Intact and BI&I counsel of a further failure of the Press asserting that this most recent failure may be related to the first failure of the Press in 2002. Papp informed the parties that an inspection was tentatively scheduled for the week of April 29, 2013 to enable the insurers’ representatives to attend.

[24] Papp had attempted to schedule examinations for discovery in accordance with the Discovery Plan agreed to by the parties. However, the Second Loss had the effect of impeding progress in the actions. Due to the recent breakdown and resulting inspection and additional productions arising from it, BI&I maintained that it was premature to establish discovery dates in advance of the inspection. The parties agreed it was necessary to vary the Discovery Plan. BI&I requested additional productions, for time to retain an expert to review the additional productions, and that any amendments to the claim be effected prior to discoveries. BI&I also took the position that discoveries could not take place before there was an assessment of whether third party proceedings were necessary.

[25] On October 17, 2013, Papp amended the claim against BI&I to add the Second Loss. Papp also proposed that the matter be heard together with the Intact Action and sought an extension of time to set the matter down.

[26] Papp and Unity reached a settlement in the Unity Action on or about November 16, 2013. Although the BI&I and Unity Actions were consolidated, when the Unity Action was settled, the claims as against BI&I remained extant.

[27] Intact delivered a Statement of Defence in the Intact Action on March 25, 2014.

[28] On June 24, 2014, BI&I commenced a separate action against Romeo for its role in the various repairs of the Press (the “Romeo Action”).

[29] On December 22, 2015, all parties agreed that Papp could amend its Statement of Claim. The parties agreed that the actions (the BI&I Action, the Intact Action, and the Romeo Action) would be heard together as they dealt with common issues and involved common parties. Given the proposed hearing together, it was necessary to allow the Intact and Romeo Actions to catch up to the BI&I Action.

[30] In order to avoid unnecessary downtime in operation of the Press, it was necessary for the parties to carry out the inspection at the same time the replacement of the press box and repairs were taking place. Beginning on February 23, 2016, the press box was removed but not disassembled and the inspection and repair of the machine took place. Engineers from BI&I and Intact attended and took photographs and made a video recording of the disassembly in accordance with the inspection protocol outlined in Justice Charney’s Order dated April 13, 2016. The terms of the inspection protocol were on consent.

The Inadvertent Dismissal of the BI&I Action

[31] The parties consented to an Order dismissing the Unity Action, which was signed by the Registrar on April 19, 2016. Unbeknownst to the parties and counsel, the Registrar’s consent dismissal Order had the unintended consequences of dismissing the BI&I Action because the actions were consolidated in 2009. It was not the intention of the parties nor was it agreed that the BI&I action was being dismissed. The parties continued to litigate the BI&I Action following the Registrar’s consent dismissal Order and did not treat the action at an end.

[32] In August and September 2016, experts on behalf of Intact and BI&I carried out an off-site disassembly and inspection of the press box.

[33] On November 30, 2016, Papp contacted BI&I seeking a revised timetable to set the action down for trial. At this point, BI&I refused on the basis that Papp had not complied with Justice Quinlan’s Oder dated April 23, 2012 requiring the matter to be set down by December 31, 2013.

[34] On December 21, 2016, Papp brought a motion to, among other things, set a new timetable in the BI&I Action. The motion was scheduled for February 23, 3017. In January, 2017, BI&I brought a cross-motion to dismiss the BI&I Action for delay.

[35] The matter was set down to be heard on October 18, 2017 which was the earliest date. On May 19, 2017, Papp served the within Notice of Motion seeking an order setting aside or varying the Registrar’s consent dismissal Order dated April 19, 2016.

Analysis

Dismissal for Delay

[36] Section 48.14 of the Rules of Civil Procedure provides:

Dismissal of Action for Delay

48.14 (1) Unless the court orders otherwise, the registrar shall dismiss an action for delay in either of the following circumstances, subject to subrules (4) to (8):

1. The action has not been set down for trial or terminated by any means by the fifth anniversary of the commencement of the action.
2. The action was struck off a trial list and has not been restored to a trial list or otherwise terminated by any means by the second anniversary of being struck off.

[37] Because Rule 48.14(1) applies in this case, Rule 24.01(2) provides that the Court shall dismiss the action for delay unless the plaintiff demonstrates that dismissal of the action would be unjust. Rule 24.01(2) provides:

24.01 (2) The court shall, subject to subrule 24.02 (2), dismiss an action for delay if either of the circumstances described in paragraphs 1 and 2 of subrule 48.14 (1) applies to the action, unless the plaintiff demonstrates that dismissal of the action would be unjust. O. Reg. 259/14, s. 6.

[38] Rule 48.14 sets a presumptive guideline for “unreasonable” delay in the civil context. If the matter has not been set down for trial within 5 years, the onus is on the plaintiff to demonstrate why the action should not be dismissed. [^1]

[39] A dismissal can be avoided if a party, with the consent of all other parties, files a timetable and draft order, at least 30 days prior to the relevant dismissal deadline. The timetable and draft order must set out the dates by which outstanding steps will be completed and a date (no more than two years after the automatic dismissal deadline for the action) by which the action will be set down or restored to the trial list. [Rule 48.14(4)]

[40] Where the parties do not consent to a timetable, one party can bring a motion for a status hearing. At that hearing, the plaintiff must show cause why the matter should not be dismissed for delay. The court can dismiss the matter, adjourn the matter, make a Rule 77 case management order, or set deadlines for completion of the steps necessary prior to set-down and a deadline for set down for trial (or restoration to the trial list). [Rule 48.14 (5-7)].

[41] The dismissal of an action under Rule 48.14 may be set aside under Rule 37.14 on such terms as are just. [Rule 48.14(10)]

Unreasonable Delay: General

[42] The test under Rule 24.01 for dismissal of an action for delay is well established in the jurisprudence. In outlining the test in Langenecker v. Sauvé, 2011 ONCA 803, Doherty J.A. cited the statements of Lord Diplock from Allen v. Sir Alfred McAlpine & Sons, Ltd. [1968] 1 All E.R. 543 at 556:

It should not in any event be exercised without giving the plaintiff an opportunity to remedy his default, unless the court is satisfied either that the default has been intentional and contumelious, or that the inexcusable delay for which the plaintiff or his lawyers have been responsible has been such as to give rise to a substantial risk that a fair trial of the issues in the litigation will not be possible at the earliest date at which, as a result of the delay, the action would come to trial if it were allowed to continue.

[43] In reviewing the passage above, Doherty J.A. isolated two types of situations may warrant a dismissal for delay. The first type of case identified in Langenecker are those cases where the plaintiff’s conduct demonstrates a disdain or disrespect for the court process and its timelines. The Court exercises its jurisdiction in this context to maintain respect for the process by ending the proceeding. For this type of dismissal, the misconduct should be clear and ongoing.

[44] The second type of case that will justify dismissal for delay has main three characteristics. The delay must be inordinate, inexcusable and such that it gives rise to a substantial risk that a fair trial of the issues in the litigation will not be possible because of the delay: see De Marco, at paras. 22, 26; Armstrong, at paras. 11-12. Langenecker, supra, at para. 7. This second type of delay is more contextual in nature, and looks at all the circumstances in determining whether or not a dismissal is warranted.

[45] While the Rules provide for a dismissal for delay, the authority to dismiss for delay is derived from the Court’s inherent jurisdiction to prevent abuses. Sharpe J.A. explained in Marché D’Alimentation Denis Thériault, 2007 ONCA 695, 87 O.R. (3d) 660, at para. 24:

Dismissal for delay is not, of course, an invention of case management. Rule 24.01 allows a party to move to dismiss an action for delay where the plaintiff has failed to prosecute the action in a timely fashion in accordance with the rules. Moreover, courts may dismiss actions for delay even when the relevant rules do not mandate it. A court has inherent jurisdiction to control its own process, which “includes the discretionary power to dismiss an action for delay.” Housser v. Savin Canada Inc. (2005), 77 O.R. (3d) 251 at para. 9 (S.C.J.). As the Manitoba Court of Appeal wrote, “The power of a superior court to strike a matter for want of prosecution does not hinge on the niceties of the wording of the rules, but rather flows from the inherent power of the court to prevent an abuse of its own process.” Kuhr v. Pearlman (1991), 76 Man. R. (2d) 67 at para. 16. In at least two cases, this court has characterized lengthy, unexplained delays as “an abuse of the court’s process.” In Susin v. Baker & Baker, [2004] O.J. No. 723 at para. 7 (C.A), the court wrote that “even if the action could not be dismissed under r. 24.01(1), given all of the circumstances, it could properly be dismissed as an abuse of the court’s process.” See also Convay v. Marsulex Inc., [2002] O.J. No. 4655 (C.A.).

[46] Similarly, in Wallace v. Crate's Marine Sales Ltd., 2014 ONCA 671, Lauwers J.A. stated at para. 22:

There comes a time, in short, when enough is enough, and the civil justice system will no longer tolerate inordinate and inexplicable delay. A court may then eject the action as an exercise of its inherent jurisdiction, whether or not the relevant rules expressly mandate it.

[47] The jurisprudence makes clear, however, that an order dismissing an action for delay is an extreme remedy. This is true whether the dismissal is under Rule 48.14 or Rule 24.01. The plaintiff is denied the opportunity to have his/her matter adjudicated on the merits. Accordingly, before taking this extraordinary step of dismissing an action for delay, the court must be satisfied that the remedy is appropriate having regard to all the circumstances. [^2] As Sharpe J.A. observed in 1196158 Ontario Inc. v. 6274013 Canada Limited, 2012 ONCA 544, at para. 19:

Procedural rules are the servants of justice not its master … We should strive to avoid a purely formalistic and mechanical application of time lines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits. The Rules and procedural orders are construed in a way that advances the interests of justice, and ordinarily permits the parties to get to the real merits of their dispute. [Citations omitted.]

Was there unreasonable delay in this Case?

1) The Length of the Delay

[48] “Inordinate delay” is measured by reference to the length of time from the commencement of the proceeding to the motion to dismiss. As recognized in Langenecker, most litigation does not move at a quick pace. Some litigation, because of the issues raised and/or the parties involved, will move even more slowly than the average case.

[49] It is safe to say the length of the delay here, which is close to 11 years, is sufficient to be characterized as “inordinate”. The fact that the delay exceeds the presumptive guideline set out in rule 48.14 requires the court to engage in an inquiry to satisfy itself that a dismissal would be unjust.

2) Reasons for the Delay

[50] The requirement that the delay be “inexcusable” requires a determination of the reasons for the delay and an assessment of whether those reasons afford an adequate explanation for the delay. As LaForme J. explained in De Marco (cited in Langenecker) at para. 26, explanations that are “reasonable and cogent” or “sensible and persuasive” will excuse the delay at least to the extent that an order dismissing the action would be inappropriate. In other words, if the delay is understandable when considered in context, it will not be “inexcusable”.

[51] In making this assessment, a court must consider the reasonableness of the delay in context, having regard to all the relevant circumstances. Factors which should be considered in assessing the “reasonableness of the delay” include: 1) the actions of the plaintiff; 2) The actions of the defendant; 3) Other circumstances that were beyond the plaintiff’s control including court availability; 4) The nature of the proceeding itself and any complexity.

[52] The assessment is not so much a scrutinizing of the relevant time periods with a view to penalizing the plaintiff for specific periods of delay. Rather, it is a contextual assessment which looks at the delay as a whole. As explained in Carioca’s Import & Export Inc. v. Canadian Pacific Railway Limited, 2015 ONCA 592 at paras. 45-48 in the context of rule 48.14:

A motion to restore an action to the trial list is not a “blame game”, where counsel should be required or encouraged to take a defensive stance and justify their conduct of the litigation on a month-by-month basis. Rather, in assessing whether a plaintiff’s explanation for delay is reasonable, a motion judge should consider the overall conduct of the litigation, in the context of local practices, which can vary quite widely between jurisdictions.

[53] When considered in context, the “length” of delay is somewhat understandable. The major complicating factor was the “Second Loss” and the actions of the defendant in the face of the Second Loss.

[54] As outlined above, in June, 2012, the Press broke down a second time. The Second Loss would become the subject of a separate action between Papp and their new insurer, Intact.

[55] The parties agreed that the actions would be heard together as they dealt with common issues and parties. Given the proposed hearing together, the original action was necessarily delayed. Indeed, BI&I took the position that discoveries could not proceed until the parameters of the Second Loss, and any potential claims against third parties were properly understood.

[56] When considered in context, the delay in the scheduling of discoveries is understandable. All parties agreed to the pace at which the litigation was progressing. It is only when BI&I learned that the matter had been inadvertently dismissed that they took a hard line in relation to the delay, and they refused to consent to a revised timetable.

[57] Clearly, the plaintiff has an obligation to keep the matter progressing. The party who commences the proceeding bears the primary responsibility for its progress: Wellwood v. Ontario Provincial Police, 2010 ONCA 386 at para. 48. The defendant is not obliged to take positive steps to move the action forward or assist a plaintiff in having the matter progress to trial. However, when the defendant asks that discoveries be delayed, the defendant can hardly rely on that delay in seeking a dismissal. As the Court of Appeal explained in Carioca's Import & Export Inc. v. Canadian Pacific Railway Limited, supra, at paras. 53 and 54:

While this court has stated frequently that the plaintiff bears the primary responsibility for moving a case forward, it has also acknowledged that the conduct of a defendant is a factor, especially where a plaintiff encounters some resistance when trying to move the action along: 1196158 Ontario Inc., at para. 29. The suggestion that it is normal and acceptable for a defendant, if not to actively delay, to simply wait for the plaintiff to make the next move, may be based on a conventional view of litigation strategy. The objectives of timely and efficient access to justice, and effective use of court resources require all parties to play their part in moving actions forward, and for counsel to act in a way that facilitates rather than frustrates access to justice: Hryniak, at para. 32. For these reasons, although the burden of proof on the motion is on the plaintiff, the conduct of all parties in relation to the litigation is relevant in determining whether to restore an action to the trial list. [Emphasis added.]

[58] In my view, the matter was proceeding as the parties had contemplated. The complexity of the case itself and the Second Loss made delays in the proceeding inevitable. Rather than have a number of separate actions, the parties agreed to consolidate matters. This approach makes eminent sense, particularly in the face of limited resources. It would hardly be reasonable to punish the plaintiff for these delays in the circumstances given the defendant’s agreement to the manner and the pace of the proceeding.

3) Prejudice

[59] The third requirement is directed at the prejudice caused by the delay to the defendant’s ability to put its case forward for an adjudication on the merits. As explained in Langenecker, prejudice is inherent in long delays. Memories fade and fail, witnesses become unavailable, and documents and other potential exhibits are lost. The longer the delay, the stronger the inference of prejudice to the defence flowing from that delay: Tanguay v. Brouse, 2010 ONCA 73, at para. 2. In addition to the prejudice inherent in lengthy delays, a long delay can cause case-specific prejudice which will be non-compensable in costs.

[60] As the courts have explained, a defendant is not required to offer evidence of actual prejudice. However, the court is entitled to consider the conduct of the defendant in light of its assertions of prejudice. As Weiler J.A. noted in B. Fuller Co. v. Rogers (c.o.b. Rogers Law Office), 2015 ONCA 173, 330 O.A.C. 378, it is an error for a judge considering dismissal for delay to fail to consider the respondent’s conduct in relation to the question of prejudice: at para. 39. See also Carioca's Import & Export Inc. v. Canadian Pacific Railway Limited, supra.

[61] In this case, the defendant raises concerns with evidence lost during the course of the delay. The defendant takes the position that they were delayed in their inspections of the Press. The defendant argues that the plaintiff continued to use the Press, and accordingly, the defendant’s ability to inspect the Press was necessarily impacted. The plaintiff also failed to ensure the exact damage was documented at the relevant time.

[62] The defendant also points to the fact that the plaintiff has not retained any records of the Press’ maintenance or any records documenting the Press’ productivity either before or after the date of loss. According to B&I, much of plaintiff’s case relies on the memory of witnesses who worked in the plant. The Court is entitled to infer prejudice in the circumstances.

[63] No doubt, the deficiencies outlined above may be sufficient to tip the scale in favor of a dismissal where the delay itself is inexcusable. However, in my view, the record here is hardly sufficient for a dismissal on the basis of the outlined prejudice. Indeed, had the defendant had an interest in preserving the Press, they could have sought the necessary orders to do so at the time. They chose not to do so.

[64] Many of the deficiencies outlined above are not as much about the delay as they are about general weaknesses in the plaintiff’s case. The weaknesses identified by the defendant together with an expert report may be sufficient on a summary judgment motion to have the claim dismissed. The prejudice identified by the defendant, however, is not sufficient to order a dismissal on a rule 24.01 motion, particularly in the face of the defendant’s clear complicity regarding the progress of the matter.

[65] In my view, to dismiss the matter for delay given the defendant’s conduct would be unjust.

Disposition

[66] In light of the foregoing, I grant the order setting aside the Registrar’s consent dismissal Order dated April 19, 2016 in Court File No: CV-07-84600.

[67] The BI&I Action with Court File No. CV-07-84600 should also be consolidated with the Papp Plastics & Distributing Ltd. v. Intact Insurance Company (the Intact Action), Court File No. CV-13-58639. My understanding is that the Intact Action is not a Newmarket file. I leave it to the parties to work out the logistics and arrange for the necessary transfers.

[68] A trial date shall be scheduled for the matter by January of 2019.

Justice C.F. de Sa Released: September 11, 2018

Footnotes

[^1]: The courts have held that “the party who commences the proceeding bears the primary responsibility for its progress: Wellwood v. Ontario Provincial Police, 2010 ONCA 386 at para. 48.

[^2]: Rule 1.04 clearly provides, the rules shall be liberally construed to secure the most just, most expeditious and least expensive determination on the merits. Rule 2.03 and 3.02(4) recognize the importance of compliance, but that any order made should be made in the interests of justice.