COURT FILE NO.: CV-13-474235 MOTION HEARD: 20181108 REASONS RELEASED: 20190221
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
Sherwood Innovations Inc., 547907 Ontario Limited and 1196158 Ontario Inc. Plaintiffs
- and-
SAM COSENTINO PROFESSIONAL LAW CORPORATION Defendant
BEFORE: MASTER D. E. SHORT
COUNSEL: D. Eveleigh, Fax: 416-596-4650 -counsel for the Plaintiffs debra.eveleigh@srcounsel.ca
W. Pepall, Fax: 416-867-2415 -counsel for the Defendant wpepall@lerners.ca
REASONS RELEASED: February 21, 2019
Reasons for Judgment
It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. Winston Churchill, October 1939.
I. Background
[1] In my view family disputes are best resolved on the merits, rather than discretionary procedural elements which can prevent closure and a resolution being achieved by the intervention of a neutral, outside assessment on disputed questions of fact and liability.
[2] This is a motion brought by the plaintiffs to set aside the Registrar’s dismissal of this action for delay. That dismissal occurred because this 2013 action was not set down for trial before the fifth anniversary of its commencement, as required by rule 48.14 of the Rules of Civil Procedure.
[3] The 2013 action was brought to seek compensation for the alleged failure of counsel to properly conduct a real estate related action that was commenced in 2006 and dismissed for failing to set down that action for trial in 2011.
[4] The present action did not progress beyond the pleadings stage during the more than five years it was extant. However, there were a number of somewhat related matters being addressed involving some or all of the parties before and during that period.
[5] The Cosentino firm was thus sued for alleged negligence with respect to the handling of the previous action.
[6] That action against the Cosentino firm was, as well, not set down in this instance by Feldman Lawyers, counsel for the plaintiff in this action.
[7] The Cosentino firm resists this motion to reinstate the now dismissed, 2013 action against it.
II. Underlying Matters
[8] I turn first to the defendant’s factum upon which I generally base the following partial synopsis of the activity of the parties leading to this motion.
[9] Put simply this action involved a claim against the defendant, Sam Cosentino Professional Law Corporation ("SCPLC"), for lawyer's negligence. In or around 2006, SCPLC was retained to pursue an action on behalf of the plaintiff in this action, 1196158 Ontario Inc. ("119"). That claim related to causes of action that arose in 2005 and earlier. SCPLC commenced an action on 119's behalf in 2006 (the "underlying litigation"), but the claim was dismissed for delay at a status hearing in 2011. The underlying litigation, like the case at hand, did not proceed beyond the pleadings stage in the five years it was extant.
[10] SCPLC is a professional law corporation based in Vaughan, Ontario. Its principal, Sam Cosentino, is a lawyer licenced to practice in Ontario (“Sam”).
[11] The plaintiffs Sherwood Innovations Inc. ("Sherwood"), 547907 Ontario Limited ("547"), and 119 are all Ontario corporations. Sam's brother, Chris Cosentino ("Chris"), is the principal of all three corporations.
[12] 119, in the underlying litigation, alleged that the vendor of the property purchased by 119 either breached a contractual obligation to deliver the property with a 600 ampere electrical service or misrepresented to 119 that the property would have such an electrical service. 119 also claimed against the former tenant of the property, alleging that the former tenant breached the lease agreement prior to the sale of the property and that there were amounts owing under the lease. 119 also claimed against Toronto Hydro-Electric System Ltd., alleging that it negligently damaged the electrical service at the property prior to 119's purchase of the property in 2005.
[13] As noted by the Court of Appeal, when it dismissed 119's appeal of the dismissal for delay of the underlying litigation, the events giving rise to the underlying litigation occurred in 2005 and even a period earlier than that. 1196158 Ontario Inc. v 6274013 Canada Limited, 2012 ONCA 544 at para 43
[14] The defendant law firm was sued for alleged negligence on an earlier matter as a result of failing to set the claim of 119 down for trial on a timely basis. The firm resists the motion to reinstate action against it. Obviously, it is necessary to examine how the parties reached the present situation.
[15] This action involved three separate claims, one by each of the plaintiffs, as follows:
(a) Sherwood had an ongoing retainer with SCPLC for the performance of various legal services. In this action, Sherwood disputed certain fees paid to SCPLC during the course of the retainer.
(b) 547 retained SCPLC to represent it in various lawsuits in which it was involved. In this action, 547 alleged that it overpaid for legal services rendered by SCPLC and sought a refund of certain fees paid to SCPLC. The claims referred to in subparagraphs (a) and (b) are referred to as the "billing claims".
(c) 119 retained SCPLC to pursue the underlying litigation, in which 119 claimed against various parties for breach of contract or misrepresentation by the previous owner of a property that 119 purchased in 2005, against a previous tenant of that property for breach of a lease agreement, and against Toronto Hydro. In this action, 119 claimed that SCPLC negligently allowed the underlying litigation to be dismissed for delay (the "lawyer's negligence claim").
[16] Counsel for the defendant firm in the present motion asserts that, in the case at hand, there was no overlap between the billing claims and the lawyer's negligence claim. The causes of action were separate and distinct. The billing claims were brought by the other two plaintiffs, Sherwood and 547, while the lawyer's negligence claim was brought by 119. Although the claims were included in a single action commenced by the plaintiffs, SCPLC was represented by separate counsel for the billing claims and the lawyer's negligence claim, and separate statements of defence were prepared in respect of the billing claims and the lawyer's negligence claim on SCPLC's behalf.
[17] This action was commenced by 119 and others in February 2013. In addition to the lawyer's negligence claim, there were a number of other claims made by the plaintiffs relating to disputes over SCPLC's billings. SCPLC was represented by separate counsel in respect of the billing claims and there was no overlap between those claims and the lawyer's negligence claim. The billing claims were resolved in 2014 (with settlement documentation finalized in 2015).
[18] Counsel for the defendant firm asserts that the lawyer's negligence claims “never formed a part of those settlement discussions and were never settled, nor were they stayed or held in abeyance while the billing claims were being resolved.” There was some discussion during that period about an "early" mediation of the lawyer's negligence claim, separate from the billing claims, but that mediation never materialized. No steps were taken during that timeframe to advance the action beyond the pleadings stage.
[19] The defendant firm argued before me that between February 2016 and the time this claim was dismissed in April 2018, SCPLC's lawyers did not receive any communication from 119, despite at least three communications that were sent by SCPLC's lawyers to 119's lawyers.
[20] In December 2017, SCPLC's lawyers wrote to remind 119's lawyer of the upcoming five year anniversary of this action's commencement, but did not receive a response. 119 concedes it did not take any steps to move the action forward during that time and has no explanation for the failure to do so.
[21] 119 now seeks to set aside the administrative dismissal.
III. Defendant Firm’s Position
[22] The defendant firm argues that contrary to the plaintiff's assertion, this is not a "straightforward" action. They submit that in order to succeed, 119 must demonstrate that it suffered damages and that those damages were caused by SCPLC's negligence:
“In a case such as this one, where the underlying action was dismissed for delay, the plaintiff has to show that it lost an opportunity of value as a result of the action being dismissed. This involves an inquiry into the merits of the underlying litigation, which relates to events that occurred in 2005 and earlier. The defendant has been asking for production of the 119's brief in support of damages and causation since 2014 but has received nothing that substantiates 119's claim that it suffered damages as a result of the dismissal of the underlying litigation. [my emphasis]
[23] The defendant in the present action further asserts:
119 has provided no satisfactory explanation for the failure to take any steps to advance the litigation between the close of pleadings and the time the action was dismissed for delay and, in respect of the last two years the action was extant, no explanation for the delay has been provided at all. 119's bald assertions of inadvertence and an intention to pursue this action are belied by the broader context of the manner in which this action has been litigated. The plaintiff's evidence is insufficient to justify setting aside the dismissal, particularly since there is prejudice to SCPLC, whose principal, Sam Cosentino ("Sam"), has had significant health problems, is now 65 years old, and has difficulty recalling the events giving rise to this claim. 119 has not rebutted the presumption of prejudice.”
[24] They thus submit that this motion should be dismissed with the result that the plaintiff’s action would thus remaining dismissed for delay. To evaluate that position I turn to the activity to date in the present action.
Prejudice
[43] The underlying litigation relates to causes of action that matured over thirteen years ago, in 2005 and earlier. This underlying litigation was commenced in 2006 and dismissed for delay in 2011. SCPLC's principal, Sam, is almost 65 years of age and his memory has deteriorated. He has also had debilitating health issues including shingles, which resulted in vestigial nerve damages and ongoing pain.
[44] The allegations of professional negligence, which have been hanging over Sam's head since 2011, are said to have been a source of great anxiety during this difficult time for him.
IV. History of the Action
i. February 2013 to March 2014: Pleadings and Settlement of the Billing Claims
[25] The Statement of Claim dealing with both the billing and negligence claims, was issued on February 14, 2013. A statement of defence regarding the lawyer's negligence claim was delivered on June 7, 2013. A reply was delivered on August 21, 2013 and the pleadings closed on that date.
[26] Following the close of pleadings, no steps were taken by the plaintiffs to advance the lawyer's negligence claim.
[27] Settlement discussions were held regarding the billing claims and a resolution was reached in March of 2014. However, the lawyer's negligence claim did not form a part of that settlement.
ii. April 2014 to June 2015: Dispute Over Scope of Settlement in the Billing Claims and Potential Mediation of the Lawyer's Negligence Claim
[28] There was subsequently a dispute about the scope of the releases to be executed by the parties. That dispute was resolved in June 2015. Thus as of June 17, 2015, the billing claims were fully and finally settled.
[29] A substantial portion of the plaintiff's factum on this motion is dedicated to describing settlement discussions regarding the billing claims during this timeframe. Those steps do not explain the delay in advancing the lawyer's negligence claim. However, to the extent the history of the billing claims are relevant, those issues were finally resolved in June of 2015.
[30] While SCPLC, through separate counsel, was negotiating a settlement to the billing claims, SCPLC's other counsel in the lawyer's negligence claim corresponded with 119's counsel on a possible early mediation to resolve the lawyer's negligence claims. Between February 2014 and June 2015, SCPLC's counsel wrote to 119's counsel at least five times to advise that SCPLC would be prepared to attend a mediation after the plaintiff produced its brief on causation and damages.
[31] Since this was a negligence claim, the plaintiff bore the onus of proving that it suffered damages caused by SCPLC's alleged negligence in allowing the underlying litigation to be dismissed for delay. In order to prove causation and damages arising out of the dismissal for delay, the plaintiff would have to show that it lost an opportunity of value as a result of the dismissal. This would require the plaintiff to demonstrate that it could have succeeded in the underlying litigation and been awarded damages.
[32] The present defendant’s materials before me assert:
“119's counsel repeatedly advised that documentation was being gathered by the plaintiff and would be delivered in due course.”
iii. July 2015 to February 2016: Continued Requests for Causation and Damages Documents
[33] In August 2015, SCPLC's counsel followed up with 119's counsel regarding the production of damages and causation documents in respect of the lawyer's negligence claim. 119's counsel responded by claiming, for the first time, that documents from the underlying litigation continued to be in SCPLC's possession and that 119 was, as a result, unable to produce causation and damages documents.
[34] It is asserted that:
“In fact, Sam returned 119's documents from the underlying litigation three years earlier, in 2012, after the underlying litigation was dismissed for delay and before this proceeding was commenced.
Sam did continue to have documents relating to other matters, including, but not limited to, the billing claims (all of which were irrelevant for the purpose of the lawyer's negligence claim). Those documents were returned to the plaintiffs on 13 October 2015. After that time, Sam had no documents remaining in his possession regarding the plaintiffs' matters.”
[35] In December 2015, 119's counsel wrote to SCPLC's counsel to provide documents that it said supported 119's case on causation and damages. Three documents were attached to the letter from 119's counsel. Subsequently, in February of 2016, 119's counsel wrote to SCPLC's counsel stating that, if 119 was not prepared to proceed to a mediation on the basis of the three documents produced by 119, it would prepare its affidavit of documents and move the action forward.
[36] SCPLC's counsel responded on February 22, 2016 by advising that the three documents produced by 119 did not demonstrate that 119 would have succeeded in the underlying litigation or that it suffered damages as a result of the underlying litigation being dismissed. SCPLC was not prepared to attend an early mediation on the basis of the three documents produced by 119.
iv. March 2016 to May 2018: No Communication from 119; Action Dismissed for Delay
[37] SCPLC's counsel did not receive a response to his 22 February 2016 letter. In June of 2016, SCPLC's counsel followed-up with 119's counsel by email, seeking a response to his 22 February letter. SCPLC's counsel did not receive a response to his June email, nor did he receive any indication that the lawyer with day-to-day carriage of the matter for 119, Eric Turkienicz, had left the firm.
[38] On December 5, 2017, SCPLC's counsel wrote to that counsel to remind him about the upcoming five-year anniversary of the commencement of the action in February 2018 and offered to exchange documents and schedule examinations for discovery. SCPLC's counsel did not receive a response to his December 2017 letter.
[39] The present action was dismissed for delay by order of the Registrar on April 19, 2018.
[40] SCPLC's counsel did not receive any correspondence from 119's counsel regarding this proceeding between February 2016 and May 2018, when 119's counsel wrote to advise that 119 would be seeking to set aside the dismissal for delay. 119 concedes that no steps were taken to move the action forward during that period.
[41] The defendant firm asserts that:
During the more than five years this action was extant, the plaintiff took no steps to move this action beyond the pleadings stage. 119 asserts that the five-year deadline for setting the action down was not diarized due to inadvertence, because a clerk at 119's law firm of record was on maternity leave. 119 further asserts that it always intended to pursue this action.
[42] In support of its resistance to the restoration of the action the Defendant’s counsel submits:
“These assertions are made baldly. There is no affidavit from the clerk on this motion, nor has 119 produced any documents or communications to support its claim that it always intended to pursue this action. Moreover, the claim of inadvertence is difficult to accept when SCPLC's counsel specifically wrote to 119's counsel to remind him about the upcoming administrative dismissal. As discussed below, this evidence is not indicative of inadvertence.
To this day, 119 has not produced an affidavit of documents or taken any steps to indicate that it would pursue this action diligently if the court were to set aside the dismissal.”
V. Plaintiff’s Perspective
[45] Feldman Lawyers, Counsel for the plaintiff 119 brings a very different perspective in their submissions. Their factum contains these observations which I have extracted (with my emphasis added) dealing with events following attempts in 2014 to resolve this action:
…After the unsuccessful settlement meeting, the Plaintiffs served the Motion Record for the Motion returnable March 21, 2014.
With that Motion pending, a settlement of all but the Lawyer's Negligence Claim was agreed to in a telephone call on March 17, 2014. Sam delivered draft releases which were revised and returned by Feldman Lawyers for Sam's consideration on March 19, 2014. Sam did not promptly deliver a substantive response to the draft releases, and the partial settlement could not be completed.
Sam then disputed the settlement and sought an adjournment of the pending stay/consolidation Motion for an opportunity to cross-examine on the supporting Affidavit and to conduct an examination of a non-party.
On March 21, 2014, at an attendance before Madam Justice Himel at Motion Scheduling Court, a date was set for a Motion to consolidate the Assessments and for Sam's partial Summary Judgment Motion on the Billing Claims. Thereafter, due to changes in Sam's counsel acting with respect to the Billing Claims and disputes over whether Sam, a witness, could act as counsel to conduct examinations, resulted in multiple attendances at Motion Scheduling Court over the next several months. In an attempt to expedite the process and avoid the difficulties arising on these Motions, the Plaintiff brought a Rule 49 Motion to enforce the March 17, 2014 settlement. That Motion was scheduled for October 14, 2014 with the other Motions deferred. Sam retained counsel for that Motion.
Following extensive but incomplete negotiations toward mutually acceptable forms of releases, the Rule 49 Motion was adjourned on consent to November 28, 2014 to provide the negotiations with an opportunity to conclude. On November 19, 2014, Sam advised that his counsel for the Rule 49 Motion would no longer be acting and he sought a further six-month adjournment of the Motion. At a subsequent Motion Scheduling Court attendance, the November 28, 2014 date was vacated to allow Sam to retain counsel and a new peremptory date was set for February 26, 2015. Sam also served a Motion seeking leave to represent the corporate Defendant returnable February 9, 2015. Sam's Motion did not proceed on that day because his materials had not been placed before the presiding Judge, and it was put over to April 17, 2015. The Plaintiffs' Rule 49 Motion which was to be held February 26, 2015 also did not proceed because Sam's filed materials had not been placed before the presiding Judge, and it was put over to April 1, 2015. Further settlement discussions ensued resulting in a consent adjournment of the Plaintiffs' Rule 49 Motion to June 18, 2015 and Sam's Motion to June 25, 2015.
On the eve of the return of the Rule 49 Motion, on June 17, 2015, the parties were at last able to come to a definitive agreement resolving the Billing Claims (including all of the pending Motions and Assessments). In July and August, the parties exchanged releases. As a result, the only remaining live claim in this action is the Lawyer's Negligence Claim by 119.
[46] While numerous delays were encountered it seems clear that to this point neither side was regarding the matters as dormant
[47] What remained as a result was only the claims based upon the alleged solicitor’s negligence claim, arising out of the failure to set down in time, the original real estate related action.
[48] The saga continues:
“In anticipation of the Billing Claims being resolved either on consent or through the various pending Motions, in December 2014 and January 2015 Eric Turkienicz and Louise Moher had corresponded about arranging a mediation for the Lawyer's Negligence Claim. The Defendant sought production of various documents in advance of the mediation which the Plaintiff stated were still in Sam's possession and which had not been returned due to the Billings Claims dispute.
Following the resolution of the Billing Claims, Mr. Turkienicz made several requests of Sam for the return of certain files, including materials sought by 119 for the pursuit of the Lawyer's Negligence Claim.
Then on October 13, 2015, Sam dropped six bankers' boxes of files at Sherwood's office. The files did not contain certain original documentation which 119 required for its claim, and so it was necessary for the Plaintiff to conduct an extensive fresh search of its own files for documents. Mr. Turkienicz then forwarded various documents to be used on the anticipated mediation to Jameel Madhany of Lerners LLP, who had assumed carriage of the matter following Ms. Moher's departure.
Subsequently, in late December 2015 the Plaintiff located a draft Affidavit of Documents which Sam had prepared in the Hydro One Action containing documents not in the returned file.”
[49] As a consequence of the identification of this important document counsel on both sides focused on the consequences of this discovery as described in the plaintiff’s counsel’s factum (with my emphasis):
23 In January and February 2016, counsel exchanged correspondence regarding the potential for scheduling a mediation. The remaining Plaintiff sought to proceed. Defendants' counsel advised that the mediation could not proceed unless and until further documents relating to damages were delivered.
Eric Turkienicz left Feldman Lawyers in February 2016, leaving Paul Feldman and one associate at the firm. At that time, Feldman Lawyers' regular long-serving clerk was on maternity leave and the firm had a temporary assistant. Through inadvertence, following Mr. Turkienicz's departure the next steps and dismissal date were not diarized in the firm's electronic tickler system. The change to Rule 48 had taken place during the life of the file and our new procedure, effective January 1, 2014 of diarizing steps to avoid Rule 48 dismissals for new files when issuing fresh claims was not carried out with respect to this file.
Therefore, despite the substantial activity over the prior three years, no further steps were taken in the two-year period between Mr. Turkienicz's departure and the five-year anniversary of the issuance of the claim.
The firm continued to represent Sherwood Innovations Inc. and its president and guiding mind, Chris Cosentino, during that period on various other matters to which our attention was turned, including, for Sherwood: completion of a settlement reached at a Pre-Trial in January 2016 on a dispute with a competitor which was to have a multi-week Trial, participation in tax litigation over research and development tax credits in 2016, defence of a copyright infringement claim in late 2016 and early 2017, defence of a fee dispute with professional advisors over a similar period; and for Chris, prosecution of an Appeal at the Court of Appeal in a dispute between siblings (including Sam) in a partition application regarding family land, and a shareholders' dispute with another sibling. Mr. Cosentino was in regular contact with Feldman Lawyers as a result of these matters and assumed that this matter was being duly pursued by Feldman Lawyers.
Neither the remaining Plaintiff nor the Defendant took any steps in respect of this matter between Mr. Madhany's letter of June 11, 2016 and December 2017. On December 5, 2017, Mr. Pepall of Lerners LLP wrote to inquire about the status of the matter, noting the upcoming 5-year anniversary and advising that “we are prepared to exchange documents and schedule examinations for discovery at a mutually convenient date in the New Year.” Mr. Feldman received that letter but was in the midst of preparation for an upcoming oppression remedy application to be heard that week on the Commercial List among other pressing matters to be completed before the holidays and therefore overlooked the correspondence. As well, Feldman Lawyers' regular clerk was again on maternity leave and the new temporary clerk had not yet been fully trained and so was not asked to assist. Had that correspondence not been inadvertently overlooked, the subsequent dismissal would likely have been avoided by consent timetable.
VI. Applicable Law
[50] In deciding whether or not to set aside a Registrar's dismissal Order, the Court adopts a contextual approach and will make an Order that is just in the circumstances of the case.
[51] As the Court of Appeal has recently confirmed in Prescott v. Barbon, 2018 ONCA 504 at para 14-15:
[14] The legal test for setting aside a registrar's order dismissing an action for delay was originally described by Master Dash in Reid and adopted by this court in Scaini v. Prochnicki, 2007 ONCA 63, 85 O.R. (3d) 179:
(i) Have the plaintiffs provided a satisfactory explanation for the litigation delay?
(ii) Have the plaintiffs led satisfactory evidence to explain that they always intended to prosecute this action within the time limit set out in the rules or a court order but failed to do so through inadvertence?
(iii) Have the plaintiffs demonstrated that they moved forthwith to set aside the dismissal order as soon as the order came to their attention, and
(iv) Have the plaintiffs convinced the court that the defendants have not demonstrated any significant prejudice in presenting their case at trial as a result of the plaintiffs' delay or as a result of steps taken following the dismissal of the action?
[15] This is not a rigid, one-size fits all test. Rather, a contextual approach is required: Scaini, at paras. 23-25. Prior to Scaini, a plaintiff had to satisfy each of the four elements. Thereafter, courts were to consider and weigh all relevant factors to determine the order that is just. ... In Hamilton (City) v. Svedas Koyanagi Architects Inc., 2010 ONCA 887, 104 O.R. (3d) 689, at para. 23, Laskin J. A. observed that the overriding objective is to achieve a result that balances the interests of the parties and takes account of the public's interest in the timely resolution of disputes. The four Reid factors provide a structured approach to achieving this result.
[52] In applying the contextual approach, delay is only one factor, and it is not necessarily determinative.
[53] The Court's concern is primarily with the rights of the litigants, not with the conduct of their counsel (except where the lawyer's conduct is deliberate rather than inadvertent). Even conduct that may be "negligent" or "bordering on negligent" may still be found to be not deliberate.
[54] While each of the factors are important, prejudice or the lack thereof is a key consideration, and the prejudice in question is not the prejudice inherent in facing an action, but the prejudice of reviving the action or because of steps taken after the dismissal.
[55] As set out above, there was significant activity in this litigation over the first three years of its existence, during the period when Mr. Turkienicz had carriage of the file. There were multiple Motions and related attendances at Motion Scheduling Court, sustained negotiations regarding the Billing Claims directly with Sam, and as evidenced by the consent adjournments, a shared understanding that the efforts directed at the ultimately successful resolution of the Billings Claim was an appropriate course. These discussions were protracted initially because Sam had to deliver the accounts which were to form the basis of the material and later due to Sam's multiple changes in counsel.
VII. Approach to Re-instatement Motions
[56] My approach to law can be found in my decision in C.O. Capital Growth Inc. v. Miller, 2018 ONSC 7. Subsequently an appeal was subsequently taken from my decision where I refused to set aside the Registrar's administrative dismissal of their action on February 24, 2014. While the present matter was under reserve, Justice Conway dealt with an appeal from my approach and decision in that case as a final order that may be appealed to a single judge of the Divisional Court pursuant to s. 19(1)(c) of the Courts of Justice Act, R.S.O. 1990, c. C.43. Her decision is reported at 2018 ONSC 7126.
[57] In her reasons Justice Conway observes in part:
16 The Master conducted a detailed review of the history of the various proceedings, including the OSC, receivership, consumer proposal, discipline and disability proceedings. He noted that the history was complex, that he was not going to review every step taken, that he had reviewed all of the evidence, and that he selected "a few of the key elements to focus upon, in detail, as I regard them as particularly relevant in determining not to restore a multimillion dollar claim that has been administratively dismissed." He recognized that this was one of the relatively rare cases where there was no reasonable justification to set aside a Registrar's dismissal order and that the circumstances in this case were "far from ordinary."
17 The Master focused on two primary factors. First, after reviewing the history of the Appellants' involvement in the various proceedings arising out of the Ponzi scheme, he found that the Appellants' explanation for the delay in this action was neither "acceptable" nor "reasonable" nor "satisfactory". He noted that the OSC, in its settlement with the Appellants, had contemplated that the Appellants would actively pursue this litigation. The Master commented that the Appellants' allowing this action to lie dormant for years was "somewhat bewildering." He rejected the submission that the Appellants' involvement in other litigation or personal affairs was a sufficient explanation for taking no active steps to move an action forward, citing Gravelle v. Denis Grigoras Law Office, 2013 ONCA 339, at para. 4, and Faris v. Eftimovski, 2013 ONCA 360, at paras. 46 and 50.
18 He found that the Appellants had “entirely failed to exhibit any due diligence in moving this action forward.” The Master observed that the Appellants had little financial incentive to pursue the action on behalf of the investors. He noted that they had no real monetary stake in the action, no likelihood of ever sharing in any recovery, and no obligation to fund the litigation.
[58] Her reasons addressed the question of the extent and type of prejudice in that case:
19 Second, the Master found that Peter Welsh had suffered significant prejudice by changing his legal position on the basis that this action had been dismissed…. His uncontradicted evidence, accepted by the Master, was that he would not have settled the Amato action if this action had not been dismissed, as the settlement depleted the insurance that would have been available to cover his defence costs in this action.
20 The Master did not make any findings of actual prejudice with respect to the other Respondents. However, he noted that the Appellants had maintained this action suspended over the Respondents' heads for over seven years, quoting the following comments of Sharpe J.A. in 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544:
Another harm that flows from delay, properly relied on by the status hearing judge, is that it leaves the litigant with the claim hanging over its head in a kind of perpetual limbo. Fairness requires allowing parties to plan their lives on the assumption that, barring exceptional or unusual circumstances, litigation time lines will be enforced. “Litigants are entitled to have their disputes resolved quickly so that they can get on with their lives” and “delay multiplies costs and breeds frustration and unfairness” [citations removed].
[59] The application of the test requires a contextual approach. The court does not require the plaintiff to satisfy each of the four Scaini factors. Rather, the court must consider and weigh all relevant factors to determine the order that is just. The overriding objective is to achieve a result that balances the interests of the parties and takes account of the public's interest in the timely resolution of disputes.
[60] Ultimately Justice Conway observed:
28 The Master was well aware that this was a motion to reinstate an action following a Registrar's administrative dismissal order. He specifically noted that this was one of those rare cases in which there was no justification to set aside an administrative dismissal order.
[61] The present case is another close call, which side should prevail?
VIII. Conclusion
[62] Having considered the elements of this case I return to Churchill’s now 80 year old description of the situation in Europe, a month after WW II commenced. How is the present conundrum to be resolved?
[63] I see no sense in creating yet another potential case within a case within another related action flowing from the failure to set the action down on a timely basis.
[64] Who made what errors with what consequence? Should anyone be held liable for the Registrar’s automatic dismissal of the present action?
[65] What is the value of a chance to have a chance to perhaps prove a recoverable loss?
[66] My variation of this Enigma is to restore this action to active status on a tight timetable.
[67] If either side misses another deadline, without the other side’s acquiesce, I would be inclined to dismiss the action, without costs either way.
[68] I am therefore setting aside the Registrar’s dismissal and directing the parties to agree on a timetable that will see this case set down for trial before December 31, 2019, which I am hereby establishing as the new set down date for this case. I will be available to manage and assist with that process, if necessary.
[69] Neither side pressed this component of the action forward with any alacrity. They both share the responsibility of letting the case languish.
[70] I am therefore restoring the action and (unless a meaningful offer to settle the motion was made) with no costs being awarded to either side.
[71] I wish to express my gratitude to both counsel for their comprehensive and helpful submissions.
Released: February 21, 2019,
DS/ R266 Master D. E. Short