Court File and Parties

COURT FILE NO.: C-72-13 DATE: 2019-02-20 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: LONDON ECO-ROOF MANUFACTURING INC., Plaintiff/Defendant by Counterclaim AND: SOUTH RIVER DEVELOPMENTS LTD., Defendant/Plaintiff by Counterclaim

BEFORE: D.A. Broad

COUNSEL: Jeremy A. Forrest, for the Plaintiff Robert J. Maki, for the Defendant

HEARD: February 14, 2019

Endorsement

Background

[1] The plaintiff registered a Claim for Lien pursuant to the Construction Lien Act in the sum of $28,581.78 against a parcel of land registered in the name of the defendant, South River Developments Ltd. (the “defendant’s land”), on December 13, 2012. The plaintiff commenced an action by Statement of Claim issued on January 25, 2013 and registered a Certificate of Action against the title to the defendant’s land. The plaintiff registered a discharge of its lien on March 6, 2013.

[2] The defendant, South River Developments Ltd. (“South River”), delivered a Statement of Defence and Counterclaim on October 4, 2013. The Counterclaim named Les Holdway (“Holdway”) as a plaintiff to the counterclaim along with South River (together the “plaintiffs by counterclaim”). The Counterclaim claimed damages against the plaintiff in an unspecified amount on the basis of an alleged improper registration and maintenance of the Claim for Lien.

[3] On January 23, 2015 the plaintiff set the action down for trial within the two-year period provided for in the Construction Lien Act.

[4] On October 6, 2015 the plaintiffs by counterclaim filed an amended Statement of Defence and Counterclaim in which it specified damages of its counterclaim of $15 million for “loss of opportunity in connection with the failure of these parties’ business enterprise.”

[5] On October 6, 2015 a pre-trial was held before Justice Sloan.

[6] The plaintiff delivered its affidavit of documents on July 7, 2017.

[7] On August 29, 2017 a second pre-trial took place before Justice Taylor who adjourned the pretrial to October 24, 2017 and directed the plaintiffs by counterclaim to serve and file a pre-trial conference memorandum no later than October 20, 2017. They did not do so.

[8] At the third pre-trial on October 24, 2017, Justice Taylor ordered the plaintiffs by counterclaim to “deliver an affidavit of documents on or before November 30, 2017 and ordered further that the case be placed on the September 10, 2018 trial sittings peremptory to the plaintiffs by counterclaim and that a pre-trial conference be scheduled after completion of examination for discovery by the plaintiff and before September 1, 2018.

[9] The plaintiffs by counterclaim did not serve an affidavit of documents on the plaintiff as ordered by Justice Taylor on October 24, 2017. They consequently were not examined for discovery and the action and counterclaim were not tried in the September 2018 sittings as ordered.

[10] On September 4, 2018 the proceeding was adjourned to the January 28, 2019 trial sittings.

[11] On January 3, 2019 the plaintiff served the subject motion seeking an order striking the Statement of Defence of South River and dismissing the Counterclaim of the plaintiffs by counterclaim in reliance on rule 60.12, or alternatively rule 30.08, of the Rules of Civil Procedure.

[12] The plaintiffs by counterclaim served an affidavit of documents on February 4, 2019.

[13] The plaintiffs’ by counterclaim affidavit of documents had been sworn by Holdway on December 7, 2017. Schedule A to the affidavit of documents lists ten documents in the possession, control or power of South River that it does not object to producing for inspection, three of which comprise the construction lien, certificate of action and discharge of construction lien of the plaintiff.

Position of the Plaintiff

[14] The plaintiff submits that the order of Justice Taylor requiring the plaintiffs by counterclaim to deliver an affidavit of documents on or before November 30, 2017 was peremptory on them since it represented a necessary pre-trial step, along with the examination for discovery of the plaintiffs by counterclaim, to be completed prior to the trial at the September 10, 2018 trial sittings stated to be peremptory on the plaintiffs by counterclaim.

[15] The plaintiff points to the case of Jourdain v. Ontario, 2008 ONSC 22130, [2008] O.J. No. 1868 (S.C.J.) at para. 12 as setting forth the factors to be considered by the court on a motion arising out of a failure to comply with a peremptory order, namely:

1. An unless order is an order of last resort. It is not made unless there is a history of failure to comply with other orders. It is the party's last chance to put his case in order.
2. Because that was his last chance, a failure to comply will ordinarily result in the sanction being imposed.
3. This sanction is a necessary forensic weapon which the broader interests of the administration of justice require to be deployed unless the most compelling reason is advanced to exempt his failure.
4. It seems axiomatic that if a party intentionally or deliberately (if the synonym is preferred), flouts the order then he can expect no mercy.
5. A sufficient exoneration will almost inevitably require that he satisfies the court that something beyond his control has caused his failure to comply with the order.
6. The judge exercises his judicial discretion in deciding whether or not to excuse. A discretion judicially exercised on the facts and circumstances of each case on its own merits depends on the circumstances of that case; at the core is service to justice.
7. The interests of justice require that justice be shown to the injured party for the procedural inefficiencies caused the twin scourges of delay and wasted costs. The public interest in the administration of justice to contain those two blights upon it also weigh very heavily. Any injustice to the defaulting party, though never to be ignored, comes a long way behind the other two.

[16] The plaintiff also points to the following very useful observations of Gray, J. in the case of Broniek-Harren v. Osborne [2008] O.J. No. 1690 (S.C.J.) at paras. 28-29:

The policy underlying the Rules of Civil Procedure is twofold: to ensure that cases that are not settled are tried on their merits; and to ensure that cases are processed, and heard, in an orderly way. A civilized society must ensure that a credible system of justice is in place, and the Rules of Civil Procedure, made pursuant to the Courts of Justice Act, reflect the scheme created by the Province for the orderly handling of civil cases.

The Rules reflect a balance. The litigant does not have an untrammelled right to have his or her case heard. In order to be heard, a case must be processed in accordance with the Rules. By the same token, adherence to the Rules must not be slavish in all circumstances. They are, after all, designed to ensure that cases are heard. Throughout the Rules, the principle is reflected that strict compliance may be dispensed with where the interests of justice require it: see, for example, Rules 1.04(1), 2.01, 2.03, 3.02, and 26.01. The difficult issue, in any particular case, is to determine when non-compliance reaches the point that it can no longer be excused. The Court, and society as a whole, have an interest in ensuring that the system remains viable. If the Rules can be ignored with impunity, they might as well not exist.

(underlining added)

[17] The plaintiff also cited the following cases as supportive of the proposition that the effective administration of justice requires sanctions to be imposed for failure by a party to comply with court orders:

Bottan v. Vroom, [2001] O.J. No. 2737 (S.C.J.) at paras. 25 and 26; DLE Consulting Inc. v. Graham, 2016 ONCA 315 (C.A.) at para. 3; Eloro Resources Ltd. v. Sovereign Capital Group (Ont.) Ltd., 2004 ONSC 14047, [2004] O.J. No. 387 (Master) at para. 6; Vacca v. Banks, [2005] O.J. No. 148 (Div. Ct.) at para. 24-27.

[18] In Vacca, Ferrier, J. (sitting as a single judge of the Divisional Court) observed:

There comes a time when this Court is obliged to meet its responsibility for the effective administration of justice through case management by dismissing an action. Such is the case when the plaintiff repeatedly fails to comply with orders of the court whether or not there has been prejudice to the defendants.

Position of the Plaintiffs by Counterclaim

[19] The plaintiffs by counterclaim point to the case of Glass v. 618717 Ontario Inc., 2011 ONSC 2810 (S.C.J.), in which D.M. Brown, J. (as he then was) stated as follows at para. 36 in the context of a motion by the plaintiffs for an order striking out the defendants’ pleadings for failure to produce material documents in a timely fashion and to provide a supplementary affidavit of documents:

The case law submitted by the parties makes two points. First, in exercising its discretion under Rule 30.08(2) a court must consider the seriousness of any breach and the prejudice such a breach may cause to the innocent party's right to a fair hearing. Second, as stated by Wein J. in Newlove v. Moderco Inc., 2002 CarswellOnt 3720 (Ont. S.C.J.), at para. 2: "the draconian measures set out in Rule 30.08(2)(b) can only be used, in my view, in exceptional circumstances" or, as put by Lane J. in Breslin v. Breslin [2006 CarswellOnt 6372 (Ont. Div. Ct.)], at para 9: the "interlocutory dismissal of an action is a remedy of last resort, to be invoked when the litigant has shown a cavalier disregard of his obligations". I agree with those statements of the law.

[20] It is noted that Glass did not involve the failure to comply with a court order, but rather a failure to comply with the Rules of Civil Procedure respecting documentary production. However, the Breslin case referred to by Justice Brown was concerned with non-compliance by the plaintiff with a court order.

[21] In Richardson v. Cuddy, 2017 ONSC 3186 Master Mills, in a case involving a motion to set aside a Registrar’s dismissal order, made reference at para. 5, to the Court of Appeal’s decision in H.B. Fuller Company v. Rogers (Rogers Law Office), 2015 ONCA 173 (C.A.) wherein the Court considered the countervailing policies of deciding actions on their merits but in a manner that is timely and efficient so as to ensure that public confidence in the administration of justice is maintained, noting that the bias must always favour resolving disputes on their merits. The Court of Appeal stated at para. 26, quoting from the earlier case of 1196158 Ontario Inc. v. 6274013 Canada Ltd. 2012 ONCA 544 (C.A.):

Procedural rules are the servants of justice not its master… We should strive to avoid a purely formalistic and mechanical application of timelines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits.

[22] The Court of Appeal in H.B. Fuller went on to observe that “the court's preference for deciding matters on their merits is all the more pronounced where delay results from an error committed by counsel.” This point is relevant in the case at bar in which it is clear that Holdway, on his own behalf and on behalf of the corporate defendant, intended to deliver an affidavit of documents in early December, 2017. He deposed in his affidavit sworn February 10, 2019 in response to the plaintiff’s motion that he met with his counsel on December 7, 2017 to complete the affidavit of documents and he instructed counsel to serve the affidavit of documents immediately thereafter. He deposed further that “I have only recently realized that the affidavit of documents was not served properly.” It is evident that the failure to serve the sworn affidavit of documents resulted from an error by the defendants’ lawyer. Indeed, Mr. Maki in submissions, acknowledged that he initiated steps to have the affidavit of documents served and assumed that it had been when it had not.

Discussion

[23] As Gray, J. noted in Broniek-Harren, there are two important policies underlying the Rules of Civil Procedure, namely the policy directed towards ensuring that cases are tried on their merits on the one hand, and the policy directed towards ensuring that cases are processed in an orderly, efficient and timely way on the other.

[24] I accept the proposition laid down by the Court of Appeal in 1196158 Ontario Inc. and H.B. Fuller that, in resolving the tension between these two policies, the bias must always favour resolving disputes on their merits. The case law indicates that this bias may be overcome and result in an order striking pleadings or dismissing a claim or counterclaim where the non-compliant party has, by his or her conduct, demonstrated a determination or approach to consider himself or herself not bound by court orders.

[25] In Jourdain, Platana. J., citing Symbol Yachts Ltd. v. Pearson, (1995) 102 F.T.R. 215 (Fed. T.D.), observed that there is a presumption that a party ought not to be allowed to proceed following a breach of a peremptory order and that such conduct is generally considered to be contumelious in nature. “Contumelious” in this context connotes conduct that is scornful, insulting or insolent.

[26] As counsel for the plaintiffs by counterclaim noted, none of the cases cited by the parties in which pleadings were struck for failure to comply with a court order, involved a situation where the order had been complied with by the time the motion was heard by the court.

[27] In my view, the non-compliance of the plaintiffs by counterclaim in the case at bar has not reached the point that it can no longer be excused. Indeed, the defendants intended to comply with Justice Taylor’s order, albeit seven days after the deadline, as evidenced by the affidavit of documents having been sworn by Holdway and instructions given by him to counsel for the plaintiffs by counterclaim to serve it on plaintiff’s counsel.

[28] Moreover, I am not satisfied that Justice Taylor’s order for delivery of an affidavit of documents by November 30, 2017 was clearly peremptory against the plaintiffs by counterclaim. For example, had they delivered their affidavit of documents on December 7, 2017 when the instructions were given (that is 7 days late) and the plaintiff had brought a motion to strike their pleadings, it is doubtful that it would have been appropriate to apply the seven factors from Jourdain.

[29] In my view, an appropriate approach to balancing the competing policies of the Rules was exemplified in the case of Dahoui v. State Farm and Casualty Company, 2015 ONSC 4731 (S.C.J.) in which Maddalena, J., after noting at paras. 19 and 20 that “orders that are made by a court must be complied with, as otherwise the administration of justice may fall into disarray,” and that “a party simply cannot be permitted to continue his or her action without complying with court orders,” ordered that “there will be one last chance order for the plaintiff.”

[30] It is noted that on February 7, 2019 Justice Flynn, in adjourning the plaintiff’s motion, ordered that the plaintiffs by counterclaim pay costs thrown away to the plaintiff forthwith in the sum of $1,500. That amount had not been paid by the time the motion was argued on February 14, 2019.

Disposition

[31] For the reasons set forth above, it is ordered as follows:

(a) The defendant/plaintiffs by counterclaim shall pay the costs ordered by Justice Flynn on February 7, 2019 within ten (10) days of the release of this endorsement;

(b) the defendant/plaintiffs by counterclaim shall produce a representative for examination for discovery by no later than May 31, 2019;

(c) the defendant/plaintiffs by counterclaim shall provide all answers to undertakings and under advisements by no later than August 31, 2019;

(d) any motion for refusals by the defendant/plaintiffs by counterclaim on discovery shall be brought by the plaintiff by October 31, 2019;

(e) a fourth pre-trial of the proceeding shall take place no later than December 31, 2019; and

(f) each of the dates set forth at paragraphs (a), (b), (c) and (e) above is peremptory on the defendant/plaintiffs by counterclaim.

Costs

[32] Given that they are being granted an indulgence, it appears to be appropriate that the defendant/plaintiffs by counterclaim be responsible for the plaintiff’s costs of the motion.

[33] The parties are strongly urged to agree upon costs. If they are unable to do so, the plaintiff may make written submissions as to costs within 14 days of the release of this Endorsement. The defendant/plaintiffs by counterclaim have 10 days after receipt of the plaintiff’s submissions to respond and the plaintiff has a further 5 days to reply. Each parties’ initial written submissions shall not exceed 5 double-spaced pages, exclusive of Offers to Settle, Bills of Costs or Costs Outlines and authorities, while the plaintiff’s reply submissions, if any, shall not exceed 2 double-spaced pages. All submissions shall be forwarded to me at my chambers at 85 Frederick Street, 7th Floor, Kitchener, Ontario N2H 0A7. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.

D.A. Broad Date: February 20, 2019