Court File and Parties

COURT FILE NO.: CV-13-482793 MOTION HEARD: 20181127 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Unlimited Motors Inc. c.o.b. Lamborghini Canada and Lamborghini Toronto, Plaintiff AND: Automobili Lamborghini Spa, Defendant

BEFORE: Master P.T.Sugunasiri

COUNSEL: P. Feldman and O. Strawczynski, Counsel for the Plaintiff J. Simpson and S. Brown-Okruhlik, Counsel for the Defendant

HEARD: November 27, 2018

Reasons for Decision on Status Hearing

[1] This action is a business dispute between the Plaintiff in its role as Canada’s exclusive importer and distributor of Lamborghinis, and the Defendant manufacturer. The Plaintiff has allowed the action to lapse, thereby requiring it to show cause as to why the action should continue pursuant to rule 48.14 of the Rules of Civil Procedure (“Rules”).

[2] It is well established that at a status hearing, a plaintiff must provide an acceptable explanation for the delay in advancing the action within the 5 year period permitted by the Rules and demonstrate the absence of non-compensable prejudice to the defendant. [1]

[3] For the reasons that follow, I do not allow the action to continue.

Chronology of Events

[4] The Plaintiff commenced the action by way of Notice of Action issued on June 14, 2013 followed by a Statement of Claim (“Claim”). According to the Claim, the parties’ business relationship began as early as 1990. The Plaintiff entered into a series of distribution agreements to be the exclusive distributor of Lamborghinis in Canada. For many years, the relationship was fruitful until 2008 when Lamborghini vehicles purchased in the United States began to flood the Canadian market, allegedly with the Defendant’s knowledge or consent. The Plaintiff claims $30,000,000 in damages for breach of contract, interference with economic relations, negligent misrepresentation and/or a breach of the Defendant’s common law duty of good faith or statutory duty of fair dealing.

[5] The Plaintiff was served with a Statement of defence and Counterclaim (“Defence and CC) on December 13, 2013.

[6] In April and May of 2014, counsel attempted to settle the CC as against the individually named defendants. In November of 2014 the Defendant advised of its intention to bring a motion for security for costs. It obtained a consent order from Master Abrams dated July 28, 2015. In the meantime, the Plaintiff delivered its Reply and Defence to Counterclaim on March 31, 2015. It also posted security for costs as ordered by her Honour.

[7] Nothing visible happened in the lawsuit again until May 30, 2018 when current counsel for the Plaintiff served his notice of change of lawyers. Behind the scenes, the Plaintiff’s Director Mr. Shammas instructed former counsel to move the action forward in the summer of 2017. Not content with the progress of the action after giving those instructions, he contacted current counsel to review the matter. While he was doing so, in February of 2018, the Plaintiff’s former counsel advised it that the case requires early attention to avoid administrative dismissal in the next three months.

[8] In May of 2018 Mr. Feldman delivered a Notice of Change of Solicitor. On June 11, 2018 he delivered the Plaintiff’s Notice of Motion. June 14, 2018 marked the fifth anniversary of the commencement of the action.

Law and Analysis

Adequate Explanation for the Delay

[9] The principal period that requires explanation is the two and a half years between the delivery of the Reply and Defence to Counterclaim, and this motion. Mr. Shammas, offers three explanations for his delay:

a. In late 2015 and early 2016, Mr. Shammas was involved in other lawsuits and purposely put the within action on hold. It was his understanding that there was no impropriety in temporarily pausing the claim and in fact was encouraged by counsel to focus on the lawsuit involving his Harley Davidson dealership. After a series of defaults including failing to set that action down for trial and failing to pay security for costs, the Harley Davidson action was dismissed on consent in June of 2017. b. In the summer of 2016 Mr. Shammas was diagnosed with Chronic Lymphocytic Leukemia and experienced bouts of gout. c. Mr. Shammas had increased family responsibilities in or around 2016 due to an ailing mother and father living in different countries, and a sick uncle for whom he was the primary caregiver.

[10] Mr. Shammas was cross-examined on these explanations. In my view, he has not demonstrated a causal nexus between his health issues and family responsibilities, and the inability to pursue this action. While they may have been impediments at various points, there is nothing on the record to suggest that illness and family responsibilities precluded him from instructing counsel in this action. My impression from the record is that the main reason for the delay is that he purposely chose to focus his attention and resources on the Harley Davidson matter, apparently on the advice of counsel.

[11] As noted in 3Dogs Real Estate Corporation v XCG Consultants Limited, 2014 ONSC 2251, “in order for the court to determine what is an ‘adequate’ explanation, the totality of the circumstances must be examined having regard to the competing interests at stake and the interests of justice.” [2]

[12] In this case, I find the Plaintiff’s explanation for its delay to be unacceptable. While not every gap must be explained nor does the Plaintiff have to meet the standard of perfection, purposely choosing to hold an action in abeyance in favour of another action is not, in my view, acceptable. It would be different if the Plaintiff had communicated with the defence to make a plan or indicate its intention such that the Defendant could arrange its affairs. Here there was radio silence and it is understandable that the Defendant believed the action to be dead on the vine.

[13] The even greater concern, however, is the prejudice to the parties and to trial fairness.

The Plaintiff has not persuaded me that there is an absence of non-compensable prejudice

[14] The onus is on the Plaintiff to address prejudice and to explain, as best as it can, the absence of non-compensable prejudice to the parties. The Plaintiff is not however expected to speculate about prejudice to a defendant and there can be an evidentiary burden on a defendant to adduce some evidence of prejudice. [3]

[15] Mr. Shammas makes two statements in his affidavit with respect to prejudice:

11. I am aware of no developments since the service of this lawsuit which would impede the fair disposition of this lawsuit. All of the Plaintiff’s available documents have been preserved, and our witnesses including myself and Mr. Seradj are available. Likewise, there is no reason to believe that the Defendant has lost any of the documentary evidence which it ought to have preserved upon being served with this lawsuit.
12. As the Plaintiff always intended to pursue this lawsuit, and as there is no prejudice to the Defendant resulting from the passage of time, I respectfully request that the Court establish a timetable…

[16] This, in my view, is not the type of robust evidence one would expect on a hail mary motion in a $30 million action. If Mr. Shammas relied heavily on his counsel, it is curious that there is no evidence from counsel or someone with knowledge of his case. Much could have been said without violating solicitor and client privilege or litigation privilege to assist the court in assessing prejudice.

[17] On cross-examination, Mr. Shammas indicated the following:

• The primary issue in the lawsuit is the flooding of the Canadian market with vehicles purchased in the U.S.;
• The problem started, or became apparent in 2008;
• There are a lot of witnesses only some of whom he is in touch with;
• One witness has passed away;
• He has not spoken to all of the witnesses;
• He is not aware if anyone has sent document preservations letters including to the Registrar of Imported Vehicles who the Plaintiff relies on to allege that over 300 cars were brought into Canada from the U.S.;
• The Plaintiff’s lawyers have not taken witness statements except former counsel may have spoken to the Plaintiff’s general manager and sales manager in 2013;
• Mr. Shammas has some knowledge of the Defendant’s witnesses but has taken no steps to secure their evidence or identify the names of the purchasers of the vehicles that were brought into Canada. This is up to the Defendant;
• The Plaintiff does not need to know the names of the purchasers because it is the vehicles that matter to the Claim;
• He knows the names and whereabout of a few of the people from the Defendant’s company that he dealt with but has had little to no contact with them; and
• His lawyer has whatever the documents are that relate to the Claim.

[18] Mr. Feldman also indicated at the cross-examination that he is ready to deliver an Affidavit of Documents in short order. This gives some comfort, but in light of Mr. Shammas’ testimony, it is not enough.

[19] In the normal course I would agree with the Plaintiff that the failure of the Defendant to secure its evidence over the years lies at the Defendant’s feet. However, on the record before me, it was perfectly understandable that the Defendant did nothing to secure witness statements because for all intents and purposes it did not look like the case was proceeding. There is no reason to expend money if nothing is happening although at the very least the Defendant should have sent a document preservation letter to any potential custodians of relevant information. I have no evidence from the Defendant that they did this. I discount the Defendant’s prejudice if they have failed to take this step.

[20] Of further the concern is that the paucity of the Plaintiff’s evidence on prejudice may reflect a paucity of the preserved evidence for the action. It is not up to the court to guess at the issue of prejudice. One would think that the Plaintiff would come to this motion armed with cogent evidence to satisfy the Court that there is an absence of non-compensable prejudice and that it is in the interests of justice that the matter proceed.

[21] If documents are indeed in hand, one would have expected a detailed explanation of what documents are available and which witnesses can be reached. Even an explanation of who the Plaintiff’s key witnesses might be or the extent to which the case relies on Mr. Shammas’ own evidence would have been helpful. There is also no explanation as to the role of Mr. Seradj and why he could not have managed the action while Mr. Hammas was focused on Harley Davidson. I observe that if Mr.Shammas is a key witness, it is clear from his cross-examinations transcript that his memory of the underlying events has significantly faded. There is no evidence or submission that this is a paper case that does not turn on memory and documents speak for themselves.

[22] While where possible, actions should be heard on their merits, the Court also has a broader gatekeeping role in ensuring efficient and timely justice. I simply have insufficient evidence to conclude that there is an absence of non-compensable prejudice or that it is in the overall interests of justice to allow this action to continue.

[23] On the contrary, the Plaintiff appears to treat the continuation of the action as a foregone conclusion with the Court merely acting as a rubber stamp. This may have been more the case when actions came up for status hearings after two years from the date of commencement. However, as noted by Justice McLeod in Marrello v Naccarato, 2017 ONSC 757, [4] the new rule 48.14 is more draconian. It gives a plaintiff more leeway to take the necessary steps in the action without the need to run to court for an extension, but as stated by Akbarali, J., the practical reality is that five years of delay will be harder to explain than two. [5] Similarly, I would add that five years of delay gives rise to a greater presumption of prejudice for the Plaintiff to overcome, than two.

[24] The tides have also changed in that the Court is encouraged to exercise a more robust gatekeeping role in moving actions along or disposing of delinquent ones if it is in the interest of justice to do so. This is reflected in part by changes to the rules that allow for greater court intervention in proceedings including acting case management by masters and judges. [6]

[25] The fact that the Defendant has not proceeded with its counterclaim does not alter my conclusion. I accept that Defendant’s argument that in the absence of any progress in this litigation, there was no need for the Defendant to expend time and money addressing an action that appeared dead on the vine.

[26] In conclusion, I simply have insufficient evidence to persuade me that there is an absence of non-compensable prejudice to the Defendant or to trial fairness as a whole. In my view, it would be unjust for this action to proceed based on the thin record before me.

Costs

[27] The parties made costs submissions at the hearing. The Plaintiff does not seek any costs. The Defendant seeks $7111 and provided a cost outline. Having reviewed the outline, and considered counsel’s submissions and the factors set out in r. 57.01 of the Rules of Civil Procedure, the Plaintiff shall pay all-inclusive costs in the amount of $7100 payable within 30 days of today’s date.

Original signed Master P. Tamara Sugunasiri Date: February 28, 2019

[1] 11996158 Ontario Inc v 6274013 Canada Ltd, 2012 ONCA 544 at 32 (“119”); See also Faris v Eftimovski, 2013 ONCA 360 at 11 (“Faris”). [2] 3Dogs Real Estate Corporation v XCG Consultants Limited, 2014 ONSC 2251 at 37 (“3Dogs”). [3] Ibid. at para. 39 citing Kerr v CIBC World Markets Inc., 2013 ONSC 60 and applying Chiarelli v Wiens, 46 OR 3d 780 at 14 (CA). [4] Marrello v Naccarato, 2017 ONSC 757 at 34. [5] Postmedia Network Inc v Meltwater Holding B.V., 2017 ONSC 6036 at 15. [6] Marrello, supra at 35.