COURT FILE NO.: CV-15-529634 DATE: 20190412
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: DAVID SMITH o/a SQUAREFOOT, Plaintiff
- and - HUDSON’S BAY COMPANY and ONTREA INC., Defendants
AND RE: HUDSON’S BAY COMPANY, Plaintiff by counterclaim
- and - DAVID SMITH o/a SQUAREFOOT, Defendant by counterclaim
BEFORE: Master Todd Robinson
COUNSEL: P. Corney, for the defendant / plaintiff by counterclaim, Hudson’s Bay Company R. Piehler, for the plaintiff / defendant by counterclaim
HEARD: April 11, 2019
REASONS FOR DECISION
Overview
[1] Do breaches of procedural orders for trial in a reference under the Construction Act, RSO 1990, c. C.30 warrant dismissal of an action? That is the issue before the court on this motion.
[2] The defendant, Hudson’s Bay Company (“HBC”), moves for an order dismissing the action of the plaintiff, David Smith o/a Squarefoot (“Smith”), for delay and for his breaches of orders made by Master Albert in her Trial Directions #5 dated October 15, 2018 (the “Trial Timetable Order”). Smith opposes dismissal of his action. However, in opposing the motion, Smith has filed no responding materials. There is accordingly no evidence before the court explaining or seeking to justify the reasons behind his breaches of the directions.
[3] After hearing the oral submissions of counsel for each of HBC and Smith, and without condoning Smith’s breaches of court orders, I dismissed HBC’s motion with reasons to follow. These are my reasons for dismissal of the motion.
Background to Motion
[4] This dispute arises out of Smith’s lien claim in the amount of $705,223.90. Smith was a contractor engaged by HBC to supply services and materials regarding the demolition and renovation of various floors in HBC’s leased office premises at 401 Bay Street, Toronto. Smith alleges wrongful termination of the construction contract and claims for unpaid supply of services and materials, including extras, and lost profits. HBC has defended and counterclaims for $250,000 plus a further $66,550 on the basis that Smith breached the contract, was overpaid and delayed the project, all of which resulted in HBC incurring losses and completion costs compensable by Smith. Smith’s action as against the landlord of the premises, ONTREA Inc., has been discontinued. The lien has not been vacated from title.
[5] A judgment of reference was obtained from Justice Lederer on June 1, 2017, referring the action to be heard and decided by a construction master. An order for trial was made on June 2, 2017, resulting in now-retired Master Albert being appointed as the reference master. Prior to her retirement, Master Albert conducted five hearings for directions in this reference (which includes a related subcontractor lien action that has been scheduled for a separate trial).
[6] Following Master Albert’s retirement, I was appointed a case management master to, in part, assume ongoing references that were before her, including this reference. I arranged a further hearing for directions to confirm compliance with Master Albert’s last trial directions, which included the Trial Timetable Order, and trial readiness. That hearing for directions proceeded on March 15, 2019, at which time I formally assumed conduct of the reference by express consent of HBC and implied consent of Smith, who has proceeded without objection to me acting as the new reference master. At the hearing for directions, HBC raised Smith’s breaches of Master Albert’s Trial Timetable Order. In particular, Smith’s breaches of the Trial Timetable Order were as follows:
(a) to answer all undertakings other than the financial analysis of his lost profit claim by October 18, 2018;
(b) to answer undertakings regarding the financial analysis of his lost profit claim by November 9, 2018;
(c) to serve his expert report on the lost profit claim by November 9, 2018;
(d) to serve all sworn affidavits of evidence in chief by November 30, 2018;
(e) to serve any responding and reply affidavits of evidence in chief to HBC’s affidavits by February 1, 2019; and
(f) to serve all witness statements by November 30, 2018, failing which no witness could be called at trial.
[7] Undertakings had originally been ordered answered by August 31, 2018, but Master Albert extended that deadline to October 1, 2018 for both parties. By the time of the hearing for directions on October 15, 2018, it appears that HBC had answered all undertakings (or at least Smith has not taken the position that HBC failed to do so). Smith sought and received a further extension from Master Albert for his undertakings as outlined above.
[8] With respect to trial evidence, Smith’s confirmed witnesses for the trial, as outlined in Master Albert’s Trial Directions #5, were as follows:
(a) Smith himself, whose evidence would be by viva voce testimony in chief;
(b) Peter Moffatt, a site supervisor, whose evidence would be by affidavit evidence in chief;
(c) Arlena Hebert, a representative of the property manager, Ivanhoe-Cambridge, who was to be summonsed and whose evidence would thereby be by viva voce testimony in chief; and
(d) Derek Rotsch, who was expected to be Smith’s expert on accounting for the lost profit claim, whose evidence in chief was to be his expert report.
[9] None of the deadlines in the Trial Timetable Order were met by Smith. Undertakings were not answered, the affidavit evidence of Peter Moffatt and witness statements for Smith and Arlena Hebert were not delivered, and the expert report of Derek Rotsch was not served.
[10] This motion arises from an election provided to HBC at the last hearing for directions in this reference. At that time, HBC sought an immediate dismissal of the action and discharge of the plaintiff’s lien on account of the plaintiff’s non-compliance with the Trial Timetable Order. I declined to do so absent a motion on proper evidence, with Smith being afforded an opportunity to tender proper evidence to explain his defaults and defend against dismissal of his action and discharge of his lien. As the non-defaulting party, HBC was given a choice of proceeding with the trial scheduled to commence on April 9, 2019, at which Smith would be barred from leading evidence that had not been delivered contrary to the Trial Timetable Order, or proceeding with HBC’s proposed motion. In particular, my Trial Directions #6 in this reference provided, in part, as follows:
Since HBC is not in breach of Master Albert’s orders, an election was offered to HBC: either proceed with the trial as scheduled, barring evidence not tendered in compliance with Master Albert’s order (other than the viva voce witnesses) or proceed with a motion to dismiss the claim and discharge the lien. If HBC moves to dismiss the action and discharge the lien, and is successful on that motion, then the trial of the counterclaim would immediately follow. If the motion is unsuccessful, alternative dates for trial in May were agreed with counsel.
[11] As part of my last trial directions, I afforded Smith an opportunity to deliver witness statements in the event that HBC either did not bring this motion or this motion was unsuccessful. Smith delivered witness statements for himself and Arlena Hebert in compliance with those trial directions.
[12] HBC elected to proceed with this motion. Motion materials were delivered by HBC in accordance with my directions. Although I did not waive the requirement for a notice of motion, which is required by Rule 37.01, HBC did not include one in its motion materials. Instead, only a draft order and affidavit were delivered. Counsel for HBC advised that he understood a notice of motion was not required given my prior directions. The draft order seeks only a dismissal of the action and the factum similarly only addresses dismissal. No relief regarding discharge of Smith’s lien was formally sought in the materials. However, at the outset of the hearing, counsel for Smith advised that Smith had offered to voluntarily discharge the lien, but still wanted to pursue the breach of contract action.
Analysis
[13] It was confirmed that HBC moves for dismissal pursuant to Rules 3.04(4) and 24.01(1)(c) of the Rules of Civil Procedure, RRO 1990, Reg 194. Those rules provide as follows:
3.04 (4) If a party fails to comply with a timetable, a judge or case management master may, on any other party’s motion,
(a) stay the party’s proceeding;
(b) dismiss the party’s proceeding or strike out the party’s defence; or
(c) make such other order as is just.
24.01 (1) A defendant who is not in default under these rules or an order of the court may move to have an action dismissed for delay where the plaintiff has failed,
(c) to set the action down for trial within six months after the close of pleadings;
[14] In seeking dismissal, HBC’s submissions focus on Smith’s multiple breaches of the Trial Timetable Order, primarily Smith’s failure to deliver materials for the hybrid trial that was scheduled to have commenced on April 9, 2019. That Trial Timetable Order is characterized by HBC as being a peremptory order, which is significant in HBC’s submissions for why Smith’s breaches warrant dismissal of the action.
[15] The applicable law is not in dispute. The test on a motion to dismiss for delay under Rule 24.01 requires the moving party to satisfy the court that either the plaintiff’s delay is intentional and contumelious or the delay is inexcusable giving rise to a substantial risk that a fair trial might not be possible: Armstrong v. McCall, 2006 ONCA 406, [2006] OJ No 2055 (CA) at para. 11, cited in New Solutions Financial Corporation v. Zilkey, 2011 ONSC 448 at para. 12; Gunderson v. Michon, 2018 ONSC 2800 at para. 14. Although no case law specific only to dismissal under Rule 3.04(4) was provided by either party, they agree that a similar analysis applies to a dismissal for breach of a timetable order. In this case, both counsel agree that a finding of intentional and contumelious conduct is a prerequisite to dismissal under Rule 3.04(4).
[16] Relevant to my analysis is Section 67(3) of the now-former Construction Lien Act, RSO 1990, c. C.30, which provides that the rules of court apply to pleadings and proceedings under the Construction Lien Act except where inconsistent with it. The Construction Lien Act was amended on July 1, 2018 (and subsequently further amended on December 6, 2018), and is now titled the Construction Act. However, the provisions of the legislation as they read on June 29, 2018 continue to apply to this proceeding by operation of the transition provisions in Section 87.3 of the Construction Act. I accordingly refer to the Construction Lien Act.
[17] During oral argument, I asked HBC’s counsel to address how Rule 27.01(1)(c), which permits a defendant to move to dismiss for delay where an action has not been set down within 6 months after the close of pleadings, is reconciled with the statutory requirement in Section 37(1) of the Construction Lien Act that a lien action must be set down within 2 years from commencement of the action. Section 37(1) provides that a lien expires on the second anniversary of the commencement of the action that perfected the lien, unless there is either an order for trial of the action or an action in which the lien may be enforced is set down for trial. I challenged HBC’s counsel to explain how HBC’s motion to dismiss the action for Smith’s failure to set it down for trial within 6 months after close of pleadings was consistent with a statutory provision granting Smith two years to set his action down for trial after issuing the claim.
[18] Neither party had any relevant case law. I am also unaware of any case law addressing a motion under Rule 27.01(1)(c) in a lien action. No compelling argument was made to reconcile the discrepancy that a defendant may be entitled to move to dismiss a lien action (and thereby obtain discharge of a lien, since a lien cannot be proven absent the lien action in which it was perfected) even though the statutory deadline to set down a lien action and prevent expiry of the lien had not yet passed, and may not even be approaching for some time.
[19] In my view, a motion to dismiss for delay under Rule 27.01(1)(c) is inconsistent with the statutory scheme of the Construction Lien Act, particularly the statutorily-prescribed timelines granted to a lien claimant to prevent expiry of its lien. I accordingly find that, pursuant to Section 67(3) of the Construction Lien Act (now Section 50(2) of the Construction Act), relief under Rule 27.01(1)(c) is not available in a lien action, as such relief is inconsistent with the Construction Lien Act.
[20] If I am wrong in that, I would nevertheless find that dismissal under Rule 27.01(1)(c) should not be granted. The court must be in a position to assess the extent and character of delay in the overall proceeding in order to determine if a dismissal under Rule 27.01 is appropriate and just. On the record before me on this motion, there is minimal evidence on the progress of the action, other than the various trial directions of Master Albert. It is accordingly difficult to accurately or fairly gauge the extent to which Smith is responsible for any delays in the progress of the action, if any such delays have been inexcusable, or if defaults have been intentional and contumelious.
[21] On the record before me, I cannot say that the progress of the action has been unduly delayed. Notably, a judgment of reference and order for trial were obtained within 2 years of issuing the claim. All discoveries were completed by mid-2018, following an extension to the discovery schedule granted by Master Albert for the benefit of both parties. There is no evidence suggesting Smith was responsible for delay in examinations proceeding. Undertakings were ordered by August 31, 2018, but that deadline was subsequently extended to October 1, 2018 by Master Albert, again for the benefit of both parties. In under 4 years from commencement of the action, it is ready for trial.
[22] With respect to relief under Rule 3.04(4), HBC’s arguments hinge on its assertion that the Trial Timetable Order was peremptory. Specifically, HBC submits case law supporting that courts have held the failure to comply with a peremptory order gives rise to a presumption that a party ought not to be allowed to proceed and that the breach of a peremptory order is itself contumelious in nature: Jordain v. Ontario, 2008 ONSC 22130, [2008] OJ No 1868 at para. 28; London Eco-Roof Manufacturing Inc. v. South River Developments Ltd., 2019 ONSC 1183 at para. 25. I agreed that, depending on the circumstances and explanation provided, it may be appropriate for the court to sanction, and potentially seriously sanction, intentional or flagrant breaches of peremptory orders. However, I do not agree that the Trial Timetable Order was peremptory.
[23] Except for the fixed trial dates, there is nothing in Master Albert’s Trial Directions #5, including in the Trial Timetable Order, that makes the timetable peremptory. Counsel for HBC rightly acknowledged during oral argument that the only reference to “peremptory” was in respect of the fixed trial dates. However, HBC’s position is that the trial dates being peremptory inherently imported that peremptory nature into the related trial material deadlines. I do not agree. Peremptory orders must be clearly peremptory. It would be unfair to imply a peremptory term where the court has not clearly articulated it. No breach of a court order is acceptable, but courts have tended to view breaches of peremptory orders as being more severe than breaches of non-peremptory orders, as outlined in the case law provided on this motion. For that reason alone, parties should have clear notice of any peremptory term in an order.
[24] HBC suggests that Master Albert’s comments at the hearing for directions on October 15, 2018 clearly confirmed the peremptory nature of her order. HBC relies on the affidavit evidence of Sofia Casinha, a legal assistant with the lawyers for HBC. That affidavit includes an email from Genna Wood, one of HBC’s counsel who attended the October 15, 2018 hearing for directions, which states, “Master Albert was unequivocal at the October 15, 2018 appearance that your clients claim would be dismissed if the timetable was not adhered to.” Ms. Casinha swears to being advised by Ms. Wood, currently on maternity leave, that Ms. Wood believes that Master Albert meant what she is purported to have said at the hearing for directions on October 15, 2018.
[25] The problem with HBC’s evidence on this point is twofold:
(a) First, it is at least double hearsay. The Court of Appeal has expressly held that double hearsay is not compliant with Rule 39.01(4) and is thereby inadmissible in affidavit evidence: Airst v. Airst, [1999] OJ No 5866 (CA). The reasoning behind that holding of the Court of Appeal is apparent from HBC’s evidence. The affidavit from Ms. Casinha advises the court what she has been told by Ms. Wood about what Ms. Wood believes, namely that Master Albert meant she would dismiss the action if the timetable was not complied with. It is not evidence within the direct knowledge of the affiant and, in any event, is highly speculative regarding Master Albert’s true intentions and thereby unreliable evidence. In my view, if a direct affidavit from Ms. Wood was submitted, it would be no less speculative and no more reliable.
(b) Second, if Master Albert meant the timetable to be peremptory (other than the fixed trial dates), then that is not clearly set out in the Trial Timetable Order or elsewhere in her trial directions from that hearing.
[26] I am unable to find that Master Albert intended any dates in the Trial Timetable Order, other than the trial dates, to be peremptory. Accordingly, as the ordered timetable was not peremptory, and Smith did not seek an adjournment of the peremptory trial dates, the case law raised by HBC that breach of a peremptory order is itself contumelious conduct is not applicable.
[27] HBC’s counsel points to the ongoing lack of response from Smith’s counsel to inquiries about whether or not Smith would be complying with the Trial Timetable Order as “quintessential” contumelious behaviour. Contumelious conduct is conduct that is scornful, insulting or insolent: London Eco-Roof Manufacturing Inc. v. South River Developments Ltd., supra at para. 25. While failing to respond to repeated correspondence is certainly discourteous, I do not agree that it rises to the level of contumelious conduct in this case. On the evidence before the court on this motion, I cannot find that the breaches of the Trial Timetable Order were intentional or contumelious.
[28] That, however, does not end the inquiry. The evidence filed by HBC on this motion does support Smith’s ongoing and unexplained breaches of Master Albert’s directions. Court orders are not mere suggestions that litigants may choose to follow if they wish. Rule 3.04(1) permits parties to vary court-ordered timetables by written agreement, unless the timetable order provides otherwise. Smith did not make any request of HBC to vary, extend, suspend or stay the Trial Timetable Order, and there was no agreement by HBC to do so. The evidence supports that Smith simply “went dark” and did not comply.
[29] I agree with HBC that Smith’s disregard of the Trial Timetable Order should not be free from sanction, lest the court may be seen to be condoning such conduct. However, Smith is not free from sanction. In my Trial Directions #6, in which HBC was given the election to bring this motion or proceed to trial, I exercised my discretion to bar evidence that Smith failed to provide in accordance with Master Albert’s orders. I ordered as follows:
I am mindful that matters should generally be determined on their merits and that the lien claim advanced in this proceeding is not insignificant. Other than undertakings, the deadlines set in Master Albert’s trial directions dated October 15, 2018 were the first deadlines set for delivery of expert reports and trial evidence. Nevertheless, the seemingly cavalier attitude of the plaintiff towards disregarding Master Albert’s orders is not unnoticed. Subject to permitting the viva voce witnesses to give evidence as outlined below (provided witness statements are delivered), I am satisfied that is appropriate and just to enforce Master Albert’s order and bar any other evidence from being led at trial that was not served in accordance with Master Albert’s order.
[30] Smith has accordingly been limited to proving his claim through the viva voce evidence of the plaintiff himself and Arlena Hebert, the two witnesses who were always to proceed by viva voce testimony in chief at trial. Smith further cannot rely on information that was not provided in answer to undertakings (consistent with Rule 31.07(2)). Smith was required by my Trial Directions #6 to serve and file witness statements in compliance with the requirements set out by Master Albert by no later than March 26, 2019. Smith complied with that direction.
[31] Dismissing an action is a remedy of last resort: see, for example, Yongten v. CLK Inc., 2010 ONSC 5857 at para. 18. The court does not and should not condone breaches of any court orders, including orders made in the course of directions in a reference. Smith’s breaches of the Trial Timetable Order have not been ignored and are not condoned. However, in all of the circumstances, and taking into account the sanction already ordered, the trial-readiness of this action and the lack of any evidence of prejudice to HBC from the trial proceeding, dismissing this action on the eve of trial would not be a fair or just result. The evidence tendered on this motion does not support intentional and contumelious disregard of the Trial Timetable Order. It is thereby fair and just that the action be disposed of at the pending trial following an assessment of the substantive merits of the claim and counterclaim. The relevance of Smith’s breaches of the Trial Timetable Order is properly to the evidence that may be tendered at trial and to costs following the trial.
[32] Accordingly, HBC’s motion is dismissed. The trial of the action and counterclaim shall accordingly commence on May 10, 2019.
Further Trial Directions
[33] In my Trial Directions #6, I directed that both parties exchange a proposed timetable for delivery of any requested or outstanding materials prior to trial in the event this motion was unsuccessful. Following my oral disposition of the motion, those timetables were reviewed and submissions made as to final trial preparations.
[34] Smith has not brought a motion for leave to deliver answers to undertakings, the affidavit of Peter Moffatt, or the expert report that were not delivered in accordance with the Trial Timetable Order. In neither Smith’s timetable nor the submissions made does Smith argue that my prior directions with respect to the evidence barred from being tendered at trial should be varied. Accordingly, my prior order shall stand such that evidence from unanswered undertakings, the evidence of Peter Moffat, and expert evidence on lost profits shall not be admissible at trial.
[35] HBC asked that I strike Smith’s claim for lost profits. I declined to do so on the basis that there was insufficient evidence before me on which to make that order. Smith may have difficulty proving such a claim absent expert evidence and having apparently failed to answer undertakings relating to financial analysis of his lost profit claim, but it will be up to Smith whether or not to purse that aspect of his claim at trial.
[36] I accordingly make the following orders regarding conduct of the trial:
(a) The trial dates of April 12, 16 and 17, 2019 are hereby vacated and the trial of the action and counterclaim shall proceed for a maximum of five (5) days on May 10 and 14-17, 2019.
(b) Evidence at trial shall be subject to the following directions arising from Smith’s breaches of the Trial Timetable Order:
(i) Smith shall not be permitted to lead any evidence at trial that is the subject matter of unanswered undertakings in accordance with Rule 31.07(2) of the Rules of Civil Procedure, except with leave at trial;
(ii) Smith shall not be entitled to tender Peter Moffatt as a witness at trial;
(iii) Smith shall not be entitled to tender Derek Rotsch or any other expert as a witness at trial; and
(iv) Smith shall be entitled to tender viva voce evidence for himself and Arlena Hebert, subject to the restrictions in paragraph 6(a) of the Trial Timetable Order regarding the witness statements that have been delivered.
(c) The following timetable shall apply to the remaining steps prior to trial, which timetable shall be peremptory as against Smith:
(i) HBC shall serve any additional affidavit evidence required to respond to the witness statements served by Smith by April 26, 2019;
(ii) Document books shall be served by the parties in accordance with paragraph 8 of the Trial Timetable Order, subject to the following revisions:
(1) Document books to be relied upon by either party shall be served by April 26, 2019;
(2) Letters of Objection to authenticity and/or admissibility of documents in a document book received shall be served by May 3, 2019; and
(3) Of the four (4) document books prepared by a party, two (2) shall be filed with the court. The remaining two are for the parties themselves: one shall be served on the opposing party and the other is for reference of the party preparing it. Each party shall bring their own copies of document books prepared and received for reference at trial.
(iii) HBC shall serve and file an enumerated list of Smith’s unanswered undertakings for which HBC maintains evidence cannot be tendered by Smith at trial pursuant to this order by April 26, 2019;
(iv) If Smith has any disputes with or objections to HBC’s list of Smith’s unanswered undertakings, they shall be added to and identified in Smith’s Letter of Objection delivered in accordance with subparagraph (ii)(2) above, but shall be limited to identifying the number(s) in HBC’s list for which Smith has a dispute or objection. No argument is to be included. Argument on any particular item will occur at trial, either as a preliminary matter or in the event of an objection by HBC to evidence tendered by Smith.
(v) If either party intends to rely on case law or legislation (other than the Construction Lien Act or the Rules of Civil Procedure) in legal submissions, then a bound and tabbed book of authorities shall be prepared, served and filed by no later than May 3, 2019;
(vi) Smith shall file a trial brief in accordance with paragraph 9 of the Trial Timetable Order, which brief shall include these reasons for decision, by May 3, 2019; and
(vii) All materials shall be filed with the court, with proof of service, at the 6th Floor, 393 University Avenue, Toronto by May 3, 2019.
(d) The prior directions in this reference as to trial shall otherwise apply except where inconsistent with this order.
(e) This order, which forms part of my procedure book for this reference, is effective without further formality.
Costs
[37] As I advised at the time of my oral dismissal of the motion, costs of the motion will be determined as part of the determination of costs following trial. The parties should be prepared to make submissions as to costs of this motion at that time, including whether or not HBC is entitled to its costs in the circumstances, notwithstanding dismissal of the motion.
Master Todd Robinson
DATE: April 12, 2019