Court File and Parties

COURT FILE NO.: CV-13-0197-000 DATE: 2019-06-20

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

PERHOL CONSTRUCTION LTD. R. Clinker, agent for R. Johansen, for the Plaintiff Plaintiff

- and -

1698358 ONTARIO LTD. o/a “ALOFT INTERNATIONAL”, ESTATE OF DONALD WING T. Rhaintre, for the Defendants Defendants

HEARD: March 20, 2019, at Thunder Bay, Ontario Madam Justice T. J. Nieckarz

Decision On Motion

Overview

[1] The Plaintiff, Perhol Construction Ltd. (“Perhol”) claims payment from the Defendants of the sum of $450,000 plus interest, on account of a debt allegedly owed to it by the Defendants, and which the Defendants have failed to repay. Default Judgment was obtained against the Defendants in the amount of $505,627.40 plus post-judgment interest at the rate of 8% per annum, plus costs of $467.75.

[2] 1698358 Ontario Ltd., operating as Aloft International (“Aloft”) has gone bankrupt since the Judgment was obtained.

[3] Pursuant to the Order of the Honourable Madam Justice H. Pierce dated November 7, 2013, Default Judgment was set aside as against the Defendant, the Estate of Donald Wing (the “Estate”) only.

[4] The Estate acknowledges that the money was loaned by Perhol, but claims that the loan was to Aloft alone. The Estate denies any personal liability for the debt of Aloft. Perhol’s only hope of recovery of the funds is if it can demonstrate that the Estate has liability for the debt.

[5] On June 21, 2018 the action was dismissed by the local registrar for delay pursuant to Rule 48.14.

[6] Perhol moves to set aside the administrative dismissal. The Estate denies that the relief should be granted on the basis that:

a) Setting aside the dismissal for delay, and reviving the claim will cause prejudice to the Estate; and b) The action has little prospect of success.

[7] For the reasons that follow, I find that the dismissal should be set aside and the action revived.

Facts

The Loan:

[8] Kenneth Perrier (“Perrier”) and Donald Wing (“Wing”) were cousins and friends.

[9] Perrier is an officer and director of Perhol. Wing was a shareholder of Aloft.

[10] Between January 20, 2012, and May 14, 2012, Perhol wrote six cheques to Aloft in the total amount of $450,000.

[11] Perhol alleges that the amounts paid to Aloft was a loan for which both Aloft and Wing agreed to be responsible.

[12] There is no written documentation evidencing the parties to the loan or the repayment terms.

[13] Perhol alleges that despite demands for payment, the Defendants failed to repay the loan.

Procedural History:

[14] On June 17, 2013, Perhol commenced the within action to recover the loan amount as against Aloft and Wing.

[15] On the same day a proceeding was commenced against the same Defendants by Patti Perrier and Kenneth Perrier for the sum of $150,000 that the Perriers allege they personally loaned to the Defendants.

[16] Wing passed away suddenly on July 8, 2013.

[17] No steps were taken by the Defendants to defend the action.

[18] As indicated above, Default Judgment was granted on July 19, 2013 for the full amount of the claim, pre-judgment interest, post-judgment interest and costs.

[19] On November 7, 2013 when the Default Judgment was set aside as against Wing on consent, the Plaintiff also brought a motion to amend the Statement of Claim to remove Wing as a defendant and substitute the Estate. The Amended Statement of Claim was issued on consent, on November 27, 2013.

[20] The Statement of Defence of the Estate was filed on November 13, 2013. The Estate denied any liability on the part of the Estate for the debt of Aloft. The Estate denied that Wing had in any way obligated himself to repay the loan, or that he had guaranteed payment on behalf of Aloft.

[21] The Estate alleges that there were three significant periods of delay in the litigation.

First Period of Delay:

[22] The first period of delay is from the close of pleadings in December of 2013 until April of 2015. The Estate alleges that Perhol did nothing to advance the litigation during this period of time.

[23] Perhol acknowledges that there was no progress in the litigation during this time, but states that it was primarily for compassionate reasons so as to permit the Estate Trustee, Gwen Dubois-Wing, who is also the widowed spouse of Wing, to get the affairs of the Estate in order before pushing forward with the action. Aloft also made an assignment in bankruptcy during this time, and some time was necessary to ascertain whether any recovery could be made through the insolvency proceedings.

[24] On February 8, 2015 email correspondence was sent from the lawyer for Perhol to the lawyer for the Estate, in which an Affidavit of Documents was requested from the Estate. Perhol also sought to set up dates for Examinations for Discovery in March of 2015.

[25] The Estate claims that in response to this email it requested from the Plaintiff corroborating evidence of Wing’s liability for the debt, as required by s. 13 of the Evidence Act, R.S.O. 1990, c.E.23.

[26] On April 9, 2015 Perhol served its Affidavit of Documents. A complete copy of the Affidavit of Documents, along with all Schedule “A” documents was later served on April 15, 2015.

[27] Roderick Johansen, lawyer for Perhol deposes in his affidavit sworn August 3, 2018 that despite multiple requests for the Affidavit of Documents of the Estate over the next year, none was forthcoming.

Second Period of Delay:

[28] The Estate alleges that it heard nothing from Perhol’s counsel for an 11 month period from April of 2015 until March 7, 2016 when email correspondence was received requesting the Affidavit of Documents of the Estate once again.

[29] No Affidavit of Documents was delivered, and on April 28, 2016 a motion was brought by the Plaintiff to compel production and to set dates for an Examination for Discovery.

[30] Pursuant to the Order of the Honourable Mr. Justice Shaw, dated April 28, 2016 the Estate was required to:

a) Deliver an affidavit of documents within 30 days of the Order; b) Agree to, and schedule examinations for discovery within 30 days of the Order; and; c) Pay costs in the amount of $125.00.

[31] A “draft” affidavit of documents was provided by the Estate on May 30, 2016.

Third Period of Delay:

[32] The Estate alleges that from June of 2016 until April of 2017 a third year passed with no progress in the litigation. Perhol did not propose a litigation timetable and did not conduct examinations for discovery of the Estate Trustee.

[33] Perhol alleges that this is not the case, and that any delay was the fault of the Estate. Specifically, Perhol alleges that examinations for discovery were confirmed with the lawyer for the Estate for July 7, 2016. A Notice of Examination was served, but the Estate Trustee failed to attend. A Certificate of Non-Attendance was obtained.

[34] The Estate Trustee denies any knowledge of the date scheduled, and denies having received the Notice of Examination.

[35] In April 2017, a second motion was brought by Perhol to compel the attendance of the Estate Trustee at Examinations for Discovery, and for a sworn Affidavit of Documents.

[36] The Order of the Honourable Madam Justice Warkentin, dated May 11, 2017 required the Estate to:

a) Deliver a sworn affidavit of documents on or before July 31, 2017; b) Attend examinations for discovery on or before July 31, 2017; and c) Pay costs in the amount of $375.00 forthwith.

Fourth Period of Delay:

[37] The Estate alleges that following motion in May of 2017 Perhol took no further action to pursue the claim until after receipt of the Registrar’s dismissal order.

[38] Perhol does not deny that this was the case. Subsequent to the making of the May 2017 Order, Mr. Daniel Matson of the Plaintiffs’ counsel’s office, and who was assisting Mr. Johansen with this file was suspended from practice. Mr. Johansen deposed that the scope of failure of Mr. Matson to perform as a lawyer was overwhelming, and resulted in Mr. Johansen having to shut down his practice for the summer while he could review all of Mr. Matson’s files, as required by the Law Society of Ontario and provide reports. Mr. Johansen described the devastation to his own practice that lasted well beyond the summer months, and his own inadvertence as a result of having to deal with the fallout of Mr. Matson’s issues. The failure to diarize this file was part of that inadvertence.

[39] In the meantime, Mr. Michael Harris of the Estate’s counsel’s office, and who had carriage of the file for the Estate, ceased practicing. The Affidavit of Documents was not produced and the Examinations for Discovery did not occur. The litigation was stalled, on both sides, once again.

[40] Mr. Johansen and Perrier depose that Perhol always intended to pursue the action, and that it was only through inadvertence that it was not pursued and the dismissal order issued.

Analysis:

[41] The sole issue to be determined is whether the Order made by the Registrar pursuant to s. 48.14 should be set aside.

The Legal Framework:

[42] Rule 48.14(10) of the Rules of Civil Procedure provides that the dismissal of an action under Rule 48.14(1) may be set aside under rule 37.14.

[43] Rule 37.14(c) of the Rules provides that any party who is affected by an order of a registrar may move to have that order set aside.

[44] The proper legal test for restoring an action was confirmed recently by the Ontario Court of Appeal in Stokker v. Storoschuk, 2018 CarswellOnt 2, 2018 ONCA 2, [2018 O.J. No. 6, 140 O.R. (3d) 473 at para. 4. The Plaintiff must demonstrate the following:

a) That there is an acceptable explanation for the delay in the litigation; and b) That if the action was allowed to proceed, the defendant would suffer no non-compensable prejudice.

[45] In conducting the conjunctive test set out in Stokker v. Storoschuk, the courts may still also look to the well-known “Reid” factors [see Reid v. Dow Corning Corp., 2001 CarswellOnt 2213, [2001] O.J. No. 2365, [2001] O.T.C. 459, 105 A.C.W.S. (3d) 649 at para. 41 (reversed on other grounds], which are:

a) The explanation of the litigation delay; b) The inadvertence in missing the deadline to set the matter down for trial; c) Whether the motion was brought promptly; and d) Whether there has been any prejudice to the defendant.

H.B. Fuller Co. v. Rogers, 2015 ONCA 173, 2015 CarswellOnt 3337 at paras. 22-24.

[46] The Plaintiff need not satisfy each of the four criteria in order to be successful in setting aside the dismissal order. While the four Reid factors are the primary ones, there may be other relevant factors in a particular case that need to be taken into consideration. Overall the court is to weigh and consider all relevant factors to balance the interests of the parties and determine an order that is just in the circumstances: Scaini v. Prochnicki, (2007) ONCA 63, 2007 CarswellOnt 408, 2007 ONCA 63, [2007] O.J. No. 299 at paras. 23-24; Finlay v. Paassen (2010) ONCA 204, 2010 CarswellOnt 1543, 2010 ONCA 204, [2010] O.J. No. 1097, 101 O.R. (3d) 390 at para. 27.

[47] There are two competing policy considerations in motions of this nature. The first is that civil actions should be decided on their merits, while the second is that civil actions should be resolved in a timely and efficient manner: H.B. Fuller Co. v. Rogers, at para. 25.

[48] The Ontario Court of Appeal has favored deciding matters on their merits rather than terminating rights on procedural grounds. This is particularly the case where delay results from an error committed by counsel: H.B. Fuller Co. v. Rogers, at paras. 26-27.

[49] Having said this, the court must consider the rights of all of the litigants. This requires a determination of not only the plaintiff’s right to have an action determined on its merits, but consideration of whether any non-compensable prejudice has been suffered by the defendant. The court must consider whether or not a fair trial remains possible despite the delay. This is not, however, the end of the inquiry. Even if a fair trial is possible, consideration must be given to whether the principle of finality and the defendant’s reliance on the plaintiff’s failure to pursue the action should prevail: H.B. Fuller Co. v. Rogers, at para. 28.

Discussion:

[50] With these key principles in mind, I turn now to their application to this case.

[51] The parties do not dispute that the motion was brought promptly. I will therefore turn to the contested factors.

Explanation for the Delay:

[52] This first factor requires Perhol to adequately explain the delay in the progress of the litigation from the institution of the action until the missed deadline for setting the action down for trial.

[53] Perhol must satisfy the court that steps were being taken to advance the litigation towards trial, and if they were not, to explain why. If the failure to proceed with the action was a deliberate decision, then the motion to set aside the dismissal must fail: Reid v. Dow Corning Corp. at para. 41; Marché d’Alimentation Denis Thériault Ltée v. Giant Tiger Stores Ltd., 2007 ONCA 695, 2007 CarswellOnt 6522, [2007] O.J. No. 3872 at para. 12.

[54] There has been a lengthy delay in the resolution of an otherwise simple claim. Having said this, based on the evidence before me, it would appear that both parties were equally culpable in much of the delay.

[55] With respect to the “first period of delay”, I find that given the circumstances surrounding the death of Wing and the bankruptcy of Aloft, the delay from December 2013 to April 2015 cannot be said to be unreasonable. While the Estate points out that it did not ask Perhol to delay the litigation, the reasons for doing so were reasonable. Leaving aside the compassionate reasons, it also made sense in the context of the issues in this litigation for Perhol to ascertain the extent to which it was possible to realize upon its judgment against Aloft before continuing the claim against the Estate. Once it was clear that recovery would not be forthcoming, in February of 2015 Perhol made the demand for an Affidavit of Documents and suggested dates for Examinations for Discovery to move the action forward. Perhol delivered its Affidavit of Documents and awaited that of the Estate, which was not forthcoming.

[56] The second period of delay is alleged by the Estate to be between April of 2015 following the delivery of the Plaintiff’s Affidavit of Documents, and March of 2016 when a further request was made for the Estate’s Affidavit of Documents. The Estate argues that this period of delay signaled to it that Perhol was not pursuing the action.

[57] While I agree with the Estate that there is no evidence that the Plaintiff took active steps to pursue the claim during this period of time, the fact remains that it was the Estate that had an outstanding obligation preventing the litigation from moving forward. It does not strike me as just that the Estate should be able to rely upon its own inaction as the basis to deny Perhol the ability to have its claim determined on the merits. Ultimately Perhol brought the necessary motion, which signaled its intention to proceed with the action.

[58] Similarly with respect to the third period of delay. Pursuant to the April 2016 order of Justice Shaw, an Affidavit of Documents was to be delivered by the Estate within 30 days and examinations for discovery scheduled. Only a draft Affidavit of Documents was provided by the Estate, and examinations of the Estate Trustee scheduled for July 2016 did not proceed. I appreciate that there is conflicting evidence as to the reason, but the fact remains that there was a court order that had not been complied with.

[59] This necessitated the Plaintiff having to bring a further motion to obtain the same Order in May of 2017. I acknowledge that Perhol was not diligent in bringing this motion, but the fact remains that it shouldn’t have been necessary at all, had the Order of Justice Shaw been complied with.

[60] With respect to the fourth period of delay, it would appear that the circumstances surrounding both the departure of Mr. Matson and Mr. Harris from their respective firms significantly impacted the ability of this litigation to move forward. This is unfortunate for the litigants, as resolution of their matter was delayed even further, and ultimately resulted in the dismissal for delay.

[61] Overall, it is the evidence of Perrier that Perhol always intended for the action to proceed. Perrier had a long standing relationship with Mr. Johansen both as business colleagues and in a lawyer/client capacity. Perrier trusted that his matter was being attended to appropriately. While it is clear that more could have been done by the Plaintiff to move this matter forward and to follow up with counsel, given the nature of the relationship between counsel and Perrier, Perrier’s inaction is satisfactorily explained.

[62] In considering the delay, Perhol correctly points out that the Estate’s conduct is also to be considered. The Estate must also accept some responsibility for the delay. The Estate argues that it simply adopted a cost conservative approach to the litigation, sitting back and waiting to see if Perhol pursued the action rather than incurring legal fees by following up with the Plaintiff.

[63] The fact is that two motions had to be brought during the conduct of this matter in an effort to compel the Estate to satisfy its obligations under the Rules of Civil Procedure. There are two court orders that still have not been complied with. Had the Estate not had outstanding obligations during the periods complained of, it may have been in a better position on this motion to argue that its cost conservative approach was appropriate, and that the Plaintiff’s inaction caused it to believe that the action was not proceeding.

Inadvertence:

[64] The Plaintiff personally, or through its lawyer, must lead satisfactory evidence to satisfy the court that the timeline for setting the action down for trial was missed through inadvertence. I find that the Plaintiff has done so.

[65] The relevant principles were summarized by van Rensburg, J.A. in para. 31 of Chrisjohn v. Riley Estate, 2015 ONCA 713, 2015 CarswellOnt 16237:

31 In Finlay v. Van Paassen, 2010 ONCA 204, 101 O.R. (3d) 390 (Ont. C.A.), Laskin J.A. noted, at para. 33, that on a motion to set aside a dismissal order, the court should be concerned primarily with the rights of the litigants, not with the conduct of their counsel. In Marché, at para. 28, Sharpe J.A. observed: “The law will not ordinarily allow an innocent client to suffer the irrevocable loss of the right to proceed by reason of the inadvertence of his or her solicitor.” Sharpe J.A. went on to recognize that the situation may be different where the lawyer’s conduct is not inadvertent but deliberate.

[66] As explained above, in the year immediately preceding the dismissal order, the Johansen firm was in a state of chaos as a result of issues pertaining to Mr. Matson. Mr. Johansen has acknowledged that neither Mr. Matson nor he properly diarized the file for the fifth anniversary of the commencement of the action. Given the lack of diarization and the chaos caused to his firm with respect to issues pertaining to Mr. Matson, Mr. Johansen overlooked the file, and missed the deadline for either filing a litigation timetable or setting the action for trial.

[67] There is no evidence to support the allegation of the Estate that the deadline was not inadvertently missed, but rather actively and strategically avoided. There is no evidence as to any strategic benefit to the Plaintiff of delaying the resolution of this action.

Prejudice:

[68] As van Rensburg J.A. noted in para. 36 of Chrisjohn v. Riley Estate, on a motion to set aside a dismissal for delay, the question of prejudice is a key, if not the key consideration.

[69] The relevant prejudice is to the Estate’s ability to defend the action that would arise from steps taken following dismissal or which would result from the restoration of the action.

[70] There is a presumption of prejudice to the Defendant arising from the delay. Perhol has the onus of rebutting the presumption by convincing the court that the Estate has not demonstrated any significant prejudice: Reid v. Dow Corning Corp. at para. 41; Madisen v. Nindon Investments Ltd. (2015), ONSC 3786, 2015 ONSC 3786, 2015 CarswellOnt 9274, 126 O.R. (3d) 611 (Ont. S.C.J.) at para. 46.

[71] Once the Plaintiff has satisfied the onus placed on it, the Defendant must show evidence of actual prejudice: Madisen v. Nindon Investments Ltd., at para. 46.

[72] While I acknowledge the inherent prejudice resulting from delay of resolving an action, I agree with Perhol that the Estate has not demonstrated any significant prejudice. As Perhol notes, the Estate does not allege that any documents have been lost or witnesses have become unavailable as a result of the delay.

[73] The Estate argues that it has suffered prejudice as a result of the delay in this matter as follows:

a) In the summer of 2017 Mr. Harris, counsel for the Estate ceased to practice law. Had this matter been pursued by the Plaintiff with diligence, the Estate would not be faced with a change in counsel, albeit at the same firm. b) The Estate Trustee continues to suffer from considerable mental anguish as a result of the lack of resolution of these proceedings. She has filed correspondence from her physician confirming that she is suffering from depression and that the lack of resolution of these proceedings is a contributing factor.

[74] From a review of the evidence it would appear that Mr. Harris’ departure from his firm was sudden and unexpected. There is no evidence that Mr. Harris’ departure has negatively impacted the Estate’s ability to defend the claim.

[75] With respect to the mental anguish of the Estate Trustee, I understand her argument to be that the lack of finality in this matter continues her to experience a significant amount of stress and anxiety that has contributed to her depression since the death of her husband. I am sympathetic to the plight of the Estate Trustee, particularly given the sudden passing of her husband and having had to deal with these unresolved issues in the years following his death. However, I do not find that this alleged prejudice is sufficient to prevent this action from being determined on the merits.

[76] As counsel for Perhol argued, unfortunately the Estate Trustee must still deal with the companion action commenced by the Perriers. Litigation unfortunately will not be at an end for Ms. Wing if this motion is not granted. The companion action deals with very similar issues and allegations.

[77] In considering the question of prejudice I cannot disregard the contribution of the Defendant to the delay in this case.

Merits:

[78] In balancing the interests of the parties the Estate urges me to consider the merits of the case and their argument that Perhol’s claim against the Estate is devoid of merit. Therefore, there is no prejudice to the Plaintiff in not permitting it to pursue its claim on the merits.

[79] I concur with counsel for Perhol that effectively the Estate seeks summary judgment. The evidentiary record in this matter is insufficient for me to make that determination, even if it were appropriate for me to do so.

Order:

[80] In light of the foregoing the Plaintiff’s motion is granted, the dismissal order is hereby set aside and the action is revived.

[81] This litigation is, however, long in the tooth and the parties need to have a resolution. It is ordered that:

1. The Estate shall serve on the Plaintiffs a sworn Affidavit of Documents no later than July 15, 2019.
2. Examinations for discovery in this matter shall be scheduled and completed no later than August 30, 2019.
3. The parties shall discuss and agree upon a litigation timetable for the remaining steps in the matter and for trial. If they are unable to agree then they may take out an appointment before me to resolve this issue.

Costs:

[82] While the Plaintiff was successful in this motion, I note that the motion was necessitated by the Plaintiff’s inadvertence. Despite the Estate’s lack of success in this motion, it was reasonable for it to defend the motion in an attempt to conclude the action. There shall be no costs of this motion.

“Original signed by” The Honourable Madam Justice T.J. Nieckarz Released: June 20, 2019