COURT FILE NO.: CV-14-515261
DATE: 2019/10/16
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Tarion Warranty Corporation v. Dunhill Development Corporation et al.
BEFORE: Master A. Graham HEARD: October 15, 2019
APPEARANCES: M. Owsiany, for the plaintiff (moving parties)
P. Mitchell, for the defendants
ENDORSEMENT
(Motion for a status hearing)
[1] The plaintiff Tarion’s claim arises from the construction of a condominium building by the defendant Dunhill Development Corporation in Barrie, Ontario between 2001 and 2003. Upon being informed of various deficiencies in the construction, Dunhill conducted remedial work until 2010, when it was informed that its proposed solution to a recurring parking garage water penetration issue was unacceptable, and that further repair access to the premises would be refused. Tarion then resolved the condominium’s warranty claims and sought reimbursement from the defendant Dunhill and the balance of the defendants, being Dunhill’s guarantors.
[2] This action was commenced by issuance of a notice of action on October 30, 2014 and the statement of claim was filed on November 28, 2014. The administrative deadline for setting the action down for trial is October 30, 2019. The plaintiff now brings this motion as a status hearing under sub-rules 48.14(5)-(7) on which it seeks first, to show cause why the action should not be dismissed for delay and second, a timetable for the completion of the remaining steps necessary to have the action set down for trial.
[3] On the issue of whether a plaintiff has or has not shown cause as to why an action should not be dismissed for delay, the plaintiff relies on the summary of the law in Cedrom-Sni Inc. v. Meltwater Holding, 2017 ONSC 3387:
The onus is on the plaintiff to demonstrate why the action should not be dismissed for delay. The test requires the plaintiff to demonstrate that there was an acceptable explanation for the delay and establish that, if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice. (See: Khan v. Sun Life Assurance Co. of Canada, 2011 ONCA 650, and Faris v. Eftimovski, 2013 ONCA 360, [2013] O.J. No. 2551 at para. 32)
The test is conjunctive, not disjunctive. Even if the plaintiff can provide a satisfactory explanation for the delay, the action will be dismissed if there would be prejudice to the defendant. And if the plaintiff is not able to provide a satisfactory explanation for the delay, it is still open to the court to dismiss the action, even if there is no proof of actual prejudice to the defendant. (See: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 at para. 33)
The responsibility to move the action along lies chiefly with the plaintiff. (See: Faris, supra, at para. 33) However, the conduct of a defendant is also a factor to be considered in determining whether the action should be dismissed for delay or allowed to proceed. (See: Carioca’s Import & Export Inc. v. Canadian Pacific Railway, 2015 ONCA 592 at para. 53)
The possible dismissal of an action for delay involves a careful balancing between the interests of the parties and society in timely and efficient justice on one hand and in the resolution of disputes on their merits, on the other. (See: Kara v. Arnold, 2014 ONCA 871 at para. 9)
There is little to be gained in debating whether there is a bright line between the “contextual approach” applicable to motions to set aside registrar’s dismissal orders (per Scaini v. Prochinicki, 2007 ONCA 63 at para. 23) and the approach taken in Faris, supra to status hearings. In considering the reasonableness of any explanation for delay, the status hearing court will almost invariably engage in a weighing of all relevant factors in order to reach a just result. (See: Kara, supra, at para. 13)
It is reasonable to approach the plaintiff’s explanation for the delay in an action on the basis that “the longer the delay, the more cogent the explanation must be”. (See: Kara, supra at para. 17)
Settlement discussions can constitute a reasonable explanation for litigation delay. A party should not be penalized for not pursuing the costly steps of litigation while engaged in a settlement process that was ultimately unsuccessful. (See: Apotex Inc. v. Relle, 2012 ONSC 3291 at paras. 7, 50 and 51)
The prejudice at issue is to the defendant’s ability to defend the action as a result of the plaintiff’s delay, not as a result of the sheer passage of time. (See: MDM Plastics Ltd. v. Vincor International Inc., 2015 ONCA 28 and Carioca’s Import & Export Inc., supra at para. 57)
A defendant’s lack of display of any sense of urgency undercuts any claim of actual prejudice. (See: Aguas v. Rivard Estate, 2011 ONCA 494 at para. 19 and H. B. Fuller Co. v. Rogers, 2015 ONCA 173 at para. 42)
[4] Based on the case law, the issue on this status hearing is whether the plaintiff can both provide an acceptable explanation for the delay in the action and establish that, if the action were to proceed, the defendant would suffer no non-compensable prejudice.
Evidence re: the chronology of the action
[5] As in any case requiring a consideration of the delay in an action, a review of the chronology of the action is necessary to determine whether the plaintiff can provide a reasonable explanation for the delay.
[6] As stated above, Tarion’s action was commenced by issuance of its notice of action on October 30, 2014 and the statement of claim was filed on November 28, 2014. Subsequent events in the action occurred as follows:
December 22, 2014: Counsel for the defendants advised of his retainer and requested particulars of the dates of relevant complaints and the nature of repairs conducted.
February 11, 2015: Counsel for the defendants made a further request for particulars.
February 16, 2015: Counsel for Tarion provided defendants’ counsel with nine documents in response to the request for particulars. On February 17, 2015, the defendants’ counsel responded that the documents did not provide the particulars requested, and Tarion’s counsel agreed to provide them.
April 16, 2015: Counsel for the defendants made a further request for particulars.
August 6, 2015: Counsel for the defendants again wrote to Tarion’s counsel to enquire as to the status of the matter.
June 9, 2016: Counsel for Tarion sent defendants’ counsel a draft affidavit of documents. (This was the first communication from Tarion’s counsel since February 16, 2015, 16 months previously.)
June 10, 2016: Counsel for the defendants informed Tarion’s counsel that the affidavit of documents did not include the documents that he had requested and again asked for them.
June 20, 2016: Counsel for Tarion replied that he was having a student “look into any gaps between what you requested and what we provided”. He also enquired as to whether “your clients [i.e. the defendants] can now be stirred to start assembling their defence(s)”.
May 29, 2017: Following a communication from Tarion’s counsel on an unrelated matter, defendants’ counsel wrote to him to enquire as to the status of this matter and received a pleasant but completely unresponsive answer.
August 22, 2017: Counsel for the defendants sent Tarion’s counsel another follow-up email and received an automated response stating that the message could not be delivered. Defendants’ counsel then followed up with two other lawyers at Tarion to inform them that his message to counsel of record could not be delivered.
August 28, 2017: Another Tarion lawyer informed the defendants’ counsel that she had assumed carriage of the matter and that Tarion intended to move forward with the action.
December 15, 2017: Tarion’s current counsel informed the defendants’ counsel that he was assuming carriage of the matter and enquired what further particulars the defendants required. The defendants’ counsel replied on December 20, 2017 that he required copies of the notices of claim submitted by “the condo” (i.e. the property owner for which the defendants did the construction), which had not been included in the draft affidavit of documents.
January 23, 2018: Tarion’s counsel provided the defendants’ counsel with the relevant claim documentation.
February 16, 2018: The defendants’ counsel informed Tarion’s counsel that he would “have a defence to you shortly on this one for all the Defendants”.
August 20 and 21, 2018: The defendants’ counsel again requested particulars of when the subject condominium made the complaints that were the subject of Tarion’s claim and the substance of those complaints, acknowledging (August 21, 2018) that he should have followed up earlier, after receiving some other documents.
August 30, 2018: Tarion’s counsel provided a chart enumerating the invoices that were the subject of Tarion’s claim.
September 24, 2018: After a further exchange of correspondence, the defendants’ counsel stated that he would serve his defence within the coming week.
October 3, 2018: The defendants (except Georgian International Ltd. which has since been noted in default) served their statement of defence. On October 31, 2018, the defendants’ counsel informed Tarion that this pleading could not be filed because the court file had been sent to storage and payment of a fee was required to retrieve it.
January 15, 2019: The defendants’ counsel enquired of Tarion’s counsel whether the file had been received from storage. Counsel then squabbled between themselves as to who should pay the fee for retrieving the file. On January 17, 2019, counsel for Tarion agreed to order the file.
February 6, 2019: The defendants filed their statement of defence and crossclaim.
May 6, 2019: Tarion’s counsel proposed scheduling examinations for discovery in August or September, 2019. On May 9, 2019, the defendants’ counsel agreed to August 21-23 for examinations.
July 4, 2019: Tarion’s counsel, with service of their notice of examination for discovery, proposed a timetable for further steps in the action extending the deadline for setting the action down for trial from October 30, 2019 to October 29, 2022. On July 9, 2019, the defendants’ counsel replied that they would not excuse Tarion from compliance with rule 48, being the obligation to set the action down for trial within five years of commencing the action, and would therefore not consent to the timetable.
July 19, 2019: Tarion’s counsel proposed dates in mid-August for a status hearing motion. On July 23, 2019, Tarion’s counsel stated that it would make sense to “figure out the administrative dismissal issue” before examinations to save the cost of examinations if the case were to be dismissed. Counsel then argued about whether the motion could be completed before the scheduled dates for examinations, given the possibility of cross-examination on affidavits. On July 25, 2019, Tarion’s counsel stated that “discovery does not make sense if you are pushing for an administrative dismissal 60 days or so later, and he would cancel the scheduled discovery dates once the court confirmed the motion date. Examinations were never held.
August 15, 2019: Tarion’s counsel served the motion record for this motion.
Evidence re: prejudice
[7] Based on the case law reviewed above, the onus is on the plaintiff to demonstrate that there would be no prejudice to the defendants if the action were permitted to proceed. The fact that the plaintiff bears this onus means that the delay is presumed to be prejudicial to the defendants’ ability to defend the action. The plaintiff may rebut this presumption through evidence regarding the availability of relevant documents and key witnesses.
[8] The evidence with respect to the issue of prejudice in Tarion’s supporting affidavit is that Warren Northcott, who was Tarion’s Warranty Services Representative responsible for making the warranty decisions at issue in this proceeding, and instructing the contractors who were responsible for the repairs flowing from those warranty decisions, is willing to attend on Tarion’s behalf as their witness at examinations for discovery.
[9] Tarion’s affiant also states that Morrison Hershfield, the engineering firm retained by Tarion to oversee the project in question, is still active and operating in Ontario.
[10] Tarion’s affiant also reviews the current corporate profile reports for the various defendants and deposes that those corporations are all active and all have the same officers as in October 2013, so those various witnesses for the defendants would be available.
Have the plaintiffs provided an acceptable explanation for the litigation delay?
[11] The period between the issuing of the notice of action on October 30, 2014 and the service of Tarion’s motion record for this status hearing on August 15, 2019 is 4 years, 9.5 months and on this status hearing, the plaintiffs are required to explain this delay. A delay of this length requires a cogent explanation (Kara v. Arnold, supra).
[12] The first period of delay to consider is the more than three years between December, 2014 when counsel for the defendants requested certain particulars of Tarion’s claim, and January, 2018 when Tarion’s counsel provided the defendants’ counsel with what appeared at that time to be a sufficient response. During this period, Tarion’s counsel’s communication to the defendants’ counsel was limited to:
providing some documents (February 16, 2015) which the defendants’ counsel immediately replied did not contain the requested information;
sending a draft affidavit of documents (16 months later on June 9, 2016);
stating that he would have a student look into any deficiencies in documents disclosed (June 20, 2016);
informing the defendants’ counsel that another lawyer had assumed carriage of the matter (14 months later on August 28, 2017);
informing the defendants’ counsel that Tarion’s current counsel was assuming carriage of the matter and enquiring what further particulars were required (4 months later on December 15, 2017), and providing the documentation (January 23, 2018, more than three years after particulars were first requested).
[13] Tarion’s counsel submitted that the defendants’ requests for particulars of the condominium’s claims to Tarion were somehow unwarranted and that accordingly, any delay arising from Tarion’s failure to respond to these requests was somehow the defendants’ fault. The problem with this submission is that Tarion’s former counsel, in responding to the requests for additional documentation, at no time suggested that the documents requested were unnecessary or irrelevant. When faced with the defendants’ requests, Tarion’s counsel was obliged either to respond promptly or to state why no additional particulars were required; they did neither.
[14] Most noteworthy in this period between December, 2014 and January, 2018 are the two periods of 16 months and 14 months during which Tarion’s counsel did absolutely nothing to advance the action. Any steps taken during this three year period consisted of incomplete efforts to respond to an apparently straightforward request for details regarding the details of the condominium’s claims to Tarion which are the basis of Tarion’s claims against the defendants. This delay of three years is therefore essentially unexplained.
[15] In February, 2018, the defendants’ counsel stated that he was satisfied with the further documentation provided and that he would serve a statement of defence shortly. He then did nothing for a further six months, until August, 2018 when he requested further details as to the timing of the condominium’s claims. The defendants are responsible for this delay.
[16] Tarion’s counsel promptly responded to the most recent request for particulars, on August 30, 2018. The defendants’ counsel then served their statement of defence on October 3, 2018, following which the matter was delayed because they could not file it owing to the file having been sent to storage. The dispute between counsel as to who should be responsible for retrieving the file was not resolved until January 17, 2019 when Tarion’s counsel agreed to order the file.
[17] As I stated to Tarion’s counsel at the hearing, the fact that the defendants were not able to file their statement of defence following service on October 3, 2018 was no reason for the action to stall at that point. The defendants had committed to their position in a pleading, and the obstacle faced in filing that pleading in no way prevented the parties from proceeding with the exchange of sworn affidavits of documents and conducting examinations for discovery. Given the initial three year delay on the part of Tarion, one would have thought that Tarion’s counsel would have displayed more urgency in moving the action forward.
[18] Similarly, however, once the defendants’ counsel had served their statement of defence, both parties had a positive obligation under rule 30.03 to serve sworn affidavits of documents and neither party did so. The 3.5 month delay between the service of the statement of defence on October 3, 2018, and Tarion’s counsel’s agreement to pay to retrieve the court file on January 17, 2019 is therefore the responsibility of both counsel.
[19] Despite the delay in the defendants filing their statement of defence, Tarion’s counsel did not see fit to take the initiative to arrange examinations for discovery until another 3.5 months later, on May 6, 2019. This delay on the part of Tarion militates against any submission that they were attempting to move the matter forward expeditiously, particularly given that the action would be vulnerable to dismissal less than six months later, on the fifth anniversary of the commencement of the action. Tarion did not see fit to address this looming deadline until July 4, 2019, less than four months before the deadline. Although there is a dispute as to which party was responsible for cancelling the examinations for discovery, the defendants’ counsel stated (July 23, 2019) that he had no particular desire to postpone the examinations, informed Tarion’s counsel that “that is your call” (whether or not to cancel examinations), and that he was happy to proceed as scheduled (on August 21-23, 2019). Ultimately, Tarion’s counsel cancelled the examinations for discovery so that this motion could be resolved before any costs were incurred by conducting examinations.
[20] With respect to the delay in scheduling examinations for discovery, the responsibility for advancing the action lies chiefly with the plaintiff, and Tarion’s delay in this regard seems consistent with its desultory approach to the action for the bulk of the time since its inception. The delay in arranging and conducting examinations for discovery is primarily the responsibility of the Tarion.
[21] I conclude that, of the 4 years and 9.5 months between the commencement of the action and the bringing of this motion, the plaintiff has not provided an acceptable explanation for the three years of delay between December, 2014 and January, 2018, and approximately another six months of delay between February and August, 2019. The defendants are responsible for the six months of delay between February 16 and August 20, 2018, and the remaining delay between October, 2018 and January, 2019 can be attributed to both parties.
[22] Not all delay in an action is fatal to the plaintiff’s ability to proceed with it. However, the 5 years permitted under rule 48.14 should be ample for a plaintiff to prepare all but the most complex cases to be set down for trial. Tarion’s failure to explain a total delay of at least 3.5 of these 5 years therefore warrants the dismissal of the action.
Have the plaintiffs established that, if the action were allowed to proceed, the defendants would suffer no non-compensable prejudice?
[23] Although Tarion’s failure to explain their lengthy delay is a sufficient basis for dismissal of the action, I will also address the issue of prejudice. The defendants have not provided any evidence of actual prejudice arising from the delay in the matter but submit that the plaintiff has failed to rebut the presumption of prejudice that arises from its onus on this motion. Tarion submits that it has provided sufficient evidence that documents have been preserved and that key witnesses are available to rebut the presumption of prejudice, and that in the absence of evidence of actual prejudice from the defendants, they have met this branch of the test.
[24] There is no evidence from Tarion that it has preserved all of its relevant documents and therefore, it has not rebutted the presumption of prejudice with respect to the availability of documents.
[25] With respect to the availability of key witnesses, Tarion has provided uncontradicted evidence that the principals of the various corporate defendants continue to be associated with those corporations. Further, Warren Northcott, who was Tarion’s Warranty Services Representative responsible for making the warranty decisions at issue, is available and willing to be their discovery witness.
[26] Tarion has also provided evidence that their engineering firm Morrison Hershfield is still active and operating in Ontario. However, the fact that this engineering firm is still operating does not assist Tarion on the issue of prejudice. Tarion has not addressed whether the engineering witnesses from this firm, who would presumably have assessed the alleged deficiencies in Dunhill’s work and approved any necessary remedial work, are available. Further, Tarion’s claim is based on the cost of remedial work required as a result of Dunhill’s allegedly deficient work, and there is no evidence as to the availability of any of the contractors who would have performed such work.
[27] A fair trial would require that all relevant documents be available and that the defendants be able to cross-examine any engineering and contracting witnesses who were involved in assessing and remediating any alleged deficiencies in Dunhill’s work. In failing to provide evidence that all relevant documents are available and that these key witnesses are still available, Tarion has failed to establish that there would be no prejudice to the defendants if this action were to proceed. In the absence of any evidence whatsoever on these issues, it is impossible to determine whether any such lack of documentary evidence or availability of witnesses arose from or independently of any delay in the action. Tarion has therefore failed to meet its onus to establish that there would be no prejudice to the defendants if the action were to proceed.
Decision
[28] I conclude that Tarion has failed to both provide an acceptable explanation for the delay in the action and establish that, if the action were to proceed, the defendant would suffer no non-compensable prejudice. Tarion has therefore failed to show cause why the action should not be dismissed for delay and the action is hereby dismissed for delay under rule 48.14(7)(a).
Costs. The defendants’ counsel filed a costs outline seeking partial indemnity costs of the motion of $8,408.02, including HST and disbursements. These costs are based on a partial indemnity rate of $245.00, which is very reasonable for counsel called to the bar in 1990. The total of 27 hours plus counsel fee for the hearing is reasonable, when compared with the total of 27.5 hours in Tarion’s counsel’s outline. The plaintiff shall pay the defendants their costs of the status hearing fixed at $8,408.02, and their costs of the action after assessment by an assessment officer.
MASTER A. GRAHAM
DATE: October 16, 2019