Court File: CV-13-495081
MOTION HEARD: 20190723
REASONS RELEASED: 20190924
SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN:
10782343 CANADA LIMITED
Plaintiff
and
ST. ANDREW GOLDFIELDS LTD.
Defendant
BEFORE: MASTER D. E. SHORT
COUNSEL: Michael Beeforth & F (416) 863-4592
Matthew Bradley michael.beeforth@dentons.com
-for moving plaintiff matthew.bradley@dentons.com
Adam Chisholm F (416) 865-7048 adam.chisholm@mcmillan.ca - for responding defendant
RELEASED: September 24, 2019
Reasons for Decision
There are strange things done in the midnight sun,
By the men who moil for gold.
The Cremation of Sam McGee,
Robert Service, 1907
I. Overview
[1] This motion arises from an administrative dismissal of this action for delay. The plaintiff failed to obtain an extension of the set down date in this matter, while awaiting the defendant’s agreement to a mediation date, for a number of months.
[2] The plaintiff’s law firm’s tickler system apparently failed to alert counsel to the impending five year anniversary of the matter. In part, this may have flowed from the fact the action was originally commenced on behalf of Kiska Metals Corporation and then, ultimately, assigned to the assigned to the current plaintiff, 10782343 Canada Limited.
[3] The action seeks a declaration that the defendant St. Andrew Goldfields Ltd. (“SAS”) is obliged to pay “net Smelter Return Royalties” pursuant to a Royalty agreement made in 2006 between SAS and an earlier predecessor to Kiska.
[4] “SAS” owns “magnificent pieces of mineral tenure” in the Timmins mining district.
[5] Kiska was amalgamated or otherwise merged or “formed” with Geoinformatics Exploration Inc. (a Yukon company in 2009).
[6] The original Statement of Claim asserts that Geoinformatics was “primarily focused on exploration targeting”. It developed a proprietary technological platform that enabled it to “aggregate and integrate a large amount of disparate geological, geophysical and geochemical data into a simple 3-dimensional database”. This clearly is something of potential value in assessing where to moil in a very different prospecting environment.
[7] On January 5, 2005 SAS entered a royalty agreement relating to Targets “which had characteristics that suggested were desirable places to look for high quality gold.”
[8] The Statement of Claim addresses the initial sections of that agreement in these terms:
Pursuant to section 3 of the Royalty Agreement, Kiska is entitled to receive "Net Smelter Return Royalties" for Ore sales “for as long as any Targets within the East Timmins Project Area are operated as a mine or as a facility from which Ore is extracted by SAS or its Affiliates or any successor in title”. (my emphasis)
Section 2 of the Royalty Agreement establishes Kiska's entitlement to be paid Net Smelter Return Royalties by SAS:
SAS hereby grants to [Kiska] royalty interests over all Targets in the East Timmins Project Area totalling 0.5% of the Net Smelter Returns as defined in clause 1.7 above, realized from within the East Timmins Project Area (the "Net Smelter Return Royalty").
[9] The Statement of Claim asserts that under the agreement the plaintiff is entitled to “0.5% net Smelter Return on any and all net income earned by SAS as a result of the sale of gold ore (“mined from Targets”).
[10] The December 2013 Statement of Claim asserted that $999,315 was owing, at that point, and that royalty obligations were continuing to accrue.
[11] The long term nature of the agreement is reflected in the following interesting provision:
- Perpetuities Savings Clause
The parties do not intend any provision of this Agreement to violate any rule of perpetuities. If the same be found to violate any rule of perpetuities, then the parties intend that the applicable period of vesting shall be limited to the life of those descendents of George Bush, 41st President of the United States, living on the date of this Agreement, plus 21 years.
[12] As is common in the mining industry, various companies come and go and mergers, and acquisitions, are not unusual. Such transactions may seek to have loses from previous unsuccessful mine operations reduce taxes on a new, successful mine’s profits.
[13] In this case the plaintiff was Kiska until Feb. 2018 and then Aurico Canada Royalty Holdings Inc. was the holder of any entitlement and it then apparently transferred its position to 10782343 Canada Limited, the present plaintiff.
[14] Having heard counsel and reviewed the materials filed on this motion, I am satisfied that there is no demonstrated intention to abandon this matter by any of the plaintiffs. It is reasonable for each new “owner” of the claim to take time to assess the status of one of a number of assets that might have been acquired at the time of each takeover.
[15] It is uncontested that CEO to CEO discussing took place in 2014 and 2105 with a view to reaching an amicable settlement.
[16] When those efforts failed, examinations for discovery were held by both sides and there appear to be no outstanding motions regarding undertakings.
[17] The plaintiff delivered its answers to undertakings in April of 2016.
[18] Having heard counsel and reviewed the materials filed on this motion, I am satisfied that there is no demonstrated intention to abandon this matter by any of the plaintiffs. It is reasonable for each new “owner” of the claim to take time to assess the status of one of a number of assets that might have been acquired at the time of each takeover.
[19] It is uncontested that CEO to CEO discussing took place in 2014 and 2105 with a view to reach an amicable settlement.
[20] When those failed, Examinations for discovery were held by both sides and these appear to be no outstanding motions regarding undertakings.
[21] The plaintiff delivered its answers in April of 2016.
[22] The defendant’ failure to answer or give undertakings resulted in Master Pope ordering answers in August of 2016, which resulted in further productions by the plaintiff.
[23] Thereafter, a conflict with a retained expert flowing from information discovered in those productions, meant the plaintiff had to search for, and retain a new expert who in May 2017 identified a further failure of the defendant to produce a number of important “missing” documents, necessary to determine the royalty amounts payable.
[24] After those records were provided by the defendant, the expert’s report was delivered in February of 2018.
[25] These are substantial sums in issue in this case and ultimately it seems to me, that the interpretation of the written agreement will be pivotal to the result.
[26] In August 2018 counsel for the then plaintiff asked for available dates for mediation in October to December 2018.
[27] Under the, then applicable, Rules, the action could not be set down for trial until a mediation was, not only scheduled, but held.
[28] On October 1, 2018 counsel for the defendant wrote to the plaintiff regarding proposed mediation dates. The letter from counsel, with my emphasis added, concluded with:
“I will look into the question of mediators and get back to you”
[29] The May 1, 2019 affidavit of Plaintiff’s counsel reports:
“… SAS never provided any further response and to date has not provided any dates for mediation.”
[30] A Registrar’s Dismissal Order for Delay was issued on February 8, 2019 and received by the plaintiff’s counsel on February 21, 2019 who promptly sought the agreement of the defendant to a consent order setting aside the dismissal.
[31] SAS counsel, after several follow-up requests, responded on March 28, 2019.
[32] I am satisfied that this is an appropriate case to set aside the Registrar’s dismissal.
[33] The delays over the five years seemed to be justified and the delays were contributed to by both sides.
[34] The action was dismissed in the over 6 month period between the August 2018 request for possible mediation dates (where 3 mediators were proposed), through the October 1, 2018 letter to Plaintiff’s counsel which clearly indicated Defendant’s counsel would “reply was made meaningful” up to the February 2019 dismissal.
[35] I note in passing that there were two periods where the “ownership” of the action was changed. Rule 11.01 provides for a stay of an action in such circumstances until an Order to Continue is obtained.
[36] There appears to be no case law that would support a “tolling” of the running of the five year period “from the commencement of the action” but applying Rule 2.01, I do regard understandable cause of delay, as a further indication of the appropriateness of my restoring this action at this time:
2.01 (1) A failure to comply with these rules is an irregularity and does not render a proceeding or a step, document or order in a proceeding a nullity, and the court,
(a) may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters in dispute;
[37] Both counsel provided helpful facta and their arguments helped to form my analysis.
II. Caselaw
[38] This motion arises from an administrative dismissal of this action for delay. To the extent necessary I rely upon rule 1.04 to as authority for my determining the issues before me:
1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.
(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
[39] Generally, the starting point in such cases is Master Dash’s 2001 decision in Reid v Dow Corning Corp, [2001] OJ No 2365, [2001] OTC 459, 11 CPC (5th) 80, 105 ACWS (3d) 649, 2001 CarswellOnt 2213. In that case he observed:
While I agree there must be some balancing of interests, I find, upon review of the caselaw presented to me, that in determining whether to set aside a registrar's order dismissing an action made under rule 48.14(3), a plaintiff must satisfy four criteria. If the plaintiff fails to satisfy any one of these criteria, the registrar's order will stand.
The four criteria to be met are as follows:
Explanation of the Litigation Delay: The plaintiff must adequately explain the delay in the progress of the litigation from the institution of the action until the deadline for setting the action down for trial as set out in the status notice. She must satisfy the court that steps were being taken to advance the litigation toward trial, or if such steps were not taken to explain why. For example the complexities of the case and the number of parties may have required significantly more time to move the action toward trial, or the delay was caused by interlocutory matters or appeals. …
Inadvertence in Missing the Deadline: The plaintiff or her solicitor must lead satisfactory evidence to explain that they always intended to set the action down within the time limit set out in the status notice, or request a status hearing, but failed to do so through inadvertence. In other words the penultimate dismissal order was made as a result of inadvertence.
3.The Motion is Brought Promptly: The plaintiff must demonstrate that she moved forthwith to set aside the dismissal order as soon as the order came to her attention.
4.No Prejudice to the Defendant: The plaintiff must convince the court that the defendants have not demonstrated any significant prejudice in presenting their case at trial as a result of the plaintiff's delay or as a result of steps taken following the dismissal of the action. The court takes note that witnesses' memories generally tend to fade over time and that sometimes it is difficult to locate witnesses or documents. However, to bar the plaintiff from proceeding with her action on the ground of prejudice, the defendant must lead evidence of actual prejudice. This might include evidence of specified documents lost over time, or destroyed following a dismissal, or of specific witnesses who have died, or have disappeared and the defendant has been unable to locate them with due diligence. While litigation is outstanding the defendants must take care to obtain and preserve evidence. (my emphasis)
[40] More recently in MDM Plastics Limited v Vincor International Inc, 124 OR (3d) 420, 2015 ONCA 28; Justice van Rensburg held:
[24] The issue of prejudice "invariably is a key consideration on a motion to set aside a dismissal order": Finlay v. Van Paassen (2010), 101 O.R. (3d) 390, [2010] O.J. No. 1097, 2010 ONCA 204, at para. 28. While an action may be dismissed even in the absence of prejudice (see 1196158 Ontario Inc. v. 6274013 Canada Ltd. (2012), 112 O.R. (3d) 67, [2012] O.J. No. 3877, 2012 ONCA 544, at para. 32), in most cases, the question of prejudice figures largely in determining whether to set aside a dismissal for delay.
[25] The prejudice that the motion judge or master must consider is to the defendant's ability to defend the action that would “[arise] from steps taken following dismissal, or which would result from restoration of the action following the registrar's dismissal": 806480 Ontario Ltd. v. RNG Equipment Inc., [2014] O.J. No. 2979, 2014 ONCA 488, at para. 4.
[26] Judges and masters must balance this prejudice to the defendant against the prejudice to the plaintiff from having the case dismissed: Armstrong v. McCall, 2006 CanLII 17248 (ON CA), [2006] O.J. No. 2055, 28 C.P.C. (6th) 12 (C.A.), at para. 12. As Sharpe J.A. noted in Giant Tiger, at para. 34 [2007 ONCA 695]:
Expeditious justice must be balanced with the public interest in having disputes determined on their merits. Where, despite the delay, the defendant would not be unfairly prejudiced should the matter proceed for resolution on the merits, according the plaintiff an indulgence is generally favoured.
[41] In Giant Tiger (at para. 38) Justice Sharpe J.A. went on to explain that the principle of finality is also relevant to the fourth Reid factor. When an action has been disposed of in a party's favour, “that party's entitlement to rely on the finality principle grows stronger as the years pass”. at some point the interest in finality must trump the opposite party's plea for an indulgence". Sharpe J.A. concluded that, if unlike the present case, there is a significant delay], the security of the legal position obtained by the defendant becomes an important factor to consider”.
[42] The present case has very different factors to consider. In particular there is the fact of the apparent continuing contractual obligations for future royalties.
[43] On these issues I adopt that regard I adopt (without footnotes) these portions of the Plaintiff’s factum:
No Prejudice to SAS
• 107 has the onus of demonstrating that SAS will not suffer significant prejudice to have a fair trial. A defendant's lack of any sense of urgency undercuts a claim of actual prejudice.
• There is no threat of prejudice to SAS if this action proceeds, nor is there any evidence of actual prejudice. The following facts support this conclusion:
(a) this action is only five years old which, in the circumstances, is not an "inordinate delay" giving rise to a presumption of prejudice;
(b) the parties have completed discoveries and all relevant documents have been produced;
(c) SAS received 107's expert report over a year ago and has had ample time to review it and respond;
(d) 107's discovery and expert witness are available to testify, and it appears that SAS's representative from examination for discovery is also available to testify; and
(e) aside from the parties completing mediation, this matter is ready to proceed to trial.
• SAS has also displayed no urgency that would suggest that the time over which this action has proceeded might prejudice SAS' s right to a fair trial. On the contrary, SAS engaged in settlement discussions for 18 months and has not reacted in a timely fashion to many steps during the course of this litigation including, most recently, failing to provide any available dates for mediation.
• Further, as the Superior Court acknowledged in Ampscon Inc. v. Melloul-Blamey Construction Inc., [2018 ONSC 7046] “it also must be observed that counsel for the defendant would have known full well when the five year anniversary of this matter was to occur”. In this case, as in Ampscon, the defendant did not raise this issue or, indeed, raise any concern about purported delay. SAS's complacency undermines any claim of actual prejudice.
[44] I also find persuasive the Plaintiff’s observation regarding the need for a contextual approach:
As the Superior Court recently affirmed, an order dismissing an action for delay is an extreme remedy. Before taking this extraordinary step, the court must be satisfied that the remedy is appropriate and just having regard to all the circumstances.
On a contextual analysis, there is uncontested evidence of 107's unwavering intention to move this action forward to be determined on the merits. Any delays created by counsel for 107 or SAS ought not to negatively impact 107.
[45] My colleague Master Jolley addressed similar issues in Neger v TheStar.com, [2017] OJ No 4839, 2017 ONSC 5585. In addressing the 4th factor regarding any prejudice to the defendant she observed:
The onus is on the plaintiff to rebut the presumption of prejudice in this case. If the plaintiff succeeds in doing so, the defendants may then demonstrate actual prejudice.
The action arises from publications that were disseminated by the defendants in 2011. …
CBC advised that it is now unable to locate one potential witness. The witness has been known to the defendants since their investigation of this story in 2011, so it is clear that at one point the defendants had the witness' contact information. It was admitted that the defendants only recently started looking for this witness. If CBC had not located this witness by 31 December 2016, it is not likely that the intervening 27 days until the action was set down for trial or the 48 days until the dismissal order was issued was the factor that made the witness impossible to find. The prejudice must arise from the delay. This is not to shift responsibility for moving the action forward onto the defendants, but the defendants do have some responsibility for locating witnesses during the currency of the action to preserve needed evidence (Kwik Snaks Ltd. v. Chepil 2017 ONSC 2921 at paragraph 31). I do not agree with the defendants' position that it would have been premature for them to attempt to contact the witness or obtain a witness statement before the matter was set down for trial…
[46] Ultimately in Papp Plastics & Distributing Ltd v Unity Insurance Brokers (Windsor) Ltd, [2018] OJ No 4628, 2018 ONSC 5009; Justice C.F. de Sa addressed the question of what makes a delay unreasonable:
- The Length of the Delay
"Inordinate delay" is measured by reference to the length of time from the commencement of the proceeding to the motion to dismiss. As recognized in Langenecker, most litigation does not move at a quick pace. Some litigation, because of the issues raised and/or the parties involved, will move even more slowly than the average case.
It is safe to say the length of the delay here, which is close to 11 years, is sufficient to be characterized as "inordinate". The fact that the delay exceeds the presumptive guideline set out in rule 48.14 requires the court to engage in an inquiry to satisfy itself that a dismissal would be unjust.
- Reasons for the Delay
50 The requirement that the delay be "inexcusable" requires a determination of the reasons for the delay and an assessment of whether those reasons afford an adequate explanation for the delay. As LaForme J. explained in De Marco (cited in Langenecker) at para. 26, explanations that are "reasonable and cogent" or "sensible and persuasive" will excuse the delay at least to the extent that an order dismissing the action would be inappropriate. In other words, if the delay is understandable when considered in context, it will not be "inexcusable".
In making this assessment, a court must consider the reasonableness of the delay in context, having regard to all the relevant circumstances. Factors which should be considered in assessing the "reasonableness of the delay" include: 1) the actions of the plaintiff; 2) The actions of the defendant; 3) Other circumstances that were beyond the plaintiff's control including court availability; 4) The nature of the proceeding itself and any complexity.
The assessment is not so much a scrutinizing of the relevant time periods with a view to penalizing the plaintiff for specific periods of delay. Rather, it is a contextual assessment which looks at the delay as a whole. As explained in Carioca's Import & Export Inc. v. Canadian Pacific Railway Limited, 2015 ONCA 592 at paras. 45-48 in the context of rule 48.14:
A motion to restore an action to the trial list is not a "blame game", where counsel should be required or encouraged to take a defensive stance and justify their conduct of the litigation on a month-by-month basis. Rather, in assessing whether a plaintiff's explanation for delay is reasonable, a motion judge should consider the overall conduct of the litigation, in the context of local practices, which can vary quite widely between jurisdictions.
[47] In the simplest terms, if the surveys provided by the plaintiffs resulted in drilling for golden locations that had a meaningful gold content, then a royalty ought to be payable. To seek to avoid such a contractual obligation in the present fact situation does not satisfy the goal of having a dispute resolved on the merits.
[48] If the evidence of Glenn Laing was felt to be significant importance, one would have thought that either or both sides would have sought to preserve his evidence at an early stage. Neither side indicated they conducted any form of evidence gathering from him until after the action was dismissed.
[49] While Mr. Laing may not be readily found it seems to me that in this day and age, we are in a world, not of individual miners heading on foot for Dawson City in the Yukon, but of meta-data and electronic search tools that, for a fee, can likely find a businessman such as Mr. Laing somewhere on the Globe.
[50] Robert Service ended his poem about a different mining dispute with an admission:
“I’m not so wise as the lawyer guys…”. I am satisfied with modern search methods, it is probable that modern lawyers will be wise enough to find this individual. Regardless I am satisfied that, in the circumstances of this case, the plaintiff ought not to be denied the restoration of its action because of the unavailability of a contract that contained an “entire agreement” clause.
III. Disposition
[51] Having considered and applied those tests I am satisfied that the Registrar’s dismissal must be set aside, and I so Order.
[52] To move the matter forward I am imposing the following timetable (subject to any other agreements by the parties): Mediation shall be scheduled by October 15 to be held by February 28, 2020. The new set down date shall be April 30, 2020.
[53] Often in such cases costs are denied to the plaintiff as an indulgence is being sought to correct an oversight.
[54] Here I see no practical justification for the Defendant’s opposition to this motion.
[55] I am therefore awarding costs of this motion on a partial indemnity basis to the plaintiff payable in 60 days.
[56] Counsel for Plaintiff shall deliver a cost memo to defendant within 20 days. Defendant will have 20 days to respond. Any Reply shall be compiled with the other submissions and sent as group to Mr. Backes, my ATC.
[57] If nothing is received within 60 days, I will presume the parties have settled the question of costs.
R. 286/DS __________________
Master D.E. Short