COURT FILE NO.: CV-08-354560

MOTION HEARD: January 24, 2019

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Arcadia Participacoes Ltda Plaintiff/Defendant to the Counterclaim (Responding party)

AND:

Alexey Kondratiev, Smart Games Canada, Inc., Defendants/Plaintiffs by Counterclaim (Moving parties)

AND:

Eugene Chayevsky, Adenilton Cezar Xavier, Cadillac Jack, Inc., Finstar Financial Group LLC and Tilley International & Associates Inc., carrying on business as Tilley Entertainment Defendants by Counterclaim (Responding parties)

BEFORE: Master J. Josefo

COUNSEL: M. Wright and G. Cantin, Counsel for the Moving Parties Defendants, Plaintiffs by Counterclaim Email: mwright@cavalluzzo.com & gcantin@cavalluzzo.com

F. Siddiqui, Counsel for the "non-Cadillac Jack" Responding Parties Defendants to the Counterclaim Email: fahad.siddiqui@nortonrosefullbright.com

M. Shapiro, Counsel for the Responding Party, Cadillac Jack, Defendant to the Counterclaim Email: max.shapiro@blakes.com

HEARD: January 24, 2019

REASONS FOR DECISION and Order

[1] This motion involves the Defendants/Plaintiffs by Counterclaim Alexey Kondratiev and Smart Games Canada, Inc., ("moving parties" or "SGC") moving to, inter alia, vary a timetable Order and extend the dismissal deadline of December 31, 2018. This motion was first brought before me on short notice December 18, 2018. Given that short notice, and an insufficient allocation of time (20 minutes) to argue the motion, a motions timetable was agreed upon. This agreement included timelines for the exchange of documents, the cross-examination of Mr. Kondratiev, and the filing of all material by January 22, 2019.

[2] My December 18, 2018 endorsement also confirmed that the Moving Party would adjourn its pleadings motion which had been previously scheduled for January 21, 2019. This motion was argued on the merits on January 24, 2019. The Moving Parties seek the relief described, while the Responding Parties all argue that the current timetable Order made May 15, 2017 by Master Pope should not be extended, with the matter, claim and counterclaim, dismissed.

Brief Overview of This Case

[3] The Moving Parties and the two Responding Parties in the main accept the chronology set out in the factum prepared by Mr. Siddiqui for the "non-Cadillac Jack" respondents. The case involves electronic bingo machines. The Moving Parties in June 2008 filed a Defence and Counterclaim, responding to the litigation initiated by the Plaintiff, Arcadia. The dispute(s) pertained inter alia to the ownership of and revenue derived from the bingo machines. The dispute arises out of matters occurring in 2006 through to 2008.

[4] The litigation over these many years has taken various twists and turns. The Moving Parties in 2009 started a new action which, pursuant to the Order of Master Haberman dated February 28, 2014, was consolidated into the original 2008 action. Certain parties to the 2009 action (Chayevsky, Xavier, Finstar and Tilley) filed their Defence about four years later, in or about October 2013. In the four year interval there were quite a number of pleadings motions and disputes. It is fair to observe that the Moving Parties have often faced an uphill struggle in attempting to amend its pleadings, which have often been struck.

[5] In 2015, yet a third action, which the Moving Parties asserted was a "related action", was commenced pertaining to the bingo machines. On December 21, 2016 this statement of claim was struck out, without leave to amend. The Court of Appeal upheld that decision, save for one paragraph in the claim which was allowed to stand. Yet that paragraph was seemingly not pursued further.

[6] There have been a total of nine what I describe as "timetable Orders". Four of these were made under the 2008 action, two were made pursuant to the 2009 action, while three were made pursuant to the consolidated action. It is not in dispute that each such Order allowed for an extension of time and varied the timetable. The ninth Order, that of Master Pope made May 15, 2017, provided typically that while the timetable itself could be varied by the parties, the set-down deadline could only be varied by Order of the Court. The set-down deadline established in this most recent Order was December 31, 2018.

[7] It is fair to note that the above-noted nine Orders were all on consent. In other words, the prior Court-Ordered "deadlines" I find were not treated as such by any of the litigants. Moreover, it was not only the Moving Parties on this motion who in the past sought extensions. Some motions to extend time were also brought by Arcadia, to which the other parties consented.

[8] It is also fair to observe that, until on or about December 4, 2018, all parties seemed to acquiesce in or even agree to this extraordinarily leisurely pace by which this litigation was conducted. This includes conduct beginning late last summer and into the autumn, when all parties agreed to schedule a motion to allow the herein Moving Parties yet another opportunity to amend their pleadings, to try to add whom they assert are appropriate and related parties (the Responding Parties obviously disagreed with the proposed amendments, which is why a motion was required).

[9] In the voluminous motion record of the non-Cadillac Jack respondents, at tab JJ, there is found a series of emails between counsel (and/or their juniors) involved in this matter. At tab II, there is also found correspondence dated August 29, 2018 from counsel for Cadillac Jack to Mr. Wright, counsel for the herein Moving Parties. That letter of August 29, 2018 takes issue with Mr. Wright's proposed pleading amendments, notes that some of the parties impacted by the proposed amendments are in the USA, and so opines that the pleadings motion which had been mooted for November 2018 was not "realistic". Yet two dates at the end of November were suggested, if proceeding in November was deemed essential. The last paragraph of that letter observes that Cadillac Jack will also be seeking Security for Costs, if the action moves forward as currently pleaded.

[10] The chain of email referenced above at tab JJ follows from the August 29, 2018 letter of counsel for Cadillac Jack. Mr. Shapiro states on October 12, 2018 that he would be available for this pleadings motion under discussion on January 21-24, or January 31, 2019. Also on October 12, Mr. Siddiqui states that he is "only available January 21-24, or January 31, 2019".

[11] In fact, the pleadings motion was scheduled on consent for January 21, 2019. As my December 18, 2019 endorsement confirmed, the Moving Parties were to adjourn it, as this within motion was to be argued a couple of days after the previously scheduled-on-consent pleadings motion.

[12] Thus, notwithstanding that nothing much happened in 2016, 2017, and even 2018 of any substance in advancing the matter (to be fair, over some of this period of time, the parties were addressing issues at the Court of Appeal or elsewhere on pleadings and causes of action), and there were gaps on the part of all parties in this matter over the years, nobody treated any of the prior timetables as Orders of the Court ought to be treated. Namely, with respect for the processes of the Court, to avoid unnecessary delay, and to work to advance matters so cases can be determined on their merits.

[13] Rather, it appears to me, considering this matter holistically, that all the parties got too wrapped up in the individual trees (particular issues on pleadings, etc.) and thus lost sight of the entire forest. They were all seemingly content to carry on, on this non-urgent basis, without regard for the most recent timetable Order and the approaching set-down deadline. It appears to me that this deadline was likely forgotten, given that nobody averted to it in the October 2018 emails or the earlier correspondence when the pleadings motion was being set.

[14] Yet on December 4, 2018, counsel for the non-Cadillac Jack respondents, on receipt of the Moving Parties' motion record for the pleadings motion, did then, for the first time, reference the various timetable Orders, and wrote as follows:

"The statement of claim in the 2009 action was struck multiple times for failure to disclose a cause of action...it was only in July 2013—four years after the 2009 action was commenced—that a viable pleading was finally delivered. ....The third set-down deadline was issued by way of Order of Master Pope on May 15, 2017...the deadline for bringing motions has passed. The combined Action will be dismissed as of December 31, 2018. We therefore consider the matter closed and intend to oppose any attempt to extend the Third Set Down deadline".

[15] Receiving that letter led to Mr. Wright, for the Moving Parties, moving (too) quickly to try to head impending disaster off at the pass. Ultimately, it led to this motion with all Responding Parties adapting in essence the position of Mr. Pasparakis, the writer of the above-excerpted December 4, 2018 letter.

[16] The question for me is, on these facts and in these circumstances, when, as one of the counsel wrote in their factum, is enough, enough? In this case, has the point of no return been reached?

Overview of the Law, and its Application to this Case

[17] Rule 48.14 is applicable in this case. It provides for dismissal for delay when an action, inter alia, has not been set down by the fifth anniversary. Whether one considers this case under that version of the Rule, or prior versions, there is no doubt that the fifth anniversary of the action has been celebrated twice, and counting.

[18] Rule 3.04 also applies. That Rule makes clear that where a party fails to comply with a timetable, the action could be stayed, dismissed, or "such other Order as is just" may be made. Clearly, Rule 3.04 means, and ought to be taken to mean, that timetable extension Orders should not be treated as unimportant by counsel, to be ignored or complied with as they find convenient. Rather, the Rule makes clear that there can and should be consequences for failure to adhere to such "lifelines", as these are often described, extended by the Court.

[19] The Rules are interpreted by the case-law. It can be extrapolated therefrom that the preference in our system of Justice, in order to do justice to the parties in a particular case, is to have matters addressed and disposed of on their merits if such is possible. The goal is not a procedural dismissal, but rather an outcome wherein the facts and law are weighed and addressed, with the trier of fact coming to a conclusion thereon.

[20] Of course, at times it is simply no longer possible to address a case on its facts and merits. Witnesses die, memories fade, documents are lost, and the case has simply sat too long without any steps being taken. It thus becomes too stale to adjudicate. In those cases, the action must be dismissed. This is even more so if such staleness occurs after a Court has already extended one, two, or more lifelines, allowing and exhorting parties to, in essence, "get on with it".

[21] The classic factors from the Reid v. Dow Corning Corp (2001) decision were addressed by counsel, which Mr. Shapiro observed in his factum were recently affirmed by the Court of Appeal in Prescott v. Barbon, 2018 ONCA 504. I apply the "Reid factors", yet I also follow the "contextual approach" as I do so, which contextual approach was indeed approved in Carioca's Import & Export Inc. v. Canadian Pacific Railway Limited, 2015 ONCA 592. Carioca pertained to a matter not restored to the trial list. As a result it was administratively dismissed pursuant to Rule 48.14. In considering whether to restore the matter to the trial list, the Court of Appeal held that "the decision whether to restore an action to the trial list is discretionary". The Court of Appeal further held that if a dismissal of an action would then result, the Court:

...must strike a balance between the need for efficiency and the need for flexibility, such that cases can be tried on the merits where there is a reasonable explanation for non-compliance with the rules [emphasis added].

[22] In this within case, of course, the matter was never struck from the trial-list. The Parties, collectively, always managed to act, on consent, perhaps near the proverbial last minute, to prevent dismissal and to buy yet more time. That was the state of affairs until December 4, 2018, anyway. Yet whether an existing dismissal or the anticipated or likely breach of a timetable Order in missing the set-down deadline, nobody can deny (and Mr. Wright did not try to do so) that the delay in this matter has been significant. Moreover, when considering whether a timetable should be varied, Rule 48.14, and the test pertaining to the setting aside of a dismissal order, applies.

[23] Is there a reasonable explanation for the within delay? Mr. Wright relies on the previously scheduled pleadings motion. That motion is not specifically before me. Yet, I appreciate that the Responding Parties assert it is utterly lacking in viability. However, when that pleadings motion was in the course of being scheduled last late summer and fall, the within Respondents fully acquiesced in that process. It appears to me that, at the relevant time, other counsel accepted that the pleadings motion was indeed a satisfactory explanation for the resulting further litigation delay.

[24] To allow counsel, after agreeing on a process, to subsequently in essence attempt to pull the rug out from under the Moving Parties, strikes me as unfair in the circumstances. Again, nobody objected to the exceedingly leisurely pace of this case until December 4, 2018—when positions suddenly changed. I thus understand why Mr. Wright argues that it appears the Responding Parties acted "tactically", attempting to obtain a tactical advantage from the pending set-down deadline.

[25] Adhering to a deadline, and requiring others to do so, is of course not at all wrong. Indeed, it is a practice to be encouraged. The concern I have in this within matter is with the inconsistency in how the Responding Parties approached the deadlines in this case. Until this last one approaching at the end of December 2018, all parties treated such deadlines equally cavalierly. Again, when the most recent deadline was seemingly noticed, it was suddenly seized upon. In my view, however, if counsel obtains new instructions, or determines that a different approach is best after for some long time (in this case, years of tolerance and acquiescence if not active participation in a particular course of conduct) acting in a certain fashion, then a fair warning to the party opposite of that change in direction I find is appropriate.

[26] On the question of reasonable delay, again, in this case all parties seemed to believe at one point that the pleadings motion was a reasonable way to move the case forward. Suddenly departing from that was in my view not fair to the Moving Parties. Whether the proposed amendments are viable, I need not answer. After all, even if not, there is still the existing action. Counsel in the above-referenced December 4, 2018 letter acknowledged that, eventually, a viable pleading was finally delivered by the Moving Parties. In other words, the Moving Parties were over the years, admittedly in fits and starts and dribs and drabs, moving or trying to move the matter forward. That they were getting pushback when so doing is not surprising, and indeed, is part of the litigation process. Some of that pushback contributed to slowing the process.

[27] Overall, I find the within litigation delay is of much concern. Yet for these reasons I find on balance, and in the particular context of this rather convoluted case, an overall reasonable explanation for it. The evidence is that the plaintiffs did overall intend to push forward—there were gaps for periods of time to be sure, yet the litigation was never abandoned, nor did the Moving Parties ever become unresponsive, as in some of the cases relied on by the Responding Parties.

[28] It must also be recalled that the original Plaintiff, Arcadia, has its obligations as plaintiff. As I remarked at the hearing, for tactical reasons Arcadia may well have chosen at the outset of this matter to be a plaintiff rather than a defendant. Yet with that choice there are concomitant obligations. Arcadia, as Plaintiff and defendant to the counterclaim, also has obligations to advance this overall matter. It has, as I have noted herein, participated equally in the delay of this matter, as indeed have all the parties.

[29] Addressing prejudice, until last December, this seemed not to be a concern of any party. Set down deadlines came and went, and nobody seemed to be bothered by this. Again, it was on some occasions not the Moving Parties who extended the deadline, on consent. Specifically, the non-Cadillac Jack defendants moved in 2016 to extend the deadline twice: from February 29, 2016 to December 31, 2016; and then from that later date to December 31, 2018.

[30] While the Moving Parties have an obligation to demonstrate a lack of delay, so does the Responding Party Plaintiff. In this case I am informed that the Plaintiff Arcadia is content to see the entire action be dismissed. That may be, yet its conduct until last December was that it was untroubled by any purported delay. Indeed, none of the parties, as counsel interacted via email, raised delay as a concern, despite the passage of years. Again, in this case and on these facts, everyone was content to continue, until quite suddenly, that changed.

[31] Overall, I find the conduct of the Responding Parties until December 2018 sufficient to allow me to conclude that delay was not then, and is not now a factor that cannot be surmounted. There is no evidence from the defendants that asserts there is non-compensable prejudice at issue. The conduct by the Respondents in this action, by not raising prejudice either specifically or even, before December 2018, in the abstract, is I find relevant. Again, the parties have all been working (intermittently at times) on this case.

[32] In Prescott v. Barbon, the decision referenced above, the action was actually dormant for some time. Then, following dismissal by the Registrar, another two years elapsed due to the seeming negligence of one of the counsel when nothing at all happened. The Court of Appeal upheld the Motions Judge who maintained the Registrar's dismissal. Yet those facts are obviously quite different from the facts before me. In this within matter, again, the case while inactive periodically, never went dormant; and the counsel for Moving Parties, since they went on the record, have been responsive to and communicative with the other counsel.

[33] On the evidence I find that there is no actual prejudice such that would prevent the Responding Parties from continuing on as they were doing early in the prior month up to when this motion was argued. While "prejudice is inherent in long delays", as was held in Papp Plastics & Distributing Ltd. v. Unity Insurance Brokers (Windsor) Ltd., 2018 ONSC 5009, again, in this case, such was not a factor; nor were concerns about prejudice previously raised. Rather, the parties were all carrying on with the case, attempting to advance their respective positions.

[34] The importance of finality is the last point which I will address. It is indeed important. As I have hopefully made clear, I am very troubled by how long this case has existed, and that Orders have come and gone with nobody being particularly concerned, if concerned at all. This is not an approach to be rewarded. Yet counsel for the Moving Parties has contritely recognized this, as his factum and submissions make clear. He also acknowledges that, now that his litigation opponents have raised the issue, any extension which I may grant is the final one. In my view, it is beyond doubt that, if I grant another extension it is final.

[35] I have struggled with whether such a final extension, the tenth one, should be granted. It is a close call given the very lengthy delay since this matter has begun. What has ultimately led me to grant the motion, and thus allow this final set-down extension, is my finding that the Responding Parties, who again have the right to change their minds and, going forward, to insist that the case proceed with alacrity, did not provide the Moving Parties with, really, any warning of this sudden change in position.

[36] If, during the period of Master Pope's Order, at some point one of the respondents to this motion had referenced the timetable and its pending expiry, that would be one thing. Yet that is not how this case unfolded. Rather, again, the parties were content to and actually did schedule a pleadings motion. Nothing was stated about prejudice last late summer and fall (2018) when the pleadings motion was being addressed and scheduled. Rather, everyone was content to carry on in that fashion.

[37] Then, suddenly averting to the deadline, the Responding Parties said, in essence, "gotcha!". Harkening to the dicta that cases should carry on if possible to be decided on their merits, in this case and on these particular facts, I find that not granting an extension, so dismissing the matter, would be unfair to the plaintiffs by counterclaim. Conversely, granting the extension only preserves the status quo for the other parties, with which status quo all parties were seemingly satisfied until only late last year. While I am cognizant of the need for the Court to express disapproval of the way this litigation has been conducted, and I do, it is not just to punish the parties who still seek justice.

[38] Accordingly, the motion is granted. Time will be extended.

[39] The Parties were not in agreement as to what would be a reasonable extension in all the circumstances (including re-scheduling the pleadings motion, if desired). I urge the parties to collaborate on a realistic timetable, including a new set-down deadline, and bring such forward on consent. I would be pleased to approve a new timetable if such is brought through a written consent motion, to my attention through my Assistant Trial Coordinator ("ATC"). Of course, it is clear that this new timetable will be final. If the parties are, however, not able to agree on specific milestones, or a set-down deadline, then a short motion to set the timetable may be brought before me.

[40] Addressing costs, as discussed at the hearing, the parties can exchange their bills of costs. While the Moving Party was successful in preserving the action, my preliminary view is not to reward the conduct of any party in this matter with an award of costs. Allowing all parties to bear their own costs which, given the material filed and the cogent arguments made by all, I presume will be significant, is an appropriate way for the Court to send a message. Yet if the parties wish to argue costs, they can book a tele-conference with me, again through my ATC.

Master J. Josefo

Date: January 25, 2019