Court File and Parties
COURT FILE NO.: CV-15-543551
MOTION HEARD: 20181026
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Metropolitan Toronto Condominium Corporation No. 1033, Torgan Management Inc, and 2387755 Ontario Inc., Plaintiffs
AND:
Toronto Hydro-Electric System Limited et al., Defendants
BEFORE: Master P.Tamara Sugunasiri
COUNSEL: Erentzen, S., Counsel for the Plaintiffs/Responding Party
Mens, G., Counsel for the Toronto Hydro-Electric System Limited/Moving Party
HEARD: October 26, 2018
REASONS FOR DECISION
Overview:
[1] On or about December 27, 2013 there was an explosion and fire at 1466 Bathurst Street in Toronto (“Bathurst Condo”). The Bathurst Condo was owned and operated by the Plaintiffs and was insured by Royal and Sun Alliance (“RSA”). RSA retained an engineering firm to investigate the cause of the explosion. In 2014 the firm was in touch with Toronto Hydro-Electric System Limited (“Toronto Hydro”) with respect to inspecting the equipment that was alleged to have failed. Toronto Hydro’s own investigator inspected the equipment and produced a report which it declined to share with the Plaintiffs. Ultimately, the Plaintiffs issued a Statement of Claim (“Claim”) on December 24, 2015.
[2] On June 22, 2016 the Plaintiffs brought a motion to extend the time to serve Toronto Hydro to December 31, 2016 on the basis that this was a subrogated claim and that first party claims were still being resolved. Master Brott granted the order and the Plaintiffs ultimately served their claim on December 19, 2016. By this time, Toronto Hydro had already recycled its equipment on March 17, 2016.
[3] Toronto Hydro brings a motion pursuant to r. 39.01(6) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to set aside Master Brott’s ex parte order on the basis that the Plaintiffs failed to disclose material facts to her Honour that might have impacted on her decision to extend the time.[^1] Toronto Hydro believes that its ability to defend itself in the action has been compromised as a result of the delay and destruction of the evidence.
[4] For the reasons that follow, I dismiss the motion.
Brief Facts:
[5] This action arises from an explosion and fire on December 27, 2013 at the Bathurst Condo. At the time, it was insured by RSA. The explosion is alleged to have occurred in or around a pull room where electrical equipment is located.
[6] RSA retained a professional electrical engineer, Mr. Chokelal, to investigate the cause of the explosion. Mr. Chokelal attended the Bathurst Condo on the day of the explosion to inspect the site. At that time, Toronto Hydro’s engineer, Mr. Glavanov, was present. During the site visit, Mr. Chokelal advised Mr. Glavanov that he had been hired by RSA and that there would likely be a claim for damages.
[7] On January 15, 2014 Mr. Chokelal wrote to Shawna Barwell at Toronto Hydro to request a copy of Mr. Glavanov’s report on the explosion and to request an opportunity to inspect the equipment from the pull room. He received no response.
[8] On February 4, 2014 Mr. Chokelal made a request for a joint examination of the equipment, this time specifying the switches, fuses, disconnects, and cabling. He also made a second request to obtain a copy of Mr. Glavanov’s report.
[9] On March 18, 2014 Mr. Chokelal made a written request for a joint examination to Ms. Baigorri who was counsel for Toronto Hydro. This request went unanswered and was repeated by emails dated April 22 and May 27, 2014.
[10] On May 27, 2014 Ms. Baigorri advised that she had no instructions with respect to Mr. Chokelal’s requests about the Bathurst Condo.
[11] On July 11, 2014 Mr. Chokelal advised Ms. Baigorri that he was transferring the file to a colleague but sought confirmation that Toronto Hydro had secured the equipment from the pull room that he had requested to inspect.
[12] On October 14 and 28, 2014 Mr. Liu-Ernsting followed up on Mr. Chokelal’s requests.
[13] On November 3, 2014 Ms. Baigorri advised that Toronto Hydro would not be releasing any internal reports nor was willing to conduct a joint evidence examination. Mr. Liu-Ernsting responded by indicating that he would move forward on his reporting with the information which he had available.
[14] On December 24, 2015 the Plaintiffs issued the Claim. They had until June 24, 2016 to serve Toronto Hydro.
[15] On March 16, 2016 prior to the end of two years and six months from the date of loss, Toronto Hydro recycled the equipment.
[16] Instead of serving Toronto Hydro by June 24, 2016, the Plaintiffs brought an ex parte motion in writing dated June 6, 2016 seeking to extend the time for service to December 31, 2016. On June 22, 2016 Master Brott granted the order.
[17] The Plaintiffs served the Claim on December 16, 2016 along with Master Brott’s June 22, 2016 order.
The Evidence Before Master Brott
[18] The Plaintiffs’ motion to extend time for service was supported by a seven paragraph affidavit sworn by an associate of the law firm acting for the Plaintiffs. The seminal portions of the associate’s affidavit read as follows:
The within action arises as a result of the alleged negligence, lack of care and breach of duty committed by the defendants, or each of them, in relation to an explosion that occurred at property owned by the plaintiffs and located at 1466 Bathurst Street, Toronto, Ontario (the “Property”).
On or about December 24, 2015, the plaintiffs issued a Statement of Claim in relation to the above incident. The claim is a subrogated claim brought on behalf of the plaintiffs’ insurance company, Royal and Sun Alliance Insurance Company of Canada (“RSA”), against the defendants.
At the time of issuance, the plaintiffs were not in a position to serve the Statement of Claim against the defendants, because the amount of the subrogated claim had not crystallized as the first party claims had not yet settled.
Counsel for the plaintiffs was advised on May 31, 2016, by Beth Collins of Royal and Sun Alliance Insurance Company of Canada that the first party claims had concluded and received instructions to proceed with the subrogated action.
The plaintiffs respectfully seek an Order extending time for service of the Statement of Claim [sic] be extended to December 31, 2016 and will serve the claim immediately upon receipt of the same.
Law and Analysis:
[19] Rule 39.01(6) provides as follows:
Where a motion or application is made without notice, the moving party or applicant shall make full and fair disclosure of all material facts, and the failure to do so is in itself sufficient ground for setting aside any order obtained on the motion or application.
[20] The parties agree that a Court may set aside an ex parte order when:
a. There was a failure to make full and fair disclosure of material facts; and
b. The omitted or misstated information might have had an impact on the original granting of the order in that it could be said that the order may well not have been made if proper disclosure had been given.[^2]
[21] I would add some additional principles based on the jurisprudence provided by both sides:
c. Even if both criteria are met, the Court retains a residual discretion to uphold the order;[^3]
d. The Court should consider the relative prejudice to the parties of a decision to set aside the ex parte order;[^4] and
e. The Court should consider and balance three policy thrusts:
i. where possible cases should be determined on their merits and not ousted by an overly technical application of the rules;
ii. limitation periods serve an important function of giving finality and predictability to potential litigants;[^5] and
iii. full and frank disclosure is the foundation of the administration of justice and must be strictly enforced to ensure that the law protects an absent party.[^6]
Toronto Hydro’s Position
[22] Toronto Hydro argues that the Plaintiffs failed to provide “highly relevant” facts that were readily available. Had they been disclosed, Master Brott might well have denied the extension request. The omitted facts are:
a. That the Plaintiffs had not sent a demand for payment or notice letter to Toronto Hydro;
b. That Toronto Hydro had not been notified of the existence of the Claim;
c. That the applicable limitation period had expired;
d. A rationale for not putting Toronto Hydro on notice; and
e. An express statement of the date of loss.
The Plaintiffs Have not Omitted Material Facts
[23] I am not persuaded that any of these facts might have had an impact on the original granting of the order in that it could be said that the order may well not have been made if proper disclosure had been given. Unless stated otherwise, the Court generally assumes in motions to extend the service of a statement of claim that the defendant is unaware of the claim. If the Court wanted a rationale, it would have made that request. Further, the motion materials attached to the statement of claim provided the Court with information as to date of loss and the expiration of the limitation period for issuing and serving the Claim. This information was not missing simply because it was absent from the body of the affidavit. The Court relies on the full record in coming to its decision.
The Failure to Address Prejudice is a Matter for Appeal
[24] Toronto Hydro also relies on Master Dash’s analysis in Fimax to argue that the Plaintiffs’ failure to address prejudice in their affidavit in support of the motion to extend amounts to material non-disclosure that warrants setting aside Master Brott’s order. Prejudice, they correctly state, is part of the test for an extension of time. In Fimax, the Court found that the failure to address prejudice in the supporting affidavit amounted to material non-disclosure.[^7] Respectfully, I disagree with this analysis.
[25] There is a difference between a party’s failure to disclose material facts in an ex parte motion and a party’s failure to meet a legal test. The former may warrant the setting aside of the ex parte order, and the latter warrants an appeal. In this case, Her Honour chose to extend the time for service of the Plaintiffs’ Claim without any evidence on whether or not the extension would cause undue prejudice to Toronto Hydro. If she was incorrect in doing so, that is an issue for appeal. Toronto Hydro is clearly arguing that the Plaintiffs failed to meet the legal test for an extension of time. At paragraph 45 of its factum it states: “The Plaintiffs also failed to show that the Defendants would not be prejudiced if the June 2016 Order were granted, as they were required to do, as per the decision of the Court of Appeal in Chiarelli.” Toronto Hydro also states that the Plaintiffs’ reason for wanting the extension is “simply not reasonable.” Master Brott clearly decided that the explanation was reasonable enough for her to grant the order. The reasonableness of her Honour’s conclusion is a matter for appeal.
[26] I would add that in any event, Toronto Hydro does not point to any evidence of prejudice that the Plaintiffs could have adduced. In the cases cited by Toronto Hydro, there was clear evidence of available facts that were omitted, or blatant misrepresentations that would have impacted on the decision-maker. Here, there is no evidence that the Plaintiffs knew, for example, that the equipment had been recycled. If known, this would have been a material fact to put before Master Brott and a reason to set her decision aside if it was omitted. To simply say that prejudice was generally not addressed and should have been because it is part of the legal test, is in my view an issue for appeal. It is another way of saying that the Court granted an order without considering the appropriate test or having sufficient evidence to meet it.
[27] To allow such an argument to prevail in a Rule 39.01(6) motion would be to allow litigants to circumvent the appeal process, its timelines and the standard of review that would otherwise be applied in situations where a party alleges that there was no evidentiary basis to grant the order made. This is neither the intent nor the spirit of the rule.
There is no material prejudice to Toronto Hydro in my decision to maintain Master Brott’s order
[28] Even if I am incorrect in my analysis and the Plaintiffs have omitted material facts that might have lead Master Brott to a different decision, I am not persuaded that her order should be set aside. In so concluding, I balance the prejudice to the parties of a decisionto uphold Master Brott’s order and the three policy thrusts noted previously. In my view, it is in the interests of justice that this case proceed on its merits.
It was Toronto Hydro’s Decision to Recycle the Equipment
[29] Toronto Hydro argues that it is prejudiced from the delay in service because it has recycled the equipment from the pull room and two of its material witness are no longer in its employ. I am not persuaded that Toronto Hydro is prejudiced. First, it chose to recycle equipment before the expiration of two years and six months from the date of loss. Even if the Plaintiffs had served Toronto Hydro by June 24, 2016 as they had a right to do with no prior notice to Toronto Hydro, the equipment would have already been recycled. As such, Toronto Hydro is the master of its any prejudice it may suffer in that regard. Further, it would appear that it is the Plaintiffs who are more likely to suffer prejudice as a result of Toronto Hydro’s decision to recycle the equipment. Toronto Hydro had its own engineer inspect the equipment at the time of loss and has the benefit of Mr. Glavanov’s report. The Plaintiffs, on the other hand, were not able to inspect the equipment despite repeated requests to access it.
Lost Witnesses are not Fatal
[30] With respect to lost witnesses, Toronto Hydro has not provided when these employees left, whether or not they were interviewed before their departure, and why they are unable to reach them in this modern age of connectedness. The mere fact that a witness is no longer employed at Toronto Hydro does not in and of itself create prejudice. It may be that these employees left within the permitted two years and six months the Plaintiffs had to notify Toronto Hydro of their Claim. If so, the loss of the witnesses and any ensuing prejudice would have nothing to do with the Brott order. It would only be if these employees left after June 24, 2016 that Toronto Hydro could even begin to argue prejudice arising from a decision to maintain the Brott order. I have no evidence in that regard.
Disposition:
[31] For the foregoing reasons, I dismiss Toronto Hydro’s motion. Having done so, there is no need to address the Plaintiffs’ cross-motion to seek validation of service nunc pro tunc.
Costs:
[32] I strongly urge the parties to resolve the issue of costs. If they cannot, they may schedule a 30 minute appearance before me on one of my regular motions dates. The parties shall exchange costs outlines at least four days prior to the hearing.
Original signed
Master P.Tamara Sugunasiri
Date: January 28, 2019
[^1]: At the hearing I raised the application of Rule 37.14 to the motion. Counsel for Toronto-Hydro confirmed that it was not moving pursuant to Rule 37.14.
[^2]: Fimax Investment Group Ltd v Grossman, 2012 ONSC 2436 at para. 10 and Coupey v Hamilton Police Services Board, [2005] OJ No 2223 at paras. 22, 25, and 40 (SC) [Coupey].
[^3]: Coupey, supra note 2 at para. 22.
[^4]: Mosregion Investments Corp v Ukraine International Airlines, [2009] OJ No 1457 at para. 22 (Master) and Rosenhek v Kerzner, [1997] OJ No 2831 at para. 23 (SC) [Rosenhek].
[^5]: Laurent-Hippolyte v. Blasse et al., 2018 ONSC 940 at para. 13; Qincome Finance Trust (Trustee of) v. Magnet, 2017 ONSC 4468 at para. 45 and see also Rosenhek, ibid at para. 11.
[^6]: Fimax, supra note 2 at para. 21 citing United States v Friedland, [1996] OJ No 4399 at paras. 27-28 (GenDiv).
[^7]: Fimax, supra note 2 at para. 32.