Superior Court of Justice - Ontario
COURT FILE NO.: CV-14-518179
DATE: 20191211
RE: Liberty Preparatory School Inc., Plaintiff
AND:
1 Eight 1 Limited, Defendant
BEFORE: Master P.T. Sugunasiri
COUNSEL: Sullivan, R., counsel for Liberty/Moving Party Feldman, P., counsel for 1 Eight
HEARD: December 9, 2019
Reasons for Decision
Overview:
[1] Liberty operates a Montessori school at 24 Boston Avenue in Toronto. The school property is owned by 1 Eight, and leased to Liberty. In this simplified procedure action, Liberty sues 1 Eight for alleged breaches of their lease agreement. By operation of Rule 48, the action expires on December 16, 2019 unless Liberty sets the action down by then. Several steps remain. Liberty has not answered its undertakings. One Eight has not examined a Liberty representative. There has yet to be a mediation.
[2] In the normal course, when an action is about to expire, the plaintiff may set the matter down for trial, file a consent timetable to extend the time to set the action down for trial, or convene a status hearing to show cause as to why the action should continue pursuant to rule 48.14 of the Rules of Civil Procedure (“Rules”). Liberty cannot set the matter down for trial. The Consolidated Practice Direction for Toronto requires parties to have had a mediation beforehand. One Eight does not consent to an extension. This would usually leave Liberty with the burden of showing cause. Liberty does not seek this option. Instead, it moves to set the action down before completing mandatory mediation so that no extension is necessary. Liberty argues that this motion is therefore not a status hearing.
[3] For the reasons that follow, I dismiss Liberty’s request to set the action down without mediation but allow it an extension of time to set it down by June 30, 2020. It is in the interests of justice that this action be heard on its merits.
Issues:
- Should Liberty set its action down for trial without mandatory mediation having first taken place?
No. Liberty is not ready for trial. It is not in the interests of the administration of justice to give it a placeholder in the litigation queue while the parties complete the remaining steps.
- Has Liberty adequately explained its delay in prosecuting its action?
Yes. Liberty is not required to explain every moment of delay. From the totality of the record, Liberty was not asleep at the wheel and has adequately explained its delay.
- Has the delay caused 1 Eight non-compensable prejudice?
No. While there is some presumed prejudice to 1 Eight, it does not prevent it from properly defending itself.
Law and Analysis:
Should Liberty set its action down for trial without mandatory mediation having first taken place?
[4] Liberty moves for directions and relies on the court’s general powers in r. 2.01 of the Rules to fix an irregularity or correct a failure to comply with the Rules on such terms as are just. A motion to delay mandatory mediation is contemplated by Part III of the Consolidated Toronto Practice Direction.
[5] While this may be a quick fix for Liberty, it has provided me with no basis to allow it to mediate the action after it has set it down for trial. Such an order would allow Liberty to “line up of for trial” before it is ready. Mandatory mediation is an important tool to reduce the number of cases in the trial queue. Avoiding administrative dismissal is not a reason to change the order mandated by the Rules. Otherwise this would be a handy tool in every Plaintiff’s toolbelt and would be a step backwards in relieving the strain on an already overburdened system.
[6] I also agree with 1 Eight that this motion is a status hearing pursuant to r. 48.14(7), or akin to one. Its purpose is to avoid administrative dismissal. Liberty’s request for a pre-mediation set down has the same purpose. It is well established that at a status hearing, a plaintiff must provide an acceptable explanation for failing to sett down the action within the 5 year period permitted by the Rules, and demonstrate the absence of non-compensable prejudice to the defendant.[^1]
[7] Having potentially reframed the motion, I canvassed Liberty to determine if it required more time or materials to address the status hearing test. Counsel advised that Liberty was prepared to show cause based on the existing record, and did so in Reply submissions.
Has Liberty adequately explained its delay in prosecuting its action?
Chronology of Events:
Liberty commences action
December 16, 2014
Statement of Claim
December 23, 2014
1 Eight’s Notice of Intent to Defend
Jan 9 2015
1 Eight’s Statement of Defence
April 7, 2015
Liberty’s document collection
April 2015-June 30, 2016
Liberty’s Affidavit of Documents
June 30, 2016
1 Eight’s Examination for Discovery
November 10, 2016
Liberty provides List of Undertakings
November 14, 2016
Lease negotiations
May 2017-July 2018
1 Eight’s suggestion to tie litigation resolution to lease renewal
May 30, 2017
Liberty’s response – lease and litigation are separate but preferable to settle litigation as well - suggesting 1 Eight make an offer other than mutual release
May 30, 2017
Liberty’s response to 1 Eight’s December 28, 2017 email – lease renewal cannot be used as a defence or bar to Liberty’s claim
January 18, 2018
1 Eight’s response to Liberty’s comments – agree that litigation is separate
January 30, 2018
Parties execute new lease
July 23, 2018
No activity on litigation – spent time attending to the needs of the school
July 2018 – end of 2018
Liberty instructions to move forward
Early 2019
Liberty letter to 1 Eight setting out undertakings list and request for mediators
March 14, 2019
Liberty’s follow-up email
April 15, 2019
1 Eight’s response indicating that counsel will review the matter next week
April 22, 2019
Liberty’s email acknowledging response
April 26, 2019
Liberty’s email asking if defence counsel is still retained
May 7, 2019
Liberty’s follow-up email
May 21, 2019
1 Eight’s response that defence counsel no longer acting
May 21, 2019
Email from new defence counsel setting out outstanding steps, commenting on crawl of litigation, and indicating all steps could be completed by the end of the year
May 21, 2019
Liberty’s response proposing a timetable and denying slow pace – referring to substantive ongoing discussions in the interim
May 21, 2019
1 Eight’s email indicating timetable is unrealistic and stating that whether the action has continued at snail’s pace or not, there is no urgency to completing the steps
May 29, 2019
Liberty’s response
May 30, 2019
1 Eight proposes timetable and suggests mediator
May 30, 2019
Liberty proposes timetable which includes extending the set down date to Sept 2020 – after the 5 year mark
November 8, 2019
Liberty’s follow-up letter to proposed timetable
November 12, 2019
Liberty’s follow-up email
November 13, 2019
Defence counsel’s out of office email – returning November 18, 2019 and checking emails intermittently
November 13, 2019
1 Eight email advising that it is not consenting to extend the set down date
November 13, 2019
Liberty’s response suggesting ways to avoid extending set down date
November 13, 2019
Liberty’s letter suggesting solutions to timetable to avoid extending set down date
November 14, 2019
Service of Notice of Readiness of Pre-Trial
November 15, 2019
Liberty’s follow-up email
November 20, 2019
[8] Based on this chronology, I conclude that the Liberty has adequately explained the pace of litigation and the delays and had always intended the pursue the action. The largest gap in the progress of the action was the two-year and four month period between November 14, 2016 and March 14, 2019. Liberty’s counsel swore two affidavits indicating that during this period the parties were negotiating a lease renewal and Liberty did not want to increase tensions by pushing the litigation. Counsel believed that 1 Eight agreed and that there was a standstill agreement on the litigation, with occasional discussion on settling it. One Eight strongly disagrees that there was any standstill agreement or any robust settlement discussions.
[9] On the record before me, I accept Liberty’s evidence that its counsel was operating under the assumption that there was a standstill agreement during the acrimonious lease negotiations. It appears that this may have only been in counsel’s mind. He mentions it a couple of times in emails, but those emails do not seem to cover the relevant period. On the other hand, 1 Eight’s counsel never objected to counsel’s standstill references and the parties discussed settling the litigation at several points during the negotiations. Regardless, Liberty’s conduct was based on counsel’s understanding, however erroneous it may have been.
[10] This is in contrast to the circumstances I addressed in Unlimited Motors Inc v Automobilii Lamborghini Spa, 201 ONSC 1423, a case 1 Eight relies upon. In that case, the plaintiff’s main explanation for delay was a pointed decision to hold his action in abeyance while tending to other cases that had nothing to do with the defendant. He did not communicate this decision to the defendant and there was no communication whatsoever between the parties. As such, the defendant formed the view that the action was dead on the vine. In those circumstances, I found the plaintiff’s explanation to be inadequate. The important distinction here is that Liberty and 1 Eight were in constant communication and had the litigation in their minds. No one had forgotten about it or wondered whether it was proceeding.
[11] Once the parties completed the lease negotiations in July of 2018, Liberty states that it turned its attentions to the needs of the school. This is not a particularly strong reason for delaying the litigation until March of 2019 when Liberty reached out to 1 Eight to move it along. However, having reviewed the chronology of events and totality of the evidence, this weak explanation is not fatal. As noted in 3Dogs Real Estate Corporation v XCG Consultants Limited, “in order for the court to determine what is an ‘adequate’ explanation, the totality of the circumstances must be examined having regard to the competing interests at stake and the interests of justice.”[^2]
Has the delay caused 1 Eight non-compensable prejudice?
[12] The prejudice at issue is to the defendant’s ability to defend the action as a result of the plaintiff’s delay.[^3] The delay has not caused 1 Eight non-compensable prejudice. One Eight argues that Liberty’s evidence does not address prejudice. I agree that its affidavits do not specifically speak to prejudice. However, there is undisputed evidence in the record that addresses prejudice. For example, both sides have preserved their documents and Liberty has examined 1 Eight. One Eight did not seek to examine Liberty prior to or during the lease negotiations. Preservation of documents is more or less important depending on the type of case it is. This is a contract case where documents matter. Liberty alleges that 1 Eight failed to meet its contractual obligation to improve the leased premises as set out in the Lease Agreement. City inspectors are alleged to have documented building and Fire Code deficiencies. No one suggests that these material documents are lost or inaccessible.
[13] I agree that Liberty has not tendered evidence of the relevant witnesses and what steps it has taken to preserve their evidence. It should have done so. On the other hand, 1 Eight has not pointed to specific prejudice that they suffer as a result of the delay. A plaintiff is not expected to speculate about prejudice to a defendant and there can be an evidentiary burden on a defendant to adduce some evidence of specific prejudice.[^4] One Eight has stated that none of the contractors who worked on the project in 2012 and 2013 except for the floor polishing contractor still do business with it and they will likely not remember what they did. I am not persuaded that this speculative statement is fatal to the continuation of Liberty’s action. Contractor work is usually documented, especially when inspections are involved. Further, in the absence of evidence that 1Eight believed the action to be dead on the vine, it could and should have obtained the necessary evidence from its contractors. A defendant’s lack of display of any sense of urgency undercuts any claim of actual prejudice.[^5]
[14] One Eight argues that even if there is no actual prejudice, presumed prejudice arises after a limitation period expires. The limitation period in Rule 48.14(1) is 5 years. Even if Liberty set its action down exactly on December 16, 2019, 1 Eight would have to proceed and could not complain of actual or presumed prejudice (unless it brought a dismissal motion under r. 24). What Liberty seeks here is permission to set the action down by June 30, 2020. This is beyond the 5 year mark and gives rise to presumed prejudice. As a plaintiff gets further and further away from the five year mark, presumed prejudice increases. In this case, there is little, if any difference between a December 2019 set down date and a June 2020 set down date to 1 Eight’s ability to defend. Stated differently, any presumed prejudice arising from six months of delay is outweighed by Liberty’s prejudice in losing its day in court.
[15] I also consider the stage of the litigation. The parties have delivered Affidavits of Documents. Liberty has examined 1 Eight. One Eight may conduct a 2 hour discovery of Liberty under the simplified procedure rules (r. 76.04(2)) They have discussed timetables for next steps and 1 Eight has suggested a mediator. They are, close to the end. This is in contrast with Lamborghini supra where the $30 million dollar ordinary procedure action had stopped at pleadings.
Conclusion:
[16] As in all discretionary decisions, the Court should consider the overall justice of the case in addition to the specific test for the relief sought. Considering the circumstances of this case, I do not find that 1Eight suffers prejudice that prevents it from properly defending itself. One Eight is not being taken by surprise. The principle that cases ought to be heard on its merits overrides any deficiencies in Liberty’s record or assumptions about the litigation. Liberty has shown cause why it should proceed.
Disposition:
[17] I extend the set down date for this action to June 30, 2020. Counsel have advised that they are able to work out a schedule of remaining steps. If they require my assistance, I remain seized of that issue and they may convene a case conference with my assistant Christine.Meditskos@ontario.ca to discuss it.
Costs:
[18] I strongly urge the parties to agree on costs. If they cannot, they shall exchange costs outlines within 7 days of today’s date and deliver written submissions of no more than 3 pages double-spaced by January 7, 2020. Counsel can file their submissions at the Masters’ Administration on the 6th floor of 393 University Avenue.
Original signed
Master P. Tamara Sugunasiri
Date: December 11, 2019
[^1]: 11996158 Ontario Inc v 6274013 Canada Ltd, 2012 ONCA 544 at 32 (“119”); See also Faris v Eftimovski, 2013 ONCA 360 at 11 (“Faris”). [^2]: 3Dogs Real Estate Corporation v XCG Consultants Limited, 2014 ONSC 2251 at 37 (“3Dogs”). [^3]: MDM Plastics Ltd. v. Vincor International Inc., 2015 ONCA 28 and Carioca’s Import & Export Inc v. Canadian Pacific Railway, 2015 ONCA 592 at para. 57. [^4]: Supra note 2 at para. 39 citing Kerr v CIBC World Markets Inc., 2013 ONSC 60, 2013 ONSC at 60 (DivCt) and applying Chiarelli v Wiens, (2000) 2000 CanLII 3904 (ON CA), 46 OR 3d 780 at 14 (CA). [^5]: Aguas v. Rivard Estate, 2011 ONCA 494 at para. 19 and H. B. Fuller Co. v. Rogers, 2015 ONCA 173 at para. 42.