Court File and Parties

COURT FILE NO.: CV-14-501733

MOTION HEARD: 20191219

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 138 All Food Delight Group Inc. and Min-Hoi Yau, Plaintiffs

AND: Canada Law Centre LLP, Ping Lee and Michael E. Freeman, Defendants

BEFORE: Master Jolley

COUNSEL: M. Donald, Agent for Counsel for the Moving Party Plaintiffs J. Nehmetallah, Counsel for the Responding Party Defendants Canada Law Centre LLP and Michael E. Freeman Ping Lee, In person

HEARD: 19 December 2019

REASONS FOR DECISION

[1] On 12 July 2018, I made an order dismissing this action with costs as a result of the plaintiffs’ breach of an earlier court order. The plaintiffs now bring this motion under Rule 37.14(2) to set aside the dismissal on the basis that they failed to appear on the motion through accident, mistake or insufficient notice. They argue that they were unaware the defendants had brought any such motion and unaware that their lawyer had failed to respond or attend on that motion or on the motion that had preceded it. They argue that the action was on the verge of trial when, without their knowledge, it was dismissed, due to their lawyer’s repeated failure to respond to the defendants (or to them, for that matter).

[2] My order was the culmination of failures by the plaintiffs’ counsel, Mr. Chang, to attend in court to respond to the defendants’ motion to have this action dismissed.

[3] The defendants first brought their motion seeking an order dismissing the action for delay on 4 April 2018. No one appeared for the plaintiffs. The court noted:

“Despite being properly served and being advised of this motion, plaintiffs’ counsel has not responded nor has bothered to show up today. This is unacceptable given the serious repercussions that success on this motion would have on the plaintiffs.”

[4] Rather than dismiss the action for delay, Master Sugunasiri imposed a timetable that required the plaintiffs to answer their undertakings by 31 May 2018. She also ordered the plaintiffs to pay the defendants $6,500 in costs within 30 days. In making her order, Master Sugunasiri noted that “I am not convinced that the plaintiffs are even aware of this motion and am willing to give them the benefit of the doubt and a final indulgence.” Master Sugunasiri also ordered Mr. Chang to serve his clients forthwith with the endorsement and a copy of the order and to file proof of service with the court.

[5] The defendants then brought a motion to dismiss the action for failure to comply with the timetable order and failure to pay costs. Given it was late served, Master Wiebe adjourned it from 19 June 2018 to 12 July 2018, to be properly served on the plaintiffs. Mr. Chang did not appear on June 19.

[6] The motion then came before me on 12 July 2018. Again, no one appeared for the plaintiffs. There was evidence that the endorsements of Masters Sugunasiri and Wiebe had been served on Mr. Chang, yet Mr. Chang had not filed an affidavit confirming that he had served his clients with the order and endorsement, as ordered. When the matter came before me, the plaintiffs had not adhered to the timetable and had not paid the costs ordered. Given the multiple breaches by the plaintiffs and their failure to respond to the motion, I granted the defendants’ motion and dismissed the plaintiffs’ action with costs.

[7] Upon learning of the dismissal order in December 2018, the plaintiffs made some attempts to contact Mr. Chang to discuss the order. There is an email from Mr. Yau dated 14 December 2018 to Mr. Chang asking him to take a look at the judgment and noting that it ordered him to pay costs of $14,000. It ends: “Please let me have a meeting date and time, do we need to go for the next Court date, and please restore the order and reinstall the case.” Mr. Chang did not reply. Mr. Yau sent a follow up email to Mr. Chang on 29 March 2019 stating: “please would you call me, tell me how to resolved it, this case. I like you keep in this case [sic].” Again, there was no reply. Mr. Yau’s evidence was that he made six calls to Mr. Chang’s office after 20 March 2019, supported by his produced telephone records, but never was able to get Mr. Chang to return his calls.

[8] There was one intervening email, to which Mr. Chang also did not respond. There is a prior related small claims court action brought by the defendants against the plaintiffs for payment of their outstanding legal accounts. On 8 February 2019, Mr. Lee sent an email to Mr. Yau serving him with a notice of motion to reinstate the small claims court action that had been stayed pending determination of this action. Mr. Yau forwarded that email to Mr. Chang that same day, stating: “Please Mr. Greg Chang. I am now in USA, will be blk at April, 2019. Please respond it to me [sic].” Mr. Chang did not reply.

[9] After attempting to reach Mr. Chang for some months, the plaintiffs finally retained new counsel at the end of March 2019 to advise them on the status of this action and their new counsel brought this motion to set aside the dismissal order. It was adjourned numerous times to attempt to obtain a response and documents from Mr. Chang. On 14 June 2019 the motion came before me and was then adjourned to 14 August 2019, when a timetable was put in place for the delivery of materials and the motion set for October 17.

[10] On 18 September 2019 I ordered Mr. Chang and his firm Bougadis Chang to deliver its complete file (the “Chang File”) to plaintiffs’ counsel within 20 days. Notwithstanding that order, the firm did not deliver the file until October 16, which resulted in the October 17 motion being adjourned on consent to December 19. My order permitted the plaintiffs to remove any privileged materials from the file, provided they listed those removed materials in a schedule.

[11] The plaintiffs’ new lawyer received the Chang File on October 16. They had been ordered to deliver the Chang File and the schedule to the defendants by November 15. They did not send the Chang File until the afternoon of December 17, a month late and just a day and a half prior to this motion. I am advised that the Chang File the defendants received has no content from 8 January 2018 to 19 April 2019, not even the emails that are in evidence from Mr. Yau to Mr. Chang. Further, the plaintiffs failed to provide a schedule.

[12] The defendants argue that this motion should be dismissed on that basis alone. They argue that this is indicative of the plaintiffs’ bad faith and lack of concern about complying with court orders. It is most unfortunate that plaintiffs’ new counsel waited 60 days to deliver these materials to the defendants and then on the eve of this motion. It was not what my order required of them. Further, it likely fueled the defendants’ suspicion that documents had been removed from the Chang File, as there was no other plausible explanation for the delay in handing it over. However, I do not find this failure by the plaintiffs’ lawyers to be grounds to dismiss the plaintiffs’ motion. Nor can I find that the month’s delay in turning over the Chang file was something the plaintiffs even knew about, let alone condoned.

[13] Similarly I do not find the failure to serve a schedule supports a dismissal of this motion. I interpret its non-delivery to mean that no privileged or other documents were removed from the Chang File before it was delivered to the defendants. It is likely that the sparseness of the file was not as a result of the plaintiffs removing documents but because Mr. Chang seems to have maintained his file in a manner consistent with his conduct of this action. He seems not even to have kept correspondence from the defendants in the file. I cannot find the plaintiffs responsible for the abject state of Mr. Chang’s file keeping.

[14] While noting that the scope of the court’s discretion should not be circumscribed on a motion such as this and that other factors may come into play, Strathy, J., as he then was, noted the following factors to be considered on a motion under Rule 37.14 in Ontario (Attorney General) v. 15 Johnswood Crescent 2009 CanLII 50751 (ON SC), 2009 CarswellOnt 5765 at paragraph 34:

(1) Proof of accident or mistake: The moving party must establish a failure to appear on the original motion through accident, mistake or insufficient notice. This is a precondition to relief under the rule. A party who has simply chosen not to appear on a motion cannot complain later if he or she does not like the outcome.

(2) The party must move forthwith after the order comes to his or her attention: This is also a precondition to relief under the rule, but there is room for flexibility in the interpretation of "forthwith", depending on the circumstances.

(3) The length of the delay and the reasons for it: In considering whether to set aside an order, the court will consider whether there has been delay in bringing the motion and the reason for it. All other things being equal, the longer an order has been in effect, particularly where parties have acquired rights or changed their positions as a result of the order, the less likely it will be that the court will set it aside.

(4) The presence or absence of prejudice: The court should consider whether a party will be prejudiced by setting aside the order or by failing to set aside the order. There will always be prejudice if an order is made against a party without sufficient notice and there will always be some kind of prejudice to the other party if the order is set aside. Nevertheless, the exercise of the court's discretion may require an examination of the relative prejudice to the parties.

(5) The underlying merits of the moving party's case: It may be necessary to consider the underlying merits of the moving party's case in weighing the various factors, balancing the interests of the parties, and determining what is just in the circumstances. Lengthy delay in bringing the motion may be more readily forgiven if the moving party has a very strong case on the merits. It will be less readily forgiven if the party's case appears frivolous.

1. Proof of Accident or Mistake

[15] The plaintiffs note that this matter proceeded appropriately until November 2017 when Mr. Chang suddenly stopped responding to the defendants when they attempted to set up mediation. On this motion the plaintiffs argue that they should not be penalized by the unexplained failures of their former counsel to respond to them, to defence counsel and to the court.

[16] The defendants ask me to find that it is implausible that Mr. Chang did not advise the plaintiffs of the various motions and to draw an inference that the plaintiffs’ failure to respond was no accident or mistake. They further argue that the plaintiffs brought this action in bad faith, only to ensure that the defendants’ own small claims court action was stalled.

[17] The defendant Mr. Lee deposed that he had not heard from Mr. Chang or anyone at his offices since he was examined for discovery in May 2017, despite sending Mr. Chang a number of faxes and emails. Mr. Freeman’s affidavit is replete with examples of Mr. Chang’s failure to respond to basic requests, usually until faced with a motion to take action. In January 2017 Mr. Chang advised the defendants that he was going to bring a motion to increase the plaintiffs’ damages claim. Then, on or about 9 March 2017 Mr. Chang advised that he would not be proceeding with his motion. He has not been heard from since. The defendants sent Mr. Freeman’s answers to undertakings to Mr. Chang on 8 August 2017. Thereafter they wrote to Mr. Chang to obtain mediation dates, answers to the plaintiffs’ 31 outstanding undertakings and ultimately to advise of their intention to bring a motion to dismiss the action for delay. The plaintiffs themselves have not heard from Mr. Chang since June 2017. The record discloses that Mr. Chang, despite follow up by the plaintiffs and by the defendants, simply stopped responding and supports that it is very plausible that Mr. Chang simply abandoned the file – and the plaintiffs.

[18] I cannot infer that the plaintiffs knew of the motions and chose not to attend or instructed Mr. Chang not to attend. There is no evidence in the Chang File that Mr. Chang forwarded the orders or the motions to his clients or that he was in touch with his clients in any manner. This is consistent with Mr. Chang’s failure to attend in court before Master Sugunasiri, his failure to file an affidavit confirming that he had served his clients with her endorsement, as ordered, his failure to attend before Master Wiebe and his failure to attend before me. It is also supported by his failure to even keep a meaningful file.

[19] Neither can I infer on this record that the plaintiffs brought this action in bad faith. Even if the defendants’ theory were correct that the plaintiffs were using this action only to stall the small claims court collection file, surely the plaintiffs would have responded to a motion to have this action struck, knowing the consequence would be to allow the small claims court action to proceed.

[20] I am satisfied that the plaintiffs were unaware of the motion to have their action dismissed and, further, unaware of the timetable, the breach of which ultimately led to the dismissal. They did not simply choose not to appear on these motions.

2. The party must move “forthwith”

[21] The defendants argue that the plaintiffs knew about the dismissal order in December 2018 and took no steps to bring a motion set it aside until mid 2019. The plaintiffs’ delay of six months in bringing this motion cannot qualify as bringing it “forthwith”. Therefore I have considered the length of the delay and the reasons for it.

3. Length of delay and reasons for it

[22] While there was a delay of almost six months in bringing this motion, I find there is an acceptable explanation for it. In short, the delay lies at the feet of Mr. Chang. The plaintiffs were in contact with his offices, leaving messages and emails, in December 2018, February 2019, March 2019 and April 2019. They finally realized in late March 2019 that Mr. Chang was unlikely to ever respond. While the motion was not brought forthwith after the plaintiffs learned of the dismissal order, they were entitled to try for some time to seek advice from their lawyer about how to proceed. When they gave up in March 2019 and retained new counsel, this motion was brought fairly quickly, a point the defendants concede. There is no evidence that the plaintiffs lost interest in their case or intended to abandon it. The delay from June 2019 to the hearing of this motion was similarly caused by Mr. Chang and his failure to turn over his file to the plaintiffs until he received a court order requiring him to do so. The defendants ask me to infer, based on the alleged failure to deliver Mr. Chang’s full file, that the plaintiffs were aware of the order and that there was communication between Mr. Chang and his clients. That inference is not supported by the conduct of Mr. Chang. The file supports the likely truth that Mr. Chang did not advise the plaintiffs about the steps in this action at all after June 2017, neglecting even to return their calls.

4. Presence or absence of prejudice

[23] The defendants allege they will be prejudiced if the action is allowed to proceed as their small claims court motion will once again be stayed pending the outcome of this action. As it stands, their trial date of 12 August 2019 for payment of 2013 legal fees was adjourned pending the outcome of this motion. While inconvenient, I do not find this is of such prejudice that would warrant the plaintiffs losing their day in court.

[24] Further, I note that the defendants’ suit is for payment of their invoices. The issues raised in that action, namely the competence of the defendants in representing the plaintiffs in a franchise dispute, are the same or similar to those the plaintiffs raise in this solicitors’ negligence action. There can be issue of lost documents or failing memory raised, given the defendants believe they have a record sufficiently complete to allow them to proceed with their own action on the same facts against the plaintiffs.

5. The underlying merits of the plaintiffs’ case

[25] There is little evidence before me on this factor. The plaintiffs do not address this factor at all. On the defendants’ side, the affidavit filed by a student in the office of counsel for Mr. Freeman sets out the lengthy history of the case but, properly, does not address its merits. Mr. Lee did file an affidavit that stated that “through the relentless efforts of CLC and its staff, the civil action was successfully mediated and resolved to the satisfaction of Yau by late 2013.” The evidence I have on the merits is not sufficient for me to determine that it would be unjust to allow it to proceed.

[26] The defendants argue strenuously that the plaintiffs have not come to court with clean hands. In addition to the argument, addressed above, that the plaintiffs brought this action for an improper purpose, the defendants argue that the motion should be dismissed because of the plaintiffs’ ongoing failure to comply with the timetable order of Master Sugunasiri. They have known for months that they had to answer their undertakings by 31 May 2018 and more than 18 months later, those undertakings remain unanswered. Further they have not paid the costs award. I accept that these are relevant factors in determining whether the court should exercise its discretion and set aside the dismissal. However, I understand the plaintiffs’ wish to know if their action was going to be allowed to proceed before turning their mind to the undertakings. The undertakings and the costs can be dealt with imposing a vigorous and peremptory timetable.

[27] The plaintiff’s motion to set aside my order of 12 July 2018 dismissing this action is hereby granted.

Next Steps

[28] The parties shall work together on an acceptable and expeditious timetable for the payment of costs, answers to undertakings, mediation and set down date. If they are unable to agree on a timetable by 31 January 2020, they shall each submit their preferred timetable to me and I shall impose a timetable.

[29] They shall also attempt to resolve the issue of costs, failing which they shall each deliver a costs outline and short submissions to my assistant trial coordinator Ms. Meditskos at christine.meditskos@ontario.ca by 31 January 2020. If either party is seeking costs from Mr. Chang, he is to be served with this endorsement and the costs outline and an affidavit of service with respect to service of these materials on Mr. Chang emailed to Ms. Meditskos. If Mr. Chang intends to take a position on costs, he is to advise the parties and me via Ms. Meditskos by 14 February 2020 and he shall have until 28 February 2020 to serve the parties with his responding materials and deliver them to me via Ms. Meditskos. If Mr. Chang wishes to address costs orally, he is to advise me and the parties in his February 14 response.

Master Jolley

Date: 23 December 2019