Court File and Parties

COURT FILE NO.: Cv-18-602379 DATE: 20200225 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Karen Deer, Plaintiff AND: RBC Dominion Securities Inc. et al., Defendants

BEFORE: Master P. Tamara Sugunasiri

COUNSEL: I. Perry, Counsel for the Plaintiff/Moving Party M. Beeforth, Counsel for RBC/Responding Party

HEARD: November 26, 2019

Reasons for Decision

Overview:

[1] Karen Deer sues RBC Dominion Securities and the other defendants in relation to an allegedly unauthorized margin that the Defendants took out without her knowledge or consent. Deer alleges that RBC purchased shares in 1997 on her behalf on the unauthorized margin account. In or around July 28, 2012, RBC sold all her Canadian dollar holdings and a majority of her U.S. dollar holdings to pay off the margin account debt.

[2] She commenced her action by Notice of Action issued July 27, 2018 amidst discussions about the claim with opposing counsel and relying on section 129.1 of the Securities Act (which limits securities proceedings to six years from the date of the last event upon which the proceeding is based.) She did not, however, file a Statement of Claim within 30 days of the NOA as required by r. 14.03(3) of the Rules of Civil Procedure. In the meantime, the presumptive limitation period under the Securities Act (if applicable) expired.

[3] Deer moves to extend the time to file her Statement of Claim and validate its service on RBC by email on January 4, 2019. RBC opposes the motion. It argues that once Deer failed to “perfect” her claim by filing a timely Statement of Claim, her action came to an end. Allowing her an extension of time to file a Statement of Claim rather than forcing her to file a new claim deprives RBC of one of its limitations defences and therefore causes it non-compensable prejudice.

[4] For the reasons that follow, I allow Deer’s motion. Deer has provided a reasonable explanation for her failure to file a timely Statement of Claim and RBC’s loss of one its limitations defences is not fatal to the motion. The action should proceed on its merits.

Law and Analysis:

[5] Rule 14.03(3) gives that court discretion to grant an extension of time for a plaintiff to file a statement of claim beyond 30 days after she has issued a Notice of Action. In Diemer (Cornacle Cattle Co.) v London Farms Ltd. [1], the Ontario Court of Appeal has confirmed:

a. the applicable test is set out in Nugent v Crook (1969), 40 OR (2d) 110 (CA). The court can extend the time if the materials demonstrate at least one of the four factors set out therein;

b. A failure to file a timely Statement of Claim after a Notice of Action brings the action to an end absent the defendant’s consent or leave of the court; and

c. The expiry of a relevant limitation period in the circumstances of an unperfected Notice of Action gives rise to a rebuttable presumption of prejudice to the respondent.

[6] The Ontario Court of Appeal is clear in Nugent. The court may extend the time to file a Statement of Claim if one or more of the factors exist. The four factors are:

(a) where the writ has not been renewed through the mere slip or inadvertence of the plaintiff's solicitor:

(b) where the writ has not been renewed for some other reasonable cause;

(c) where the defendant's conduct has lulled the plaintiff into a false sense of security;

(d) the absence of prejudice to the defendant by reason of the delay.

[7] The factors are not conjunctive. If any one exists, the court may grant the extension of time. [2] In theory, this means that if there is a reasonable explanation for the delay, but the delay has caused prejudice, the court may still grant the extension.

[8] However, the Court of Appeal does not state that the extension must be granted if one of the factors exist. As in all discretionary decisions, the court must consider the overall interests of justice. This inevitably requires the court to weigh the relative prejudice to the parties and to balance two policy thrusts – one to promote the adjudication of cases on their merits and the other to avoid dilution of the rule of law by permitting parties to disregard legislated Rules of Civil Procedure.

[9] I also note that in Diemer, it appears that the Court of Appeal requires a Plaintiff to address presumptive prejudice arising from the passing of a limitation period where she has failed to perfect her claim by a timely Statement of Claim. This seems to depart from the court’s comments in Nugent. Regardless, having regard to the Nugent factors, the Court of Appeal’s comments in Diemer and the overall justice of the case, I grant Deer and extension of time to file her Statement of Claim.

Deer has provided a reasonable explanation for the delay

[10] RBC argues that Deer has not provided a reasonable explanation for her delay in filing her Statement of Claim. I disagree. On July 27, 2018, Deer issued her Notice of Action and served it on RBC counsel. This was amid discussions between counsel about Deer’s potential claim as set out in her counsel’s detailed letter of June 25, 2018. After that, Deer’s counsel took from September to December of 2018 to review documents spanning over two decades to prepare the Claim. During this time counsel also relocated its office, unexpectedly lost a law clerk, added employees and transitioned the firm’s computer systems. Given the age of the transactions in question, I find this explanation a reasonable one.

Deer has rebutted any presumption of prejudice

[11] In many of not most cases, a limitation period expires between the Notice of Action and the Statement of Claim. Indeed, in this case, even if Deer had filed her Statement of Claim by August 27, 2018 as required, the purported limitation period under the Securities Act would have expired because Deer issued the Notice of Action one day prior to the SA limitation period. However, it appears that the Court of Appeal considered a similar scenario in Diemer. It concluded in that case that failing to perfect a Notice of Action by filing a Statement of Claim within 30 days brought the action to an end. In those circumstances the Court of Appeal faulted the Plaintiff for failing to rebut the presumption of prejudice arising from the passing of the limitation period since the issuance of the Notice of Action. I therefore address this issue.

[12] The presumption of prejudice arising from the passing of a limitation period is often based on the notion that a defendant has been unable to investigate the claim, must rely on faded memories and is deprived of the finality otherwise afforded to defendants by limitations legislation. In the present case, the evidence reflects that Deer has been in discussions with RBC since 2012 when she says she became aware of the use of her Canadian and US holdings to fund an alleged deficit in the margin account. She contacted counsel in May of 2018 who then wrote to RBC in June of 2018 to set out her concerns. That letter provided a detailed explanation of Deer’s concerns including the heads of damages under which she would seek relief. Counsel then discussed the issues and RBC was able to provide Deer with a copy of the 1997 Margin Agreement at issue in the dispute.

[13] In other words, as early as June of 2018, RBC was aware of Deer’s concerns and had an opportunity to investigate them. It clearly has access to the key document in a document driven case. There would also be no basis for RBC to rely on a sense of finality. Deer was in touch with RBC since 2012, and prior, to resolve the problem. While there appears to have been no communication with RBC for a period of five months after issuing the Notice of Action, RBC does not attest that it thought her Claim was dead on the vine.

There is no actual prejudice to RBC

[14] In considering the overall justice of the relief sought, I consider any actual prejudice to each party. RBC has not tendered any evidence of actual prejudice. While not a requirement, evidence of actual prejudice would solely be in RBC’s knowledge and evidence of it would be relevant to the exercise of my discretion. One would think that if it existed, RBC would tender it. I also note that RBC received the Statement of Claim prior to the service deadline that would have applied if Deer had filed her Statement of Claim by August 27, 2018, as required. Had she done that, she would have had until February 27, 2019 to serve RBC with it. In other words, RBC is in no worse a position now than it would have been if Deer had perfected her Notice of Action in time.

[15] RBC argues that its actual prejudice is the loss of a substantive limitations defence. Currently, Deer’s action is at an end (as per Diemer). This means that she would have to file a new Statement of Claim that is clearly outside even the Securities Act limitation period. If I allow Deer to proceed on the force of her Notice of Action, she is presumptively within the Securities Act limitations period and RBC would lose that aspect of its limitations defence. It would then have to rely exclusively on other limitations arguments related to discoverability and inapplicability of the Securities Act to have Deer’s action summarily dismissed.

[16] In Strazisar v. Canadian Universal Insurance Co. [3], County Court Judge Borins (as he then was) considered this very issue in a motion to renew a writ of summons (the type of motion considered by the Court of Appeal in Nugent). In discussing prejudice, he stated that:

In this type of case it would seem that the Court is balancing the prejudice to the plaintiff which would result if the action cannot proceed because of the intervention of a limitation period against any prejudice to the defendant if the action is permitted to proceed ... It is prejudice to the defendant in maintaining a defence on the merits that is to be considered ... and not the mere fact that if the renewal is granted the defendant will lose a technical defence of statute of limitations. [my emphasis].

[17] I am unaware of any case that has altered this view and neither party provided any case on point. As such I adopt the court’s approach in Strazisar.

Deer’s claim would be stopped in its tracks

[18] While RBC may lose one part of a broader limitations defence, denying Deer’s motion would stop her claim in its tracks. It is clear from the evidence that she issued the Notice of Action in order to preserve the limitation period in the Securities Act. Whether that is a successful approach is not for this court to determine. What I can conclude is that Deer’s claim would have no chance of success if she cannot proceed on the force of her Notice of Action. On Deer’s own evidence of discoverability, a new Statement of Claim would clearly be outside the time limit imposed by the Securities Act if applicable, or the Limitations Act, 2002.

Conclusion:

[19] In this case, the policy thrust of actions being heard on the merits outweighs the importance of parties adhering to legislated rules. I do not find Deer’s violation of the Rules of Civil Procedure so egregious that it disqualifies her from pursuing her claim or brings the administration of justice into disrepute. I find that she always intended to pursue her claim and was not able to file her Statement of Claim as a result of the work that counsel needed to do and the firm’s relocation. She has rebutted any presumption of prejudice to RBC. There is also no actual prejudice to RBC.

Disposition:

[20] I extend to time for Deer to file her Statement of Claim to one week from today’s date. Her Notice of Action remains valid. I also validate service of the Statement of Claim as of the date of filing. I make no order as to when RBC must deliver its Statement of Defence. The Rules speak for themselves. If RBC requires an extension of time to deliver its Defence, I expect Deer to accommodate any extension requests. If required, RBC may bring a motion before me to extend to time to deliver its Defence.

Costs:

[21] I strongly urge the parties to agree on costs. I note that Deer has sought an indulgence of the Court. If the parties cannot agree on costs, they may contact my assistant trial coordinator, Christine.Meditskos@ontario.ca to book a 20 minute appearance on of my regular motions lists.

Original signed Master Sugunasiri Date: February 25, 2020

[1] Diemer (Cornacle Cattle Co.) v London Farms Ltd., 2016 ONCA 946 at paras. 3 and 7. [2] See for example Rafeek v Yao, [2007] OJ No 5126. [3] Strazisar v Canadian Universal Insurance Co., [1981] OJ No 2194 at para. 27 (Co.Ct.).