Court File and Parties

COURT FILE NO.: CV-14-510545 MOTION HEARD: 20201216 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Joseph Longo, Plaintiff AND: Henry Yu Cheng et al., Defendants

BEFORE: Master J. E. Mills

COUNSEL: J. Van Allen, Counsel, for the Moving Party Plaintiff S. Babwani, Counsel, for the Responding Party Defendants

HEARD: December 16, 2020

Reasons for Decision

[1] This motion brought by the plaintiff to set aside a Registrar’s dismissal for delay proceeded today by Zoom. For the reasons that follow, the motion is granted and the Registrar’s dismissal is hereby set aside.

[2] The motion was initially filed in November 2019 and pursuant to my order dated January 8, 2020, the matter was fixed for a hearing on May 20, 2020. Due to the restricted court operations arising from the Covid-19 pandemic, the motion was then adjourned sine die. The eleven-month delay in hearing this motion from January 2020 to date cannot properly or fairly be attributed to either party. The motion was brought in a timely manner.

[3] The plaintiff issued his Statement of Claim on August 19, 2014, seeking damages arising from an alleged breach of a lease agreement in respect of commercial premises where the defendants operated a grocery store business. The matter is a Simplified Procedure action.

[4] There was a Demand for Particulars delivered by the defendant which went unanswered by the plaintiff’s two prior counsel for approximately four years. The delay cannot now be fully explained as there appears to be limited documents in the prior files to disclose the efforts undertaken by both prior counsel during this period to meaningfully advance the litigation.

[5] Rather than provide a proper response to the Demand for Particulars, the plaintiff’s counsel instead took out default judgment against the defendants and commenced enforcement proceedings with the filing of a Writ of Seizure and Sale and a Notice of Garnishment.

[6] Once the existence of the default judgment was discovered, the defendant immediately took steps to have it set aside. By order of Master McGraw, the judgment was set aside and the plaintiff was ordered to provide a response to the Demand for Particulars.

[7] For the next several months, the parties engaged in further procedural wrangling in respect of the Demand for Particulars which necessitated a further court order, and a motion threatened by the defendants to strike portions of the Statement of Claim. Eventually a Statement of Defence was delivered on March 1, 2019, four and a half years after the Statement of Claim was issued.

[8] The evidence of the plaintiff’s current counsel is that in preparing the Affidavit of Documents, it came to his attention that five years had elapsed since the commencement of the litigation and that the registrar had dismissed the action for delay. It appears from the evidence that neither counsel received notice of the dismissal. When the plaintiff’s third counsel assumed carriage of the action in December 2018, he noted the five-year anniversary date but for reasons unknown, the date was not put into the firm’s tracking system and it passed without warning due to counsel’s inadvertence.

[9] The relevant test to set aside a Registrar’s Dismissal Order is the application of the Reid Factors with a contextual analysis in an effort to balance the interests of the parties and to ensure justice is done in all of the circumstances. [1]

[10] The Reid Factors require the moving party to a. provide an adequate explanation for the litigation delay; b. lead evidence to establish inadvertence in missing the deadline; c. demonstrate the motion was brought promptly; and d. establish there was no significant prejudice to the defendant in presenting their case at trial as a result of the plaintiff’s delay. While it is not necessary to satisfy all four factors, the court will give due consideration to each when exercising its discretion. [2] Prejudice will be a key consideration. [3]

[11] The plaintiff bears the primary onus to address the Reid Factors with respect to the conduct of the action, however the defendant’s conduct will also be a relevant consideration in the court’s analysis. [4]

[12] In the exercise of my discretion in this matter, I am particularly cognizant of the Court of Appeal decision in H. B. Fuller Company v. Rogers wherein the court considered the countervailing policies of deciding actions on their merits but in a manner that is timely and efficient so as to ensure public confidence in the administration of justice is maintained at all times. The bias must always favour resolving disputes on their merits. “Procedural rules are the servants of justice not its master … We should strive to avoid a purely formalistic and mechanical application of time lines that would penalize parties for technical non-compliance and frustrate the fundamental goal of resolving disputes on their merits.” [5]

[13] This approach is of particular importance when the dismissal for delay is as a result of an error committed by counsel. The inadvertence of counsel ought not to result in the irrevocable loss by the client of the right to proceed to a determination of the action on its merits. [6] The fact that there may be a right of recovery from counsel’s insurer is not an answer nor necessarily an appropriate remedy.

[14] Examining the Reid Factors in the context of this action, it is conceded the motion to set aside the dismissal order was brought promptly, without delay.

[15] The plaintiff and his counsel have explained much of the litigation delay, even though the explanation may be characterized as less than entirely satisfactory. There is no meaningful explanation for the delay from October 2014 until the initial counsel was removed from the record in December 2016 as the firm no longer exists and there appears to be no file in existence from that time. It is unknown what steps, if any, were taken to advance the litigation. In my view, this situation must not be heavily weighed against the plaintiff in the exercise of my discretion as it is a entirely beyond the plaintiff’s control.

[16] The change of counsel after the initial Demand for Particulars appears to have sent this matter off the rails in early 2017. It is unclear whether the plaintiff’s second counsel was aware of the unanswered Demand for Particulars; one would assume not since she proceeded to take out default judgment and pursue enforcement proceedings. Once the judgment was set aside, further delays were occasioned in providing an appropriate response and in setting aside a further noting in default. The steps taken by counsel during this period of time could be generously characterized as misguided. They do however indicate an intention by the plaintiff and his counsel to pursue the litigation. There was no evidence the plaintiff abandoned his claim during this period of delay.

[17] Following the appointment of the plaintiff’s third and current counsel, time and effort were expended dealing with outstanding garnishments and writs of seizure and sale from the improper default judgment. This too occasioned further delay in moving the litigation forward. Counsel did commence drafting an Affidavit of Documents, which has been the first positive step in this litigation in some time. An inquiry was made of the defendant to consider mediation. All efforts, although modest, indicate the plaintiff’s intention to proceed with the litigation.

[18] The deadline to set this action down for trial passed as a result of inadvertence. I accept the explanation of counsel that the failure to set the matter down for trial or to bring a motion for a status hearing was an oversight. This is not a case of conduct so egregious as to elevate it to the level of solicitor’s negligence.

[19] I have not been persuaded the defendants will suffer any non-compensable prejudice as a result of the delay. They have been aware of the action since 2014 and have already been provided with many of the documents upon which the plaintiff will rely at trial, despite not having delivered a properly sworn Affidavit of Documents. If there are relevant documents omitted from the plaintiff’s productions, they may be pursued by way of discovery. There is speculation by counsel but no evidence before me to suggest that relevant documents have been destroyed, no longer exist or cannot be located.

[20] Early notice of the action was given. The defendants are under a positive obligation to preserve documents within their possession or control and to identify and perhaps interview necessary witnesses. I understand former employees of the corporate defendant can no longer be located but I have no evidence to suggest they would be required at a trial of this action. Victor Liu, the former business partner of the defendant Cheng, has been located by counsel for the plaintiff and is available to give evidence. The plaintiff and the defendant Cheng remain available to give evidence in the action and they, together with Mr. Liu, are the individuals with first-hand knowledge of the issues and events in dispute.

[21] The issues for determination do go beyond those of a breach of commercial lease dispute. The defendants have raised Limitations Act defences in their Statement of Defence. These however are issues to be determined on another day. They do not constitute prejudice arising from the delay in advancing this litigation. The issues existed at the time the action was commenced.

[22] In the context of the litigation as a whole, balancing the interests of both parties, I am satisfied the plaintiff has met his burden under the Reid Factors and the defendants have failed to establish real prejudice as a result of the overall delays in the litigation or as a result of the Registrar’s dismissal for delay. It is in the interests of justice that this action be permitted to proceed to an adjudication of the merits.

[23] The parties are to negotiate a timetable to ensure this matter is advanced without any further delay. The action shall be set down for trial by June 30, 2021, failing which it may be dismissed for delay.

[24] The plaintiff has been wholly successful on this motion and would ordinarily be entitled to his costs. Counsel for the plaintiff is not however seeking costs of this motion. Having given the plaintiff a lifeline, counsel submits it is appropriate for the defendant to be awarded his costs of $15,000. This is a motion that ought to have proceeded on consent with a strict timetable imposed more than a year ago. The costs incurred by the defendant are unreasonable and were entirely avoidable. In the circumstances, there shall be no order as to costs.

Master J. E. Mills Date: December 17, 2020

Footnotes

[1] Reid v. Dow Corning Corp., [2001] O.J. No. 2365 at paras. 40-41; reversed on other grounds, Reid v. Dow Corning Corp., [2002] O.J. No. 3414 (Div. Ct.); H. B. Fuller Company v. Rogers (Rogers Law Office), 2015 ONCA 173 at paras. 20-27. [2] Scaini v. Prochnicki, 2007 ONCA 63. [3] Karagiannis v. Riapov, 2018 ONSC 2575 (DivCt); MDM Plastics Limited v. Vincor, 2015 ONCA 28. [4] H. B. Fuller, supra., at para. 23. [5] Ibid., at paras. 25-26. [6] Ibid., at para. 27.