COURT FILE NO.: CV-15-3640-SR
DATE: 20210901
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
YACHUAN GU also known as Brite Gu
Anser Farooq, for the Plaintiff
Plaintiff
- and -
BING WANG also known as Brian Wang, WANXIN HUANG also known as Cindy Huang, RONG CHANG GAO and 1894944 ONTARIO INC.
Heng (Pandora) Du, for the Defendant, Rong Chang Gao
Defendants
HEARD: August 19th, 2021
REASONS FOR DECISION
LEMAY J
[1] This is a motion brought by the Defendant, Mr. Rong Chang Gao (“Mr. Gao”) for an order dismissing the action for delay as well as an order vacating the pre-trial date and removing the matter from the trial list. The matter was placed on the trial list and the pre-trial date was set by Ricchetti R.S.J. at Assignment Court on June 28th, 2021, prior to this motion for delay being returnable.
[2] The underlying action in this matter was commenced on August 7th, 2015. On September 18th, 2015, the Statement of Claim was served on Mr. Gao. No Statement of Defence was filed by Mr. Gao up until September 12th, 2017 when he was noted in default. Mr. Gao subsequently advised the Court and the Plaintiff that he had not known about the Statement of Defence. A motion to set aside the noting in default was brought on in mid-2019 and an order was issued setting aside the noting in default on July 4th, 2019.
[3] On May 14th, 2021, counsel for Mr. Gao wrote to Mr. Gu’s counsel to follow up on this matter. Within the week, the notice of pre-trial conference had been served and the matter had been placed on the trial list by Mr. Gu’s counsel. The Defendant Gao asserts that this motion should still be granted as a result of the alleged prejudice he will suffer, even though the matter is now listed for trial and a pre-trial and trial date has been set.
[4] For the reasons that follow, the Defendant’s motion is dismissed.
Background Facts
a) The Parties and the Claim
[5] This action concerns a business called Easonview Media Inc. The Plaintiff, Mr. Gu was a shareholder in this business and was also offered the opportunity to do some work for the company. Easonview is a company that was apparently incorporated to work in the area of digital signage. Although Easonview is not listed in the style of cause as a Defendant, the Statement of Claim states that it is also one of the Defendants.
[6] The Defendants Bing (Brian) Wang, Wanxin Huang and Mr. Gao were all also shareholders in the company. Mr. Wang lives in Markham but is taking no part in this motion. Mr. Huang apparently lives in China. Mr. Gao is the Defendant bringing this motion.
[7] Based on the evidentiary record before me, it appears that Mr. Wang and Mr. Gao were also both directors of Easonview. There is also a numbered company, 1894944 Ontario Inc. that is listed as a Defendant in this action. The numbered company was apparently supposed to be sold to Easonview media, but the sale allegedly never took place.
[8] Mr. Gu’s claim states that he asked to see Easonview’s finances in late 2014. Mr. Gu’s claim states that, when he reviewed the finances of the business, he determined that funds between Easonview and the numbered company were being intermingled and that Mr. Wang was taking money out of the business for his personal use. Mr. Gu’s claim also asserts that clients were being diverted away from Easonview to the detriment of Easonview.
[9] Based on these allegations, a claim for unjust enrichment and other relief under the Business Corporations Act (including a claim under the oppression remedy provisions) was launched. This claim was commenced in June of 2015. The total value of Mr. Gu’s claim is apparently $46,500.00.
[10] I have set these allegations out in order to provide some context to this litigation. Given that this is a procedural motion, I am not making any findings of fact and nothing in this decision should be taken as a finding that binds the trial judge.
b) The Procedural History
[11] The Statement of Claim in this matter was issued in June of 2015. It was served on Mr. Gao when the process server left a copy with his daughter Rebecca on September 18th, 2015. At the time that Rebecca was served, she was a minor. However, Mr. Gao’s Affidavit acknowledges that his daughter Rebecca recalls receiving the documentation and that she simply put the sealed envelope in a pile of papers. Mr. Gao did not respond to the claim and he was noted in default on September 12th, 2017. A default judgment was issued by the Court on March 21st, 2018.
[12] Once the default judgment was issued, the Plaintiff Mr. Gu sought to conduct an examination in aid of execution. Mr. Gao received notice of this examination in aid of execution in January of 2019. Once the default judgment came to Mr. Gao’s attention, he took some time to retain a lawyer. Mr. Gao’s current lawyer was retained on May 1st, 2019 and contacted Mr. Gu’s lawyer on May 2nd, 2019.
[13] At this point, the only Defendant that is still actively participating in the action is Mr. Gao. Mr. Wang delivered a Statement of Defence on January 6th, 2016 and nothing further has been done with the action against Mr. Wang.
[14] The motion to set aside the default judgment was granted on terms that the parties consented to on July 4th, 2019 and Mr. Gao served his Statement of Defence on the same day. The terms of setting aside the default judgment were that Mr. Gao would pay Mr. Gu costs of $1,500.00. No further steps were taken in the matter by either side for approximately twenty-two (22) months.
[15] Then, on May 14th, 2021 Mr. Gu’s counsel, wrote to inquire about discovery and an Affidavit of Documents. A few days later, on May 19th, 2021, Mr. Gu served his Affidavit of Documents on Mr. Gao’s counsel. On May 20th, 2021, Mr. Gu served his Notice of Readiness for Pre-Trial Conference on Mr. Gao’s counsel.
[16] In early June, 2021, Mr. Gao’s counsel obtained a motion date for a motion to have this action dismissed for delay under either Rule 24 or Rule 48. A few days after that motion date was obtained, the parties received a Notice of Assignment Court for June 28th, 2021.
[17] At the assignment Court on June 28th, 2021, Defendant’s counsel raised the issue of whether this action should be on the trial list because the other Defendants were not participating. Ricchetti R.S.J. proceeded to set a pre-trial date in December of 2021 and to place this matter on the May, 2022 blitz list.
[18] The motion for delay was subsequently scheduled for August 19th, 2021 and was argued before me on that day.
Issues
[19] In this case, I must determine whether the action should be dismissed under either Rule 48 or Rule 24. In that regard, the following questions need to be answered:
a) Is Rule 48 applicable to this case?
b) If Rule 48 is not applicable to this case, should I apply the test under Rule 24 and dismiss this action?
[20] I will address each issue in turn.
Issue #1 – Does Rule 48 Apply to This Case?
[21] No.
[22] Mr. Gao’s counsel directs my attention to Rule 48.14(1), which states:
48.14 (1) Unless the court orders otherwise, the registrar shall dismiss an action for delay in either of the following circumstances, subject to subrules (4) to (8):
The action has not been set down for trial or terminated by any means by the fifth anniversary of the commencement of the action.
The action was struck off a trial list and has not been restored to a trial list or otherwise terminated by any means by the second anniversary of being struck off.
[23] Counsel for Mr. Gao argues that the provisions of the Rule are mandatory. Since this action was started more than five years ago, counsel argues that the action must be dismissed by operation of this Rule. I disagree.
[24] I start by noting that more than five years passed between the time the Statement of Claim was filed and the time that the matter was set down for trial. Theoretically, this would mean that the Rule could apply. Counsel for Mr. Gao argues that the Rule must apply. However, there are three problems with this argument.
[25] First, for the time between September of 2017 and July of 2019, almost two years, Mr. Gu had either a noting in default or a default judgment against Mr. Gao. Neither counsel was able to identify a case for me where either this Court or the Court of Appeal has discussed which party should be responsible under Rule 48 for a time period in which the Plaintiff had either noted the Defendant in default or had received a default judgment. After the motion was taken under reserve, I conducted some legal research and was also unable to find a case directly on point.
[26] However, in spite of the absence of case-law directly on point, counsel for Mr. Gao still argued that the words of Rule 48.14 are mandatory. She argues that the Rule requires the Court to dismiss the action if more than five years have passed and the action has not been placed on the trial list. I disagree.
[27] In assessing the period of delay under either Rule 24 or Rule 48, the Court of Appeal’s decision in D’Souza v. Brunel International Inc. (ITECC Consulting) is instructive. In that decision, van Rensburg J.A. states (at para 8):
[8] In a motion to restore an action to the trial list, where the effect of refusing the order is to bring the action to an end, the court must determine whether a reasonable explanation has been provided for the relevant period of delay and whether the defendant will suffer non-compensable prejudice if the action is restored to the trial list. Where delay has been addressed in a prior court order, or consented to, it is any subsequent delay that requires explanation: Stokker v. Storoschuk, 2018 ONCA 2, 140 O.R. (3d) 473, at para. 5. And while the court should not mechanically review each step in an action and require a plaintiff to explain every period of delay, the overall delay of the plaintiff in prosecuting the action is a factor that can inform the court’s assessment of whether an acceptable explanation has been provided by the plaintiff and whether the defendant will suffer non-compensable prejudice if the action is restored to the trial list: Carioca’s, at para. 62; Stokker, at para. 14.
[28] This passage makes it clear that the Court must consider whether there is an explanation for any delay under Rule 48.14. In assessing the delay in this case, Mr. Gao was served in 2015 by way of a copy of the claim being left with his daughter at his residence. The fact that this service took place is not denied. Based on this service, the Plaintiff in good faith asked for both a noting in default and a default judgment. It was almost four years after he was served with the Statement of Claim when the Defendant Gao finally contacted the Plaintiff and asked to have the default judgment that had been granted set aside.
[29] This is not a delay that is the Plaintiff’s responsibility. The Plaintiff proceeded in good faith with default proceedings. Although they could have been done faster, that is not something that the Defendant can complain about as he was not participating in the action. As a result, I am of the view that the bulk of the delays in this case (approximately four of the six years) are not the fault of Mr. Gu and should not trigger any liability or responsibility under the Rules of Civil Procedure.
[30] I am fortified in this conclusion by a consideration of the purposes of Rule 48.14. As MacLeod R.S.J. noted in Sirotek v. O’Dea 2020 ONSC 3427 at para 21 “the purpose of Rule 48.14 is not to set a trap for unwary plaintiffs but to weed out inactive files and keep the Court information current”. Applying Rule 48.14 in the technical manner suggested by Mr. Gao’s counsel would be contrary to the purpose of the Rule. Indeed, counsel’s interpretation of the Rule would result in traps being regularly set for unwary plaintiffs.
[31] Second, there was a significant period of time between March 16th, 2020 and September 13th, 2020 where limitation periods did not run as a result of the pandemic. See Ont. Reg. 73/20. This is time that must be deducted from the amount of time between the service of the Statement of Claim and the setting of this matter down for trial. This deduction results in the time period between the service of the claim in September of 2015 and the date that the matter was set down for trial being reduced to just over five years. This is another factor that favours dismissal of the Defendant’s motion.
[32] Third, even if the five year period in Rule 48.02 was triggered, the Rule also provides the Court with discretion to “order otherwise”. In my view, for the reasons I have discussed above, it would be contrary to the Rules to permit Mr. Gao to have this action dismissed on the basis of a period of delay in which he either had been noted in default or had a judgment issued against him.
[33] In addition, on the facts of this case, it would be an abuse of process to allow Mr. Gao to proceed with this motion after the matter had been set down for trial. Mr. Gao’s counsel argued that it was the Plaintiff’s obligation to move the action forward. That may be true. However, if the Defendant wished to avail himself of the provisions of Rule 48, his motion should have been brought before the matter was set down for trial. He had two years from when the default judgment was set aside to when the matter was set down for trial to move to dismiss this action for delay and he took no steps to do so.
[34] As a final matter, Mr. Gao has argued that it is up to the Plaintiff to show that there is no prejudice in this case. The burden of proof lies on the Plaintiff when a motion is brought to set aside a dismissal under Rule 48.11. See Cardillo v. Willowdale Contracting et. al. 2020 ONSC 2193 and Ever Fresh Direct Foods v. Jamia Islamia Canada 2021 ONSC 1278. However, this is a motion brought by the Defendant to mandate the Court to dismiss the action under Rule 48.12 after it has been placed on the trial list.
[35] Therefore, I am of the view that, in these circumstances, the burden of proof falls on the Defendant to establish prejudice. It is the Defendant who is asking for relief. In a motion to set aside a noting in default under Rule 48.11 it is the Plaintiff who is asking for relief. The party seeking the relief should bear the burden of establishing that the relief should be granted. However, I will address the issue of prejudice more fully in my discussion of Rule 24, which follows.
[36] For these reasons, I decline to dismiss this action under Rule 48.
Issue #2 – Rule 24
[37] The Defendant seeks to have this action dismissed for delay under Rule 24.01. This Rule states:
24.01 (1) A defendant who is not in default under these rules or an order of the court may move to have an action dismissed for delay where the plaintiff has failed,
(a) to serve the statement of claim on all the defendants within the prescribed time;
(b) to have noted in default any defendant who has failed to deliver a statement of defence, within thirty days after the default;
(c) to set the action down for trial within six months after the close of pleadings; or
(d) Revoked: R.R.O. 1990. Reg. 194, r. 24.01 (2).
(e) to move for leave to restore to a trial list an action that has been struck off the trial list, within thirty days after the action was struck off. R.R.O. 1990, Reg. 194, r. 24.01; R.R.O. 1990, Reg. 194, r. 24.01 (2); O. Reg. 770/92, s. 7; O. Reg. 533/95, s. 4 (1).
(2) The court shall, subject to subrule 24.02 (2), dismiss an action for delay if either of the circumstances described in paragraphs 1 and 2 of subrule 48.14 (1) applies to the action, unless the plaintiff demonstrates that dismissal of the action would be unjust. O. Reg. 259/14, s. 6.
[38] Counsel’s argument focused specifically on subparagraph 24.01(2). Counsel argues that, where a Defendant moves to dismiss an action for delay under this provision and more than five years have passed, there is a presumption of prejudice to the Defendant.
[39] It is necessary to step back and consider the test for dismissing an action under Rule 24.01. As Daley J. noted in Ever Fresh, supra at para 80:
[80] The jurisprudence under rule 24.01 states that an order dismissing an action for delay under this rule is warranted where: (I) the default is intentional or contumelious; or (II) the delay is inordinate, inexcusable, and prejudicial to the defendant, in that it gives rise to a substantial risk that a fair trial of the issues will not be possible.
[40] In this case, it is impossible to say that the delay was intentional or contumelious. The Plaintiff was under the impression, for most of the time period in issue, that he had the right to a default judgment in this case. There is no merit to the suggestion that the Plaintiff’s failure to energetically pursue the judgment he was holding is an intentional or contumelious delay.
[41] The lack of an intentional or contumelious delay would, on the facts of this case, be sufficient to dismiss the motion under Rule 24. However, Mr. Gao has vigorously argued the question of prejudice. On that issue, I note that Mr. Gao has stated that “although I was named as a director, I was not involved in the actual operation of Easonview”. Mr. Gao’s assertions that he was not involved in the business and, as a result, does not know anything about its operation is not prejudice in the sense that the term is used in the case law interpreting either Rule 24 or 48.
[42] Instead, these are all factual assertions made by Mr. Gao that need to be tested at trial. If Mr. Gao’s evidence is believed, then Mr. Gu’s claim is more likely to be dismissed. However, Mr. Gao’s claims that he knows nothing about this case do not amount to prejudice within the meaning of the case law. They are evidentiary assertions that are relevant to the merits.
[43] In any event, as counsel for the Plaintiff has pointed out, there are some factual discrepancies in Mr. Gao’s Affidavit on this motion. In particular, in paragraph 8 of his Affidavit, Mr. Gao states “I have no documents respecting the establishment and/or operation of Easonview in my possession.” As far as I am aware, Mr. Gao has not delivered an Affidavit of Documents in this case.
[44] In any event, however, Mr. Gao’s own Affidavit indicates that he was assigned some work in the business. Further, Mr. Gao’s own Affidavit includes documentation between the Plaintiff and the Defendant Wang in November and December of 2014. Mr. Gao certainly has some records in this case. I am concerned that those records have not been produced. Given the failure of Mr. Gao to produce these documents and perhaps others in his possession, I would not be prepared to find that he has been prejudiced by the delays in this action even if those delays were the responsibility of Mr. Gu.
[45] Finally, Mr. Gao’s counsel argued that he would be prejudiced because Mr. Gu was not proceeding with his claim against the other Defendants. Counsel did not offer any case-law in support of this assertion and I was unable to find any in my review of the case-law. I also reject this argument for two reasons:
a) There is nothing in the Rules of Civil Procedure that requires the Plaintiff to bring an action against all the potential parties to the transaction. The fact that another party is not present and is responsible for the damages may be a defence to the claim, but it is not “prejudice” as that term is understood under either Rule 24 or 48.
b) On the facts of this case, Mr. Gao has failed to show any prejudice that might arise. For example, Mr. Gao has not shown any efforts that he has made to find these documents or obtain information from the other Defendants.
[46] For these reasons, the Defendant’s motion is also dismissed under Rule 24.
Conclusion and Costs
[47] For the foregoing reasons, the Defendant Gao’s motion is dismissed.
[48] The parties are strongly encouraged to agree on the costs of this motion. Failing agreement, the Plaintiff shall provide his costs submissions within seven (7) calendar days of the release of these reasons. Those costs submissions shall be no longer than three (3) single-spaced pages, exclusive of bills of costs, case-law and offers to settle.
[49] The Defendant Gao shall provide his costs submissions within seven (7) calendar days of receiving the Plaintiff’s costs submissions. Again, those costs submissions shall be no longer than three (3) single-spaced pages, exclusive of bills of costs, case-law and offers to settle.
[50] All costs submissions are to be filed with the Court Office. In addition, a copy of those costs submissions are to be sent to my judicial assistant at karen.bunbury@ontario.ca. BOTH methods of filing are required.
[51] There shall be no extensions for the time-limits for receiving costs, even on consent, without my leave. If costs submissions are not received in accordance with the timetable that I have set out, then there shall be no costs for this motion.
LEMAY J
Released: September 1, 2021
COURT FILE NO.: CV-15-3640-SR
DATE: 20210901
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
YACHUAN GU also known as Brite Gu
Plaintiff
- and -
BING WANG also known as Brian Wang, WANXIN HUANG also known as Cindy Huang, RONG CHANG GAO and 1894944 ONTARIO INC.
Defendants
REASONS FOR DECISION
LEMAY J
Released: September 1, 2021