RDA Inc. v. Orrico, 2022 ONSC 1023

Court File No.: CV-16-559083 Released: 2022/02/14 Superior Court of Justice - Ontario

Re: RDA Inc., RDA Corp. and RDA Ltd. v. John Orrico, Orrico Holding Inc., Orrico Financial Services Inc., Enzo Ferrari and Ferrari & Associates Insurance and Financial Services Inc.

Before: Associate Justice Graham Heard: February 11, 2022

Counsel: Tushar Sabharwal for the plaintiffs (moving parties) Jamie VanWiechen for the defendants

Reasons for Decision

(Re: plaintiffs’ motion for a status hearing)

[1] The plaintiffs allege that they entered into an agreement with the defendant John Orrico pursuant to which Orrico would represent them in the sale of insurance products and financial services, and in servicing their existing customers. The plaintiffs claim that, while still their employee, Orrico solicited various RDA clients to switch their insurance provider to the corporate Ferrari defendant, in breach of his agreement with RDA.

[2] The statement of claim was issued on August 22, 2016 and following a demand for particulars from the defendants and the plaintiffs’ response, the defendants served their statement of defence and counterclaim on February 15, 2017. Pleadings closed on September 11, 2017 when the plaintiffs delivered their reply and defence to counterclaim.

[3] The plaintiffs served an unsworn affidavit of documents in late November, 2017 and the Orrico defendants served their unsworn affidavit of documents in March, 2018. The unchallenged evidence of the defendants is that the parties agreed to provide sworn affidavits of documents at examinations for discovery.

[4] It is agreed by the parties that following service of the Orrico defendants’ affidavit of documents in March, 2018, the plaintiffs took no steps to advance their claim until September 27, 2021 when plaintiffs’ current counsel advised that he had assumed carriage of the matter and requested defendants’ counsel’s consent to an order extending the deadline for setting the action down for trial and to a timetable for the balance of steps in the action. Defendants’ counsel would not agree to do so because of the long delay in the action.

[5] The plaintiffs now move for an extension of the deadline to set the action down for trial from the current deadline of February 20, 2022 to October 15, 2022 and for a timetable for the completion of further steps in the action prior to that date.

Applicable rules and case law

[6] Rule 48.14(1) of the Rules of Civil Procedure 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):

1. The action has not been set down for trial or terminated by any means by the fifth anniversary of the commencement of the action. [emphasis added]
2. 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. . . .

[7] The fifth anniversary of the commencement of this action, which would have precipitated the dismissal of the action for delay by the registrar, was August 22, 2021. Owing to the Covid-19 pandemic, the deadline was extended to February 20, 2022, and it is this deadline that the plaintiffs seek to extend on this motion. The parties agree that under rules 48.14(5) and (6) the hearing of the motion shall be convened as a status hearing.

[8] Under rule 48.14(7), at a status hearing, “the plaintiff shall show cause why the action should not be dismissed for delay” and the court may “dismiss the action for delay” or “set deadlines for the completion of the remaining steps necessary to have the action set down for trial . . .”.

[9] The test to be applied at a status hearing was established by the Court of Appeal in 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 and reiterated in Faris v. Eftimovski, 2013 ONCA 360 (at para. 42):

42 . . . [A] plaintiff bears the burden of demonstrating that there is an acceptable explanation for the delay in the litigation and that, if the action was allowed to proceed, the defendant would suffer no non-compensable prejudice.

[10] Other relevant cases stand for the following principles:

• The plaintiff, having commenced the proceeding, bears primary responsibility to move the action along. (Wellwood v. Ontario Provincial Police, 2010 ONCA 386 at para. 48)
• The conduct of the defendant may be relevant, such as where a plaintiff who tries to move an action along is faced with some resistance or tactics that are not consistent with a willingness to see a relatively straightforward case proceed expeditiously. (1196158 Ontario Inc., supra at para. 29)
• Whether an explanation for delay is “acceptable” depends on the circumstances of each case [citation omitted]. “Acceptable” does not mean that the explanation must be “good”, only “adequate” or “passable” and “cogent” and the terms “acceptable”, “satisfactory” and “reasonable” are interchangeable in this regard [citations omitted]. The progress of an action does not have to be ideal and the court should not conduct a week by week or month by month analysis [citations omitted]. A plaintiff may have to give a more robust explanation to explain delay after five years than was the case after two years under the previous rule [citations omitted]. (Super A Hotels Investment and Management Group Inc. v. 1205723 Ontario Inc., 2020 ONSC 6785 at para. 23)
• “Although the court must be guided by the applicable two-part test, the determination as to whether to allow an action to proceed is discretionary and determining whether it would be unfair of the action to be dismissed requires a consideration of the circumstances and a balancing of the parties’ respective interests.” (Super A Hotels, supra at para. 18)
• “Dismissals for delay involve a careful balancing between two competing values. On the one hand, the Rules of Civil Procedure need to be enforced in a way that ensures timely and efficient justice, in the interests of plaintiffs, defendants and society in general. On the other hand, society in general, and the parties, have an interest in the resolution of disputes on their merits and in the availability of flexibility to avoid potentially draconian results, by providing the opportunity for parties to offer a reasonable explanation for delay when it takes them beyond established timelines. (Kara v. Arnold, 2014 ONCA 871 at para. 9)
• The court should be concerned primarily with the rights of the litigants, not with the conduct of their counsel. However, where the lawyer's conduct is not inadvertent but deliberate, this may be different. (Habib v. Mucaj, 2012 ONCA 890 at para. 7) (Although Habib v. Mucaj involved the setting aside of a registrar’s dismissal order under rule 48.14(1)1., rather than a status hearing, these comments are broadly applicable to any case involving the possible dismissal of an action for delay.)

Issue on the motion

[11] In their factum, the defendants acknowledge that “other than the inherent prejudice caused by a lengthy delay such as this, the Defendants have not suffered additional prejudice.” Nonetheless, the defendants submit that because the Faris test is two-fold and conjunctive, the plaintiffs must still demonstrate that there was an acceptable explanation for the delay, failing which the action must be dismissed. The defendants’ submission in this regard is correct, but in addition, based on the case law reviewed above, and in particular Super A Hotels (para. 18), the court retains an overriding discretion to consider all factors that are relevant to achieving a just result. Therefore, the issue on the motion is: Considering the delay in the action, the plaintiffs’ explanation for the delay, and any other relevant factors, should the action be dismissed for delay or should the plaintiffs be permitted to continue with the action?

Submissions of the plaintiffs

[12] The plaintiffs acknowledge a 3.5 year delay between March, 2018 when the defendants served their affidavit of documents and September, 2021 when their counsel contacted defendants’ counsel requesting their consent to an order extending the February 20, 2022 deadline to set the action down for trial and setting a timetable for further steps in the action.

[13] The plaintiffs have been represented by the same law firm, DAK LLP throughout. Their explanation for the delay is as stated in the following paragraphs in their current counsel’s supporting affidavit:

10 Unfortunately, [. . .] a former associate of DAK LLP, failed or neglected to schedule the Examinations for Discovery with respect to this Action prior to his departure from our firm in June 2019. 11 Partly due to the pandemic, and partly due to a turnover in the associate position, which included a departure in the early part of 2020, followed by a sudden departure based on a medical leave by a replacement associate, no further steps were taken, by either party, in the herein action after Mr. Holland’s departure. I can advise that the client was not responsible for the delay. [emphasis added]

[14] Defendants’ counsel’s response to plaintiffs’ counsel’s letter of September 27, 2021 was that the defendants would not consent to the extension sought and that the action should be dismissed. On October 20, 2021, plaintiffs’ counsel requested a sworn affidavit of documents from the Ferrari defendants and requested defendants’ counsel’s available dates for examinations for discovery in November or December, 2021. Defendants’ counsel served an affidavit of documents from the Ferrari defendants and advised that he was not available for examinations in November or December. Owing to the approaching deadline of February 20, 2022, plaintiffs’ counsel then booked this motion.

[15] Plaintiffs’ counsel’s explanation for the delay leading to this status hearing is essentially that, following receipt of the defendants’ affidavit of documents, a series of three associate lawyers at the firm failed to take steps to arrange examinations for discovery. The plaintiffs further submit that although it is not the responsibility of the defendants to move the matter forward, defendants’ counsel made no effort to contact plaintiffs’ counsel between March, 2018 and September, 2021.

[16] The plaintiffs also attribute the delay to the pandemic. However, the pandemic does not assist the plaintiffs on this status hearing. While the pandemic clearly disrupted the progress of litigation throughout the country, the effect of any pandemic-related delay was mitigated by the six month extension to the deadline for the administrative dismissal of the action from August 22, 2021 to February 20, 2022. This six month grace period should have been ample for counsel to adapt to the changes in practice required by the pandemic.

[17] The plaintiffs also submit that the defendants contributed to the delay in the action by failing to serve affidavits of documents from the Ferrari defendants. However, an email (at tab K of the plaintiffs’ own supporting affidavit) indicates that on April 2, 2018 a former lawyer at plaintiffs’ counsel’s firm agreed that an affidavit of documents from Mr. Ferrari was unnecessary as it would contain the same documents as the Orrico defendants’ affidavit. Further, any failure of the Ferrari defendants to serve an affidavit of documents cannot constitute resistance to the plaintiffs’ efforts to move the action forward because the plaintiffs made no such efforts for 3.5 years.

[18] Plaintiffs’ counsel relies on para. 18 of Super A Hotels, supra, repeated here for ease of reference: “Although the court must be guided by the applicable two-part test, the determination as to whether to allow an action to proceed is discretionary and determining whether it would be unfair of the action to be dismissed requires a consideration of the circumstances and a balancing of the parties’ respective interests.”

[19] Based on Super A Hotels, Counsel submits that notwithstanding the 3.5 years of delay, in considering all of the circumstances, including the acknowledged absence of actual prejudice to the defendants, the plaintiffs should be granted the indulgence of being able to proceed to the disposition of their action on the merits. A further consideration is that the time that it would take to complete the required steps before setting the action down is sufficiently short that the action should be permitted to continue.

[20] The plaintiffs also rely on the following statement from Marche d’Alimentation Denis Theriault Ltee v. Giant Tiger Stores Ltd., 2007 ONCA 695 (at para. 34):

34 Expeditious justice must be balanced with the public interest in having disputes determined on their merits. Where, despite the delay, the defendant would not be unfairly prejudiced should the matter proceed for resolution on the merits, according the plaintiff an indulgence is generally favoured.

[21] Based on this passage, the plaintiffs submit that, where it is acknowledged that there would be no prejudice to the defendants in allowing the action to proceed, the plaintiffs should be permitted to move the case forward to a disposition on the merits.

[22] Counsel acknowledges that the file “fell through the cracks” at the plaintiffs’ law firm for 3.5 years, but this failure to advance the action should not be visited on the plaintiffs. Where the delay is not the fault of the plaintiffs themselves, the appropriate resolution would be to allow the action to proceed with a timetable for further steps. Counsel tried to get the matter “back on track” in September, 2021, but defendants’ counsel were not prepared to agree to dates for examinations for discovery.

[23] Plaintiffs’ counsel also submits that where the defendants have a counterclaim which is intertwined with the main action, the entire action should be permitted to proceed. However, as stated in their factum, the defendants have agreed to abandon the counterclaim if the action is dismissed, so the plaintiffs cannot rely on the counterclaim as a basis for resisting the dismissal of the main action.

Submissions of the defendants

[24] Defendants’ counsel submits that the court should consider the various delays that occurred during the entire course of the action. These delays include the seven months between the service of the defendants’ statement of defence and counterclaim in February, 2017 and the service of the plaintiffs’ reply and defence to counterclaim in September, 2017, for which no explanation has been provided.

[25] With respect to the delay attributed to the transfer of the file between various associates at the DAK LLP firm subsequent to March, 2018, counsel submits that there is no explanation as to why nothing happened during the periods when each of the associates supposedly had carriage of the file. The absence of any such explanation does not meet the requirement under Faris v. Eftimovski, supra that the delay be explained, even accepting the comment in Super A Motels, supra that an “acceptable” explanation for delay need not be “good”, but only “adequate” or “passable”.

[26] Counsel further submits that the plaintiffs’ argument that “we are not far off” from setting the action down is inaccurate because the parties must still complete oral examinations, answer undertakings, and participate in mandatory mediation.

[27] With respect to the law, counsel acknowledges that under Super A Hotels, the court does have discretion to allow the action to continue, but there must be a reason to justify the court’s exercise of discretion. Further, as stated in Super A Hotels, a more robust explanation is required for an extension following a five year delay.

[28] With respect to plaintiffs’ counsel’s submission that the plaintiffs should not be penalized for the conduct of their counsel, defendants’ counsel submits that, if the action were dismissed, the plaintiffs could still assert a claim against their counsel which presumably LawPro would respond to.

Plaintiffs’ reply submissions

[29] In response to the defendants’ counsel’s submission that the plaintiffs’ delay includes seven months to serve their reply and defence to counterclaim, plaintiffs’ counsel submitted that they were also preparing the plaintiffs’ affidavit of documents during this period. Even accepting this submission, which is not based on any evidence, there is still no explanation as to why it took seven months to prepare the reply pleading and then two more months to serve the affidavit of documents.

[30] With respect to the submission that if the action were dismissed, the plaintiffs would have recourse against their counsels’ insurer, plaintiffs’ counsel submits that Rule 48.14 provides a more efficient route for the resolution of the plaintiffs’ claim, which would be to allow their action to proceed in the absence of prejudice to the defendants.

[31] Plaintiff’s counsel acknowledges that during the period of “associate turnover” during which no steps were taken to advance the action, “the firm dropped the ball”, but in the absence of actual prejudice, the court should allow the plaintiffs to have their case heard on the merits.

Analysis and decision

[32] There is no question that the need for this status hearing was precipitated by the fact that the plaintiffs’ file languished in their counsel’s office for 3.5 years between the service of the defendants’ affidavit of documents in March, 2018 and their lawyer’s request for an extension of the deadline to set the action down in September, 2021. Even disregarding the additional delay of some months in the service of the plaintiffs’ reply and defence to counterclaim, a delay of 3.5 years during a total period of 5.5 years following the commencement of the action is significant.

[33] Plaintiffs’ counsel’s explanation for this delay is that three different associates at the DAK LLP law firm did nothing to advance the claim. There is no evidence as to any possible reason for these individuals’ lack of action or as to what, if any, direction they were given in relation to the file. The unchallenged evidence in the supporting affidavit is that the client was not responsible for the delay.

[34] To summarize the parties’ positions, the plaintiffs submit that they should not be penalized with the dismissal of the action by their counsel’s lack of diligence where there would be no actual prejudice to the defendants if the action were permitted to proceed. The defendants submit that the test on a status hearing requires some explanation for the delay that led to the status hearing, particularly more than 5 years after the action was commenced, and the explanation that plaintiffs’ counsel “dropped the ball” is inadequate.

[35] The issue is whether the plaintiffs have provided an explanation for the delay in the action that in all the circumstances should allow them to continue with the action. The “explanation” that three different associates failed to do anything to advance the claim is not a compelling one. However, the evidence that the plaintiffs themselves were not responsible for the delay is unchallenged and it is acknowledged by the defendants that they would not suffer any actual prejudice if the action were permitted to proceed.

[36] In Habib v. Mucaj, supra, the Court of Appeal stated: “The court should be concerned primarily with the rights of the litigants, not with the conduct of their counsel.” In Marche d’Alimentation, supra, the Court of Appeal also stated: “Where, despite the delay, the defendant would not be unfairly prejudiced should the matter proceed for resolution on the merits, according the plaintiff an indulgence is generally favoured.” In Super A Hotels, supra, Master McGraw (as his title then was) stated: “Although the court must be guided by the applicable two-part test, the determination as to whether to allow an action to proceed is discretionary and determining whether it would be unfair of the action to be dismissed requires a consideration of the circumstances and a balancing of the parties’ respective interests.”

[37] In this case, where the delay is the responsibility of plaintiffs’ counsel and not the plaintiffs, and the defendants would not be unfairly prejudiced if the case were to continue, the appropriate exercise of the court’s discretion is to allow the plaintiffs’ action to proceed to a resolution on the merits. For these reasons, I decline to dismiss the action, and it shall be permitted it to proceed.

[38] Counsel agreed at the hearing that if the court were to order that the plaintiffs be permitted to proceed with their action, they would attempt to agree to a timetable. If they require the court’s assistance in that regard, they may request a case conference with me.

[39] The order allowing the action to proceed does require a new deadline for the setting of the action down for trial. In order to meet this requirement, I hereby order that the deadline for setting the action down for trial be extended to November 30, 2022. If counsel wish to agree to a different deadline, they may either request a telephone case conference or submit a consent in writing, and I will vary this term of the order.

Costs

[40] Although the plaintiffs were successful in avoiding a dismissal of the action, their explanation for at least 3.5 years of delay was not compelling and the defendants acted reasonably in contesting the status hearing. The indulgence granted to the plaintiffs is a significant one and in the circumstances of this case, the price to the plaintiffs of that indulgence is the costs of the hearing.

[41] Defendants’ counsel served and filed a bill of costs setting out partial indemnity costs of $5,550.00 plus HST and disbursements. As stated to counsel at the hearing, the total of 11 hours for reviewing the plaintiffs’ materials, preparing a responding affidavit and factum, and preparing for and attending at the hearing is reasonable. However, $500/hr is an excessive rate for partial indemnity costs. I assess the defendants’ partial indemnity costs at $4,000.00 for fees, $520 for HST and $33.90 for disbursements. The plaintiffs shall pay to the defendants the total costs of this status hearing fixed at $4,553.90, payable within 30 days.

ASSOCIATE JUSTICE GRAHAM February 14, 2022