Court File and Parties

Court File No.: CV-20-00648263-0000 Motion Heard: 2022-10-13 Superior Court of Justice - Ontario

Re: METALLI GROUP INC. et al, plaintiffs And: ALTECH ENVIRONMENTAL CONSULTING LTD. et al, defendants

Before: Associate Justice R. Frank

Counsel: Alexandra Psellas for the defendants/moving parties Julian Binavince and Shervin Rismani for the plaintiffs/responding parties

Heard: October 13, 2022

Reasons for Decision

A. BACKGROUND

[1] This is a motion by the defendants seeking an order dismissing this action for delay pursuant to Rule 24.01 of the Rules of Civil Procedure.

[2] The underlying action relates to environmental assessment services allegedly provided by the defendants to Metalli Group Inc. (“Metalli”) with respect to certain properties (the “Properties”) that were formerly owned by Toronto Machine Limited (“TMT”), a subsidiary of Metalli. The individual plaintiffs are shareholders in Metalli.

[3] The claim alleges that the defendant Altech Environmental Consulting Ltd. (“Altech”) undertook two Phase 2 environmental assessments with respect to the Properties; the first when TMT purchased the Properties in 2015, and the second in 2018 when the first mortgagee of the Properties enforced its rights under its mortgage.

[4] The plaintiffs allege that the defendants were negligent and breached their contractual obligations regarding the 2015 Phase 2 environmental assessment.

[5] The procedural history for this action is as follows.

[6] The plaintiffs commenced this action by statement of claim on September 24, 2020. The defendants served a demand for particulars on January 18, 2021. The plaintiffs provided responses to the demand for particulars on February 5, 2021. The defendants served a statement of defence on April 7, 2021. The plaintiffs did not file a reply.

[7] On April 8, 2021, immediately after filing their statement of defence, the defendants advised the plaintiffs that they took the position that it would be a conflict of interest for Willms & Shier, then counsel for the plaintiffs, to continue representing the plaintiffs in this action.

[8] On or about April 27, 2021, the Properties were sold to non-parties under power of sale. The defendants were not expressly notified that the Properties had been sold.

[9] On June 4, 2021, the plaintiffs’ then counsel, Mr. Butler, informed the defendants that the plaintiffs would be seeking new counsel. The defendants followed up with Mr. Butler in September and December 2021 about the status of the plaintiffs’ representation.

[10] On May 30, 2022, counsel for the defendants advised Mr. Butler of the defendants’ intention to bring this motion and provided draft materials, requesting the plaintiffs’ position and availability. Mr. Butler responded on June 3, 2022, advising that he had sent the materials to the plaintiffs. The notice of motion was served on Mr. Butler on July 11, 2022.

[11] On July 13, 2022, the defendants received a notice of change of lawyer appointing the plaintiffs’ current counsel as their lawyers of record.

[12] The defendants served their motion record on the plaintiffs’ new counsel on July 15, 2022. No correspondence from the plaintiffs or the plaintiffs’ new counsel was received until September 20, 2022, after counsel for the defendants requested the plaintiffs’ position on the motion returnable on October 13, 2022.

B. LAW AND ANALYSIS

(i) Positions of the parties

[13] The defendants’ position is that: (1) the plaintiffs have taken no steps to move this proceeding forward since the close of pleadings; (2) the plaintiffs have failed to provide an adequate explanation for their failure to move this action forward; and (3) the delay prejudices the defendants because key evidence for their defence, including with respect to liability and damages, will now be difficult or impossible to obtain.

[14] The plaintiffs’ position is that:

1. The defendants are not entitled to bring the motion because they have not complied with their obligation under Rule 29.01.03(2) to agree on a discovery plan.
2. There has not been an inordinate delay.
3. There is a reasonable and cogent explanation for the delay that was caused by: (a) the Defendants’ objection to Mr. Butler’s retainer; (b) the health of Mr. Blum, who is the “driving force behind the business activities of Metalli”; (c) the COVID‑19 pandemic; and (d) the sale of the Properties, which was a complicated and time‑consuming transaction.
4. The defendants have not demonstrated any presumptive or actual prejudice from the delay that gives rise to a substantial risk that a fair trial of the issues in the action will not be possible.

(ii) Legal background, discussion and analysis

[15] Rule 24.01(1)(c) provides that a defendant who is not in default under the Rules may move to have an action dismissed for delay where the plaintiff has failed to set the action down for trial within six months of the close of pleadings. [1]

[16] In Ever Fresh Direct Foods Inc v Jamia Islamia Canada Ltd, 2021 ONSC 1278 [2], Daley J. summarized the applicable test on a Rule 24.01 motion as follows:

[79 ] The test to be met on a motion seeking to have an action dismissed for delay under rule 24.01 is set out in North Toronto Chinese Alliance Church v. Gartner Lee Limited, 2012 ONCA 251, 12 C.L.R. (4th) 1, at para. 11, leave to appeal refused, [2012] S.C.C.A. No. 248 (S.C.C.), and was restated in Ticchiarelli v. Ticchiarelli, 2017 ONCA 1, at para. 12.

[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.

[81] Under the first situation the case law provides that the default is intentional or contumelious where there is (a) no reasonable explanation for the delay/default and (b) there is an element of disrespect to the court, usually involving a breach of one or more court orders: Langenecker v. Sauvé, 2011 ONCA 803, 286 O.A.C. 268, at para. 6.

[82] As to the alternate second circumstance warranting dismissal of an action for delay, this is engaged where 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. Inordinance is measured “by reference to the length of time from the commencement of the proceeding to the motion to dismiss”: Langenecker, at para. 8; Ticchiarelli, at para. 15. It is also a contextual inquiry that depends on the nature of the case: Langenecker, at para. 8.

[83] A delay is inexcusable where there is no "reasonable and cogent" explanation for it: Langenecker, at paras. 9-10; Ticchiarelli, at para. 16.

[84] There is a presumption of prejudice "inherent in long delays" that increases with the length of delay: Langenecker, at para. 11.

[85] The moving defendant bears the ultimate burden on a rule 24.01 motion; however, the plaintiff bears an evidentiary burden to (I) provide a reasonable explanation for the delay; and (II) rebut the presumption of prejudice arising from the delay: Langenecker, at paras. 10-12; Ticchiarelli at paras. 27-29. [3]

[17] Determining whether a delay is “inexcusable” requires consideration of the reasons for the delay, and an assessment of whether those reasons afford an adequate explanation. A court must consider not only the credibility of the explanation offered for individual components of the delay, but also whether the explanation adequately explains the overall delay as a whole. [4] The explanation must be “reasonable and cogent” and amount to more than “the usual problems encountered by litigants”. [5]

[18] When exercising its discretion under Rule 24.01, “a court must balance the plaintiff’s interest in having a hearing on the merits and the defendant’s interest in having the matter resolved in an expedient and time-efficient manner.” [6] In Langenecker, Doherty, J.A. noted as follows:

An order dismissing an action for delay is obviously a severe remedy. The plaintiff is denied an adjudication on the merits of his or her claim. Equally obviously, however, an order dismissing an action for delay is sometimes the only order that can adequately protect the integrity of the civil justice process and prevent an adjudication on the merits that is unfair to a defendant. [7]

[19] The Court of Appeal has stated that “a high threshold has been established to dismiss an action for delay under rule 24.01”. [8]

(a) Has there been an inordinate delay?

[20] Although the defendants make no direct submissions in their factum on the issue of whether this delay is inordinate, during oral argument they argued that: (1) Rule 24.01(c) permits a party that is not in default under the Rules to move for dismissal for delay where an action is not set down for trial within 6 months of the close of pleadings; and (2) the more than 1.5 years that have passed from the close of pleadings to when the defendants brought their motion constitutes an inordinate delay by the plaintiffs. The defendants submit that even though this delay is not as lengthy as in other cases where the court has found the delay to be inordinate, the length of the delay is connected to the prejudice suffered by the defendants. More specifically, the defendants argue that although the delay in this case is relatively short, the precise concern to a defendant about delay has occurred, namely, that there has been prejudice to their ability to obtain key evidence in support of their defence.

[21] The plaintiffs argue that the defendants are not entitled to bring the within motion because they are not in compliance with Rule 29.1.03(2), which requires the parties to agree on a discovery plan within 60 days of the close of pleadings. In any event, they submit that 1 year and 9 months from when the claim was commenced (or less if the delay is calculated from when the defendants gave notice of Mr. Butler’s conflict of interest) does not constitute an inordinate delay. They point to case law in which the court has dismissed cases for delay under Rule 24.01 and argue that the delay in those cases was significantly longer. They also submit that the requirement under Rule 48.14(1) that an action to be set down for trial within 5 years from the commencement of the action is a reasonable benchmark for assessing whether a delay is inordinate.

[22] With respect to the defendants’ argument that the length of the delay is connected with the resulting prejudice, I accept that the three parts of the Rule 24.01 test (i.e., that the delay is inordinate, inexcusable, and prejudicial to the defendant) are not watertight compartments and that one aspect of the test may inform the conclusions reached on another aspect of it. Nevertheless, the three requirements of the test remain independent requirements that a moving party must satisfy to succeed on a Rule 24.01 motion to dismiss for delay.

[23] With respect to the plaintiffs’ argument that the defendants are not entitled to bring the within motion because they are not in compliance with Rule 29.1.03(2), I do not accept that this is a default that bars the defendants from bringing this motion. Both parties have obligations under Rule 29.01.03(2), and in any event it is clear from the evidence that the action became stalled due to plaintiffs’ failure to address the conflict issue, which effectively precluded the progress of the action through discovery. [9]

[24] With respect to the plaintiffs’ argument that there is a 5 year “benchmark” for assessing delay, while Rule 48.14(1) provides that an action may be administratively dismissed if it not set down for trial within 5 years from the commencement of the action, Rule 24.01(c) requires the plaintiff to set the action down for trial within 6 months of the close of pleadings. In the result, there may be circumstances in which a delay that is less than 5 years will be considered inordinate such that (if the other parts of the Rule 24.01 test are met) an action may be dismissed for delay.

[25] As noted above, inordinance is measured by reference to the length of time of the delay and it requires a contextual inquiry that depends on the nature of the case. [10] In assessing this part of the test under Rule 24.01, and the other parts of the test considered below, I have been mindful of the need to balance the plaintiffs’ interest in having their claim determined on the merits and the defendants’ interest in having the action resolved in an expedient and time-efficient manner. [11] I have also been mindful of the high threshold established to dismiss an action for delay under Rule 24.01 and that an order dismissing an action for delay is a severe remedy. [12]

[26] Having considered the length of the overall delay and the context and circumstances of this case, I find that the defendants have failed to demonstrate that the delay of 1 year and 9 months between the close of pleadings and this motion was an inordinate delay.

(b) Is there a reasonable explanation for the delay?

[27] The defendants submit that the delay is inexcusable, as demonstrated by the plaintiffs’ failure to take steps to move this action forward since the close of pleadings, including their failure to appoint new counsel for over a year after advising they had decided to do so. The defendants argue that the latter failure is even more notable given that no new counsel was appointed until after the plaintiffs were put on notice of this motion and after the notice of motion was served.

[28] The defendants argue that the plaintiffs’ purported explanations are not reasonable excuses for the delay. With respect to Mr. Blum’s health, the defendants submit that, while the circumstances relating to Mr. Blum’s health are unfortunate, they do not provide an adequate explanation for the delay in prosecuting this action. They argue that Mr. Blum’s condition was known to the plaintiffs at the time they commenced this action in September 2020, nine months after the stroke he suffered in January 2020. The defendants submit that the explanation that Mr. Blum’s wife, Ms. Riel (who swore the affidavit delivered by the plaintiffs in opposition to this motion), has been occupied attending to Mr. Blum’s affairs and that Mr. Wilson, the other principal of Metalli, has been occupied with work in an unrelated business, does not excuse the delay in moving this action forward. In support of their position, the defendants rely on Ransom v Ontario, 2010 ONSC 3156. [13] However, Ransom was a case in which the court considered a party’s delay in commencing an application for judicial review, rather than delay as a factor under the test for dismissing an action pursuant to Rule 24.01. As a result, the principles and test outlined in Ransom are not directly applicable to this case.

[29] The defendants also argue that there is no evidence as to how the COVID‑19 pandemic has impacted the plaintiffs’ ability to move the action forward. Further, the defendants submit that they were within their rights to object to Mr. Butler continuing to act due to a conflict of interest, and that the fact that the plaintiffs were required to change counsel is not a reasonable excuse for the delay.

[30] The plaintiffs submit that the court should look at the “constellation of circumstances” that caused the delay in this action. They argue that those circumstances are more than the “usual problems encountered by litigants”. [14] They submit that the combined effect of Mr. Blum’s health issues, the effects of the COVID-19 pandemic, and Metalli’s involvement in a complicated and time consuming real estate transaction are sufficient reasons for the plaintiffs taking more time than normally expected to identify and retain new counsel.

[31] As noted above, in assessing the explanation for the delay, the Court considers the reasons offered and whether those reasons provide a “reasonable and cogent” explanation. [15] In my view, the adequacy of the explanations must be assessed in context. Here, the context includes a complained‑of delay of 1 year and 9 months from when the claim was commenced (or less if the delay is calculated from when the defendants gave notice of Mr. Butler’s conflict of interest). Had the delay in this case been of greater length, the explanations offered may not have been adequate. Certainly, the plaintiffs could have acted more promptly in retaining new counsel once Mr. Butler’s conflict was acknowledged. Similarly, devoting time to attending to Mr. Blum’s health and other business priorities can only go so far as an explanation for the delay. Further, although it may be argued that it is plain and obvious that the pandemic has created some additional hurdles in advancing litigation, the plaintiffs have failed to provide any specific evidence of how the COVID-19 pandemic affected their ability to move this action forward. Nevertheless, in the current circumstances, I find that the combined effects of Mr. Blum’s health, the COVID-19 pandemic, and Metalli’s involvement in a complex transaction are a sufficiently reasonable and cogent explanation for the plaintiffs’ delay in retaining new counsel and moving the action forward.

(c) Has the delay been prejudicial to the defendant?

[32] As noted above, the test of prejudice under Rule 24.01 requires an analysis as to whether the delay is prejudicial in that it gives rise to a substantial risk that a fair trial of the issues will not be possible. [16]

[33] The defendants submit that the inordinate delay in this case gives rise to a presumption of prejudice that must be rebutted by the plaintiffs. [17] However, for the reasons outlined above, I find that the delay in this case was not inordinate. Therefore, there is no presumptive prejudice and the onus of demonstrating prejudice remains on the defendants.

[34] In terms of actual prejudice, the defendants submit that the delay is prejudicial because: (1) it appears that Mr. Blum, the driving force behind Metalli, may be unable to give complete evidence on discovery due to his declining health; and (2) the intervening sale of the Properties to a third party has made it difficult or impossible for the defendants to collect representative and relevant evidence about the state of the contamination. The defendants submit that Mr. Blum’s evidence will be crucial for, among other issues, Metalli’s business operations that the defendants allege may have caused the contamination between 2015 and 2018. They also submit that Mr. Blum’s knowledge and recollection of the events in issue is key to the defendants’ limitations defence. They submit that Ms. Riel and the co-plaintiff, Mr. Wilson, will not be a proper source of evidence in place of Mr. Blum, and they argue that Ms. Riel is not a director or officer of Metalli and cannot be examined on its behalf. Finally, they argue that they are prejudiced with respect to issues relating to the current state of the contamination on the Properties because of the 2021 sale of the Properties without any advanced notice to them.

[35] There are several difficulties with the defendants’ position on prejudice. First, to be relevant, the prejudice must have had a negative impact on the defendants rather than the plaintiffs. However, some of the prejudice the defendants complain of would affect the plaintiffs rather than the defendants. For example, some of the evidentiary concerns raised by the defendants would impact the plaintiffs’ ability to demonstrate their reliance on the Altech reports in connection with their negligent misrepresentation claim.

[36] Further, the prejudice to the defendants must have been caused by the delay. Here, Mr. Blum’s medical condition pre‑dated the delay. While there is the possibility that there has been some deterioration in Mr. Blum’s health, I do not find there to be sufficient evidence that the deterioration would make a material difference in his condition and the evidence available from him. [18] With respect to the sale of the Properties to a third party, that transaction was completed in April 2021. As a result, the impact of the sale of the Properties was not caused by the delay in prosecuting the action.

[37] Most problematic, however, is the defendants’ failure to put forward any evidence of the type of information that is needed but unavailable to them from their own records or otherwise. They have also failed to demonstrate that the plaintiffs will be unable to furnish such information because of the delay. For example, there is no evidence that material information with respect to relevant activity by the plaintiffs on the Properties has become unavailable from Metalli’s records. To the contrary: (1) the plaintiffs have filed evidence from Ms. Riel as to the sufficiency of the documentation available to them in support the action; (2) there is no reply affidavit evidence from the defendants contradicting Ms. Riel’s evidence; and (3) Ms. Riel was not cross-examined on her affidavit.

[38] In the result, I find that the defendants have not met their onus of demonstrating prejudice that gives rise to a substantial risk to a fair trial of the issues.

C. DISPOSITION AND COSTS

[39] For the reasons outlined above, I find that the defendants have failed to satisfy the test for dismissal for delay under Rule 24.01. The defendants’ motion is dismissed.

[40] With respect to costs, the defendants submitted that the motion was necessitated by the plaintiffs’ failure to move this action along or appoint new counsel in a timely manner, and that even if the motion is dismissed, no costs should be awarded to the plaintiffs.

[41] The plaintiffs submitted that, if the defendants’ motion is dismissed, the defendants should pay costs of the motion to the plaintiffs. In terms of quantum, the plaintiffs acknowledge that they could have been more responsive and communicated their intentions to the defendants more promptly, and that this impacts the time from which the court should assess costs in the plaintiffs’ favour. Specifically, the plaintiffs submit that the defendants should pay costs from the time that the plaintiffs served their responding motion record through to the hearing of the motion. On this basis, the plaintiffs seek costs in the amount of $7,000 on a partial indemnity basis.

[42] In my view, although the plaintiffs were successful in opposing the motion, the motion was made necessary by the plaintiffs’ inaction. This includes their failure to appoint new counsel and move the action forward in a timely manner, as well as their failure to respond to this motion until mere weeks before the return date. In these circumstances, I find that this is a proper case in which to exercise my discretion under Rule 57.01(2) to decline to award costs in favour of the successful party. I order that no costs are payable with respect to this motion.

R. Frank Associate J. Date: February 13, 2023

Footnotes

[1] With respect to the requirement that the moving party shall not be in default under the Rules, see Olendzki v. W.A. Baker Trucking Ltd., at para. 18.

[2] Ever Fresh Direct Foods Inc v Jamia Islamia Canada Ltd, 2021 ONSC 1278 [“Ever Fresh”]

[3] Ever Fresh, at paras. 79-85

[4] Langenecker, 2011 ONCA 803 [“Langenecker”] at paras. 9-10

[5] Langenecker, at para 14

[6] Faris v. Eftimovski, 2013 ONCA 360 (“Faris”), at para. 24

[7] Langenecker, at para. 3

[8] Faris, at para. 37

[9] See Wang v. Wu, 2019 ONSC 3736, 2019 CarswellOnt 9603, at para. 26

[10] Ever Fresh, at para. 82 citing Langenecker, at para. 8

[11] Faris, at para. 24

[12] Faris, at para. 37; Langenecker, at para. 3

[13] Ransom v Ontario, 2010 ONSC 3156, at paras. 23 and 29

[14] Langenecker, at para. 14

[15] Langenecker, at paras. 9-10

[16] Langenecker, at para. 7; Ever Fresh, at para. 82

[17] See, for example, Tanguay v. Brouse, 2010 ONCA 73 (Ont. C.A.), at paras. 2-5; Langenecker, at para. 25

[18] London (City) v. Osler Hoskin & Harcourt LLP, 2016 ONSC 3000, at paras. 27, 31 and 33