Court File and Parties

Oshawa Court File No.: CV-18-619 Date: 2024-12-17

Ontario Superior Court of Justice

Between: Penglong Zhao and Yu Feng, Plaintiffs – and – Hua Zhu and Zhi Li, Defendants

Counsel: Kathleen Y. Jin, for the Plaintiffs Ryan Hanna, for the Defendants

Heard: November 27, 2024

Reasons for Decision

Charney J.:

[1] The Defendants, Hua Zhu and Zhi Li, bring this motion pursuant to Rule 24.01 of the Rules of Civil Procedure to dismiss the Plaintiff Yu Feng’s action for delay, or, in the alternative, staying the action as an abuse of process.

[2] The claim by the other Plaintiff, Penglong Zhao, has already been dismissed without costs on consent.

Facts

[3] The Defendant Hua Zhu (“Ms. Zhu”) is the registered owner of a property on Plum Tree Circle in Markham, Ontario (the “Property”). The Defendant Zhi Li (“Mr. Li”) is Ms. Zhu’s spouse.

[4] This action relates to the enforcement of a mortgage in favour of the Plaintiffs, Mr. Zhao and Mr. Feng, registered against the Property on January 24, 2012, in the amount of $700,000, with a maturity date of December 31, 2012 (the “Mortgage”).

[5] The Plaintiffs originally held an interest in the Mortgage as tenants in common in the following proportions: Mr. Zhao 80% and Mr. Feng 20%.

[6] The Plaintiffs commenced an action on December 19, 2013, issued solely as against Ms. Zhu in the Newmarket Superior Court of Justice (the “2013 Action”). The 2013 Action sought to enforce the Mortgage by way of an order for possession of the Property based on an alleged default in payment of the Mortgage.

[7] On January 20, 2014, Ms. Zhu defended the 2013 Action and also, with her spouse Mr. Li and the corporation XP Realty Development Ltd., counterclaimed against the Plaintiffs in the 2013 Action, seeking to enforce an ancillary contract whereby the Plaintiffs were alleged to have foregone enforcement of the Mortgage.

[8] On April 16, 2014, the Plaintiffs defended the counterclaim and the pleadings were closed. No further steps were taken by the Plaintiffs after April of 2014 to move the 2013 Action forward.

[9] On March 8, 2018, after nearly four years of inactivity, the Plaintiffs issued a second Statement of Claim in the Oshawa Superior Court of Justice. This second claim was for the same purpose of enforcing the Mortgage, except it added Mr. Li as a Defendant, and in addition to seeking possession of the Property, it added relief for judgment against Ms. Zhu and Mr. Li on the alleged mortgage debt of $1,148,786 (the “2018 Action”).

[10] The Defendants again defended, filing their Defence to the 2018 Action on March 26, 2018, once more asserting that the Mortgage was invalid. Their Defence also expressly referenced the existence of the duplicative 2013 Action and their counterclaim in that 2013 Action.

[11] Neither party took any steps to address the duplication of proceedings. No further steps were taken by either party with respect to the 2018 Action until 2023.

[12] On December 28, 2018, the Registrar of the Newmarket Superior Court of Justice ordered that the 2013 Action be dismissed for delay.

[13] In early 2019, the Defendants learned of the dismissal of the 2013 Action. The self-represented Defendants believed the dismissal included the 2018 Action and that it had effectively ended the Mortgage enforcement proceedings in their entirety. Based on this misunderstanding, the Defendants did not move within 30 days under Rule 24.04 to continue their counterclaim as part of the 2018 Action.

[14] The Plaintiffs did not take any steps to advance the 2018 Action. The Defendants mistakenly believed that both the 2013 Action and the 2018 Action were dismissed. The Mortgage remained on title.

[15] In May 2022, under the belief that the Mortgage Actions had been dismissed for delay, the Defendants commenced proceedings by way of an Application in the Oshawa Superior Court of Justice to have the Mortgage declared void or unenforceable due to the expiry of the 10 year limitation period for the enforcement of mortgage debts in the Real Property Limitations Act, R.S.O. 1990, c. L.15. At that time, given their belief that the 2018 Action had been dismissed with the 2013 Action, the Defendants did not advise their counsel of the 2018 Action.

[16] The Application proceeded to Court in May, 2022, April 2023 and August 2023, but was adjourned on each date for reasons that I need not review.

[17] In October 2023, the Applicants’ (Defendants’) counsel was made aware of the 2018 Action.

[18] In November 2023, pursuant to a settlement between the Defendants and Penglong Zhao and the Order of Casullo J. dated November 22, 2023, Mr. Zhao’s claim against the Defendants was dismissed on consent and Mr. Zhao’s interest of 80% in the Mortgage was discharged, such that the secured amount of the Mortgage was reduced to only Mr. Feng’s remaining portion of 20%, the principal amount of the Mortgage therefore being $140,000.00 plus interest.

[19] Mr. Feng is the remaining Plaintiff.

[20] Given the existence of the 2018 Action, the Defendants have not proceeded with their Application, but have instead brought this motion to have the 2018 Action dismissed for delay.

Dismissal for Delay

[21] Rule 24.01 is the rule which permits a defendant who is not in default under the rules to bring a motion to dismiss the action for delay where the plaintiff has failed to, inter alia, “set the action down for trial within six months after the close of pleadings”. In addition, there is an inherent jurisdiction to dismiss an action for delay to prevent an abuse of the Court’s process. See: Ticchiarelli v. Ticchiarelli, 2017 ONCA 1, at para. 12 and Wallace v. Crate’s Marine Sales Ltd., 2014 ONCA 671, at para. 22.

[22] Also relevant to the analysis in this case is Rule 48.14, which provides:

Dismissal of Action for Delay

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.

[23] The applicable test on a motion for dismissal for delay under Rule 24.01 is set out in the Court of Appeal’s decision in Langenecker v. Sauvé, 2011 ONCA 803. The Court held that an action will be dismissed for delay where the delay (i) is inordinate, (ii) inexcusable, and (iii) results in a substantial risk that a fair trial of the issues in the litigation will not be possible because of the delay, whether through an unrebutted presumption of prejudice or by evidence of actual prejudice to the defendant’s ability to have the case adjudicated on its merits: Barbiero v. Pollack, 2024 ONCA 904, at para. 8.

[24] The factors to be considered were summarized by Master Graham in Szpakowsky v. Tenenbaum, 2017 ONSC 18, at para. 19 (citations omitted):

(1) To dismiss an action for delay, the court must be satisfied that the plaintiff's default has been intentional and contumelious, or that there has been inordinate and inexcusable delay for which the plaintiff or his lawyers are responsible resulting in a substantial risk that a fair trial will not be possible.

(2) A dismissal on the basis of intentional and contumelious delay would be warranted in cases “in which the delay is caused by the intentional conduct of the plaintiff or his counsel that demonstrates a disdain or disrespect for the court process.”

(3) The plaintiff is responsible for moving the action along.

(4) Any delay in the prosecution of an action requires an explanation. The onus rests with the plaintiff to show that the delay was not intentional. In the absence of an explanation from the plaintiff for the delay, it is to be presumed that the delay was intentional.

The onus is on the plaintiff to rebut the presumption of prejudice arising from the unexplained delay by showing that documents have been preserved, and that the issues in dispute do not require the recollection of witnesses, or that necessary witnesses are available with detailed recollection of events.

(5) The requirement that the delay be “inexcusable” requires a determination of the reasons for the delay and an assessment of whether those reasons afford an adequate explanation for the delay. . . [E]xplanations that are “reasonable and cogent” or “sensible and persuasive” will excuse the delay at least to the extent that an order dismissing the action would be inappropriate.

In assessing the explanations offered, the court will consider not only the credibility of those explanations and the explanations offered for individual parts of the delay, but also the overall delay and the effect of the explanations considered as a whole.

(6) An inordinate delay after the cause of action arose or after the passage of a limitation period gives rise to a presumption of prejudice in which case the defendant need not lead actual evidence of prejudice and the action will be dismissed for delay unless the plaintiff rebuts the presumption. The plaintiff's onus is to persuade the court with convincing evidence that there is no substantial risk that a fair trial is not possible.

(7) Courts may dismiss actions for delay even when the relevant rules do not mandate it. A court has inherent jurisdiction to control its own process, which includes the discretionary power to dismiss an action for delay. The power of a superior court to dismiss an action for delay is not limited to that conferred by any specific Rules of Civil Procedure, but also flows from the inherent power of the court to prevent an abuse of its own process.

[25] The Court of Appeal has recently reiterated the principle that:

[T]he party-prosecution character of our current civil court adjudication system imposes on the party who initiates a claim the burden of moving a proceeding to its final disposition on the merits. As a result, the consequences of any dilatory regard for the pace of litigation falls on the initiating litigant, absent resistance from a defendant to proceed to a final disposition on the merits…(Barbiero, at para. 6).

Analysis

[26] In the present case, the analysis is somewhat more complicated because the Plaintiffs commenced the action twice: once in 2013, and again in 2018.

[27] The 2013 Action has already been dismissed for delay. The focus of this motion is the 2018 Action. But the 2018 Action cannot be assessed in isolation.

[28] In my view, the 2018 Action was, from the outset, an abuse of process.

[29] Section 138 of the Courts of Justice Act provides that “As far as possible, multiplicity of legal proceedings shall be avoided”.

[30] At the time that the 2018 Action was commenced, the 2013 Action was still outstanding, although nothing had been done to advance the action in almost 5 years. Instead of commencing a second action, the Plaintiffs should have moved to amend the first action to add Mr. Li as a defendant and to add a claim for damages. The pleadings had closed in the 2013 Action, and the Plaintiffs could not amend the Statement of Claim without the consent of the Defendant or leave of the Court.

[31] In Maynes v. Allen-Vanguard Technologies Inc. (Med-Eng Systems Inc.), 2011 ONCA 125, the Court of Appeal stated, at para. 2:

I agree with the motions judge that the statement of claim in the New Action is an abuse of process (rules 21.01(3)(d) and 25.11(c)). It repeats substantially the same allegations against the same defendants, known as the Original Defendants, as in the two other Ongoing Actions. As against the Added Defendants (i.e. those defendants who had not been named in the Ongoing Actions), the statement of claim in the New Action circumvented the requirement in rule 26.02(c) to obtain leave of the court to add a non-consenting party to an action after pleadings are closed.

[32] The Court continued, at para. 36:

The doctrine of abuse of process seeks to promote judicial economy and to prevent a multiplicity of proceedings.

[33] And at paras. 39 and 49:

[T]he plaintiffs effectively circumvented the express procedural requirement in rule 26.02(c) that leave of the court be obtained to add a non-consenting party to the proceeding after pleadings have closed. This was an abuse of process. By starting the New Action instead of moving to amend their pleadings in their existing actions to claim “enhanced relief” against the Added Defendants, the plaintiffs circumvented the court’s jurisdiction to: (1) assess whether the defendants would be prejudiced by an amendment and to determine whether that prejudice can be compensated for by costs; (2) to impose costs in favour of the defendants for granting the amendment; and (3) to impose other terms that are just.

The present statement of claim is an abuse of process because it duplicates claims in the two Ongoing Actions with respect to the Original Defendants and undermines the integrity of the administration of justice by circumventing rule 26.02(c) with respect to the Added Defendants.

[34] The Plaintiffs have not provided a legitimate reason for not seeking leave of the Court to amend their pleadings to add Mr. Li. Had the Plaintiffs brought a motion to add Mr. Li as a Defendant, the motion may well have been dismissed because Mr. Li is not a party to the mortgage which is the basis of the action.

[35] In most cases, a plaintiff cannot commence a second action after nearly 5 years because most causes of action are subject to a two year limitation period under the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. Since this is a mortgage action, it is subject to the ten year limitation period under the Real Property Limitations Act. The fact that there is a longer limitation period is not, however, a licence to circumvent the Rules of Civil Procedure by commencing multiple proceedings instead of seeking to amend a Statement of Claim.

[36] The filing of the 2018 Statement of Claim while the 2013 Statement of Claim remained extant also placed an inappropriate burden on the Defendants, who would have to bring a motion to strike the 2018 Claim as an abuse of process, “when the onus should have properly been on the plaintiffs to convince the court that leave should be granted to amend their pleadings in the Ongoing Actions” (Maynes, at para. 40). In addition, the second Statement of Claim became the source of considerable confusion when the first Statement of Claim was dismissed for delay. It is, in my view, perfectly understandable that the Defendants (who were self-represented at this point) were under the mistaken impression that the dismissal of the 2013 Action applied to the 2018 Action.

[37] As events unfolded, the 2013 Action was dismissed by the Registrar for delay pursuant to Rule 48.14 on December 28, 2018 since the action was not set down for trial by the fifth anniversary of its commencement. At this point, only the 2018 Action remained.

[38] Also relevant to this analysis is Rule 24.05, which provides:

24.05 (1) The dismissal of an action for delay is not a defence to a subsequent action unless the order dismissing the action provides otherwise.

[39] In most cases where an action is dismissed for delay, the Plaintiff will not be able to commence a subsequent action for the same cause of action because the 2 year limitation period is likely to have expired. In the present case, the 2018 Action was commenced within the 10 year limitation period for mortgage actions.

[40] That said, the Court of Appeal held in Mintz v. Wallwin, 2009 ONCA 199 that, notwithstanding Rule 24.05(1), it would be an abuse of process to commence a second identical action to one that has been dismissed for delay. The Court stated, at paras. 1-3:

In our view, the motion judge erred in applying Rule 24.05(2) in a manner that, in essence, entitled the respondent to proceed with a second identical action, subject only to paying the costs of the first action that had been dismissed for delay.

The rule does not do this. It provides no right to a plaintiff to commence a second action identical to one that has been dismissed for delay. In this case it does not give the respondent an answer to the appellant’s claim that the respondent’s second action is an abuse of process, a claim that the motion judge did not address.

The respondent concedes that the order dismissing the first action for delay was correct. In our opinion to permit the respondent to proceed with the second action would indeed constitute an abuse of process. In the circumstances before us, it would bring the administration of justice into disrepute to now permit the respondent to proceed with a second, identical action. [1]

[41] In the present case, the 2018 Action was commenced 9 months before the 2013 Action was dismissed for delay, but, for the reasons given above, it was still an abuse of process when it was commenced on March 8, 2018. In my view the Mintz decision supports the Defendants’ position that although the focus of this motion is the 2018 Action, the 2018 Action should not be assessed in isolation.

[42] Thus, while Mr. Feng takes the position that the delay should only be counted from the commencement of the 2018 Action, I agree with the Defendants that the delay must be assessed from the commencement of the 2013 Action. The Plaintiffs cannot restart the clock by issuing a Statement of Claim that is an abuse of process. The period between 2013 and 2018 continues to be part of the analysis.

[43] With that introduction, I will consider the factors set out in the cases referenced above.

Is there an inordinate delay?

[44] The delay is measured by reference to the length of time from the commencement of the proceeding to the motion to dismiss: Langenecker, at para. 8; Ali v. Fruci, 2014 ONCA 596, at para. 11. In this case, the total delay is just over 10 years, from the commencement of the 2013 Action in December 2013, to the commencement of the Defendants’ motion to dismiss on March 14, 2024.

[45] The Plaintiffs’ 2013 Action was dismissed for delay in December 2018, thus putting the Plaintiffs on notice that they had to prosecute their 2018 Action or risk having it dismissed for delay. The Plaintiffs were essentially given a warning and a second chance.

[46] Notwithstanding that second chance, the Plaintiffs did nothing to move the 2018 Action forward following the receipt of the Defendants’ Statement of Defence on March 26, 2018. This is not a case with multiple parties or multiple causes of action. This is a mortgage action that could have proceeded in accordance with the timelines contemplated by the Rules of Civil Procedure. This is a case in which the Plaintiffs have done nothing to advance the claim since the pleadings closed in April 2014.

[47] The fifth anniversary of the 2018 Action was March 8, 2023, and no steps to move it forward or to have it set it down for trial have been taken by the Plaintiffs. Even applying the Covid limitations extension provided for under Regulation 73/20 of the Emergency Management and Civil Protection Act (183 days), the fifth anniversary of the 2018 Action was September 7, 2023.

[48] In my view, in the context of this case, the 10 year delay constitutes an inordinate delay.

Is there a reasonable explanation that would excuse the delay?

[49] The remaining Plaintiff has provided no real explanation for the delay. He states that he relied on his co-Plaintiff, Mr. Zhao and the lawyer who filed the 2018 Action to conduct the litigation. He waited for updates from the lawyer and “trusted that he would let me know if there were any further steps that needed my involvement”. He was not concerned about the time or the deadlines because he thought that as a mortgage holder his debt was secured.

[50] There is no affidavit from the lawyer who filed the 2018 Action to explain why no steps were taken to move the case forward. There is no explanation for the delay between 2013 and 2018. The Plaintiffs did nothing to move the 2018 Action forward despite already experiencing the dismissal of the 2013 Action after 5 years.

[51] The Plaintiff has primary responsibility to advance the action. The Plaintiff cannot justify or explain the delay simply by shifting responsibility to a co-plaintiff.

Is there a substantial risk that a fair trial of the issues in litigation will not be possible because of the delay?

[52] As outlined in Ticchiarelli, at paras. 28-29 and 32, the test is whether the delay has been prejudicial to the defendants in that it creates a substantial risk that a fair trial of the issues will not be possible. A finding of inordinate delay creates a rebuttable presumption of such prejudice. There is an evidentiary burden on the plaintiff to demonstrate that the responding defendants have not been prejudiced.

[53] In the present case, the Defendants argue that the dismissal of the 2013 Action and the commencement of the 2018 Action effectively robbed them of their counterclaim. As indicated above, the Defendants mistakenly believed that the dismissal of the 2013 Action also dismissed the 2018 Action, and, therefore, the Defendants did not move within 30 days under Rule 24.04 to continue the counterclaim as part of the 2018 Action. There is an argument that the counterclaim is based on breach of contract, with a two year limitation period, although the counterclaim is, in many respects, just a mirror image of the Defendant’s defence to the mortgage action. The Defendants are concerned that their failure to comply with Rule 24.03 means that they may no longer be able to assert the counterclaim in response to the 2018 Action.

[54] The remaining Plaintiff confirms that he takes the position that the counterclaim is now out of time and cannot be resurrected as part of the 2018 Action.

[55] As indicated above, the Defendants did reference their counterclaim in their Statement of Defence to the 2018 Action. It is at least arguable that the reference to the counterclaim in the 2018 Statement of Defence referentially incorporated that claim into the 2018 Action. It is also arguable that the elements of the counterclaim are all pleaded in the 2018 Statement of Defence.

[56] Whether the counterclaim continues as part of the 2018 Action is not an issue that I can decide on this motion. The point here, however, is that, as a result of the Plaintiffs’ delay and the commencement of two separate but virtually identical actions, the continuation of the counterclaim is now a contentious issue. This is prejudicial to the Defendants.

[57] The Defendants also contend that the delay is prejudicial because relevant witnesses are no longer available. Given the Defendants’ Statement of Defence, this will not be litigation driven solely by documents. The former Plaintiff, Mr. Zhao, resides in China, and the parties have been unable to contact him since his action was dismissed. Mr. Zhao provided no evidence on this motion, even though Mr. Feng stated that he relied on Mr. Zhao to advance the action. The Mortgage at issue is alleged by the Defendants to be security for a share purchase agreement, and the current location of other witnesses involved in the drafting of the share purchase agreement – the now disbarred lawyer Rebecca Chin and Mr. Zhao’s former power of attorney Jie Pan – are also unknown. This raises the prospect that the delay has prejudiced the fair trial of this action.

[58] The Defendants also argue that the delay is prejudicial because, if they are not successful at trial, they will suffer significant financial hardship from having to pay 10 years of accrued interest at 10% (the interest rate in the mortgage). Had the Plaintiffs moved the mortgage action forward, the matter would have been resolved one way or the other many years ago, and the Defendants could have paid their debt if they were not successful. This is not the kind of prejudice with which the Court is concerned in a motion to dismiss for delay. The prejudice at issue is prejudice to a fair trial and the Defendant’s ability to defend against a long-delayed action. Financial prejudice is not a relevant factor.

Conclusion

[59] For the above reasons, I find that the 10 year delay in this matter constitutes inordinate delay in the circumstances of this case and that the remaining Plaintiff has not provided an adequate explanation for the delay. I also find that the remaining Plaintiff has failed to rebut the presumption of prejudice caused by the inordinate delay.

[60] The Defendants’ motion to dismiss the Plaintiff’s action for delay is therefore granted.

[61] If the parties are not able to agree on costs, the Defendants may file costs submissions of no more than 3 pages plus costs outline and any offers to settle within 20 days of the release of this decision, and the Plaintiff may file responding costs submissions on the same terms within a further 15 days.

Justice R.E. Charney

Released: December 17, 2024

Footnote:

[1] I note that Mintz did not deal with an administrative dismissal by the Registrar. An administrative dismissal does not estop a second proceeding if the limitation period has not expired: Caliciuri v. Matthias, 2017 ONSC 748, at para. 24.