In July of 2016, the Ontario Court of Appeal, in Southwestern Sales Corp. v. Spurr Bros. Ltd., 2016 ONCA 590, delivered judgment in a case of dismissal of six construction lien actions and one trust action for delay. This was an appeal from an order of Justice Hebner from the dismissal of a motion to set aside a Master's Order dismissing the action.
The Plaintiff, Southwestern, supplied aggregate building materials. It registered six claims for lien against the Spurr's land in December 2000. The action was commenced in January 2001. Spurrs paid into Court approximately $330,000to vacate the liens. In January 2003, the Plaintiff filed its trial record. It then commenced a breach of trust action. A very lengthy period of inactivity followed. Status hearings were scheduled but were adjourned. The trial was set for September 2009 but did not proceed and was struck from the trial list. More status hearings were scheduled and adjourned at the Defendants' request. A Status hearing was set for October 6, 2014 which was pre-emptory. No one appeared for the Plaintiff and the actions were dismissed by Master Pope.
The Defendant recovered the money it had paid into court and then tried to garnish the Plaintiff's bank account to satisfy its unpaid costs order. The Plaintiff obtained new counsel who immediately moved to set aside the dismissal of the Plaintiff's actions. The Plaintiff's lawyer had been representing the Plaintiff up until he surrendered his license to the Law Society of Upper Canada about two months before the status hearing. The Plaintiff did not know this.
The Plaintiff advanced three grounds of Appeal to the Court of Appeal:
1. The Motion Judge applied the wrong legal test in dismissing the actions;
2. She erred in failing to accept the appellant's explanation for its delay and,
3. She erred in finding that the Defendant had suffered prejudice.
The Legal Test
The Court found that the correct legal test had been met.
The Court of Appeal stated "a decision to dismiss an action for delay at a status hearing is discretionary and entitled to deference on appeal unless the decision was made on an erroneous legal principle or is infected by a palpable and overriding error of fact." It then stated that:
The timeliness of the adjudication is one measure of the health of a justice system. In respect of the criminal justice system the Supreme Court of Canada has stressed the need to change a 'culture of delay and complacency towards it (R. v. Jordan, 2016 S.C.J. No. 27). The same can be said of the Ontario Civil Justice System.
The Rules of Civil Procedure contain general and specific provisions to create a culture of timely civil justice. At the general level, rule 1.04(1) requires courts to construe the rules 'to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.' At the specific level, rule 48.14 establishes a presumptive timeframe for the listing of a civil action for trial which, if not met, requires the Plaintiff to show cause why the action should not be dismissed. Rule 48.14 provides the court with a tool by which to assume an active role in controlling the pace of litigation."
The Court summed up the issue by finding that a Plaintiff wanting to set aside the dismissal order made at the status hearing must demonstrate two things: (1) that there was an acceptable explanation for the Plaintiff's delay and (2) that if the action were allowed to proceed, the Defendant would suffer no non-compensable prejudice.
Explanation for Delay
The Plaintiff explained its delay of thirteen years and stated that it was misled by its counsel about the progress of the action and wasn't told that the status hearing was scheduled for October 2014.
The motions Judge found that the Plaintiff did not have an adequate explanation for the delay. She stated:
When years had passed without any substantive steps being taken towards a resolution why did the Plaintiff not investigate and demand that steps be taken? Why did the Plaintiff not retain another counsel to move the action forward? There was no answer offered to answer these questions.
The Court of Appeal found that the Plaintiff bore primary responsibility for its progress, and that retaining a lawyer in the action did not lessen that obligation:
As part of its obligation to move its construction lien actions along, the appellant was required to take reasonable steps to supervise its counsel's work to ensure there would be an expeditious determination of the actions on their merits. On a motion to set aside a dismissal order, one would expect a commercial plaintiff like the appellant to file concrete evidence describing the steps it had taken to supervise its counsel's handling of its actions.
There was simply no acceptable explanation for the 13 year delay.
Prejudice to the Defendants
The Court held that the since the Plaintiff failed to give an acceptable an explanation for its delay, it was not necessary to deal with the issue of noncompensable prejudice to the plaintiff. The Appeal Court did review the prejudice matter without making a decision.
The Court agreed with Justice Hebner's reasons for judgment when she stated:
A lien claim can be an onerous thing for a defendant. A defendant is faced with the prospect of either having its land tied up as a result of the registration of a claim for lien or, alternatively having to finance sometimes substantial payments into court in order to free up title to the land. Similarly, a breach of trust claim can also be an onerous thing for defendants. They are faced with the possibility of being personally responsible for a corporate debt. For these reasons, it seems to me that a lengthy delay in a claim for lien case (and a breach of trust case) constitutes prejudice to the defendants of the kind described above. If the lien claimant wants to take advantage of the provisions of the Construction Lien Act and tie up title to a defendant's property, it ought to proceed expeditiously to have its claim determined. Similarly, if a lien claimant wants to take advantage of the trust provisions of the Construction Lien Act it ought to be prepared to proceed expeditiously to have its claim determined. A lien claimant ought not to be entitled to sit back and allow years to pass while the defendant's property (or, as in this case, the defendant's money) is held hostage.
Judges have an uncanny instinct to find cases where the facts are so clear that a new concept can be enunciated which will take hold and will greatly assist our beleaguered judicial system. Master Pope, Justice Hebner and the Court of Appeal were all right, and they gave reasons in very clear and certain terms. Plaintiffs will now be under increasing pressure to move their cases along as quickly as possible and clients will share that responsibility with their lawyers.
David I. Bristow, Q.C