If a plaintiff’s action is dismissed for delay pursuant to rule 48.14(1) of the Rules of Civil Procedure (the “Rules”), the plaintiff may subsequently move to have the action restored either by consent of the defendant, or by bringing a motion before the court pursuant to rules 48.14 and 37.14. If a motion is brought before the court, a contextual analysis of the circumstances, which includes considering and weighing the four Reid factors, must be conducted to determine whether an action should be restored. If the motion is successful and an action is restored to the trial list, the plaintiff is given a second opportunity to move the matter forward. Recently, in the case of MDM Plastics Limited v Vincor International Inc.,the Court of Appeal for Ontario decided an appeal relating to such a motion and in doing so, provided further guidance with respect to how the Reid factors should be applied, particularly the factor of prejudice.
In February 2009, the Respondent, MDM Plastics Limited (the “Plaintiff”), commenced an action against the Appellant, Vincor International Inc. (the “Defendant”). In July 2011, after a status notice was not complied with, the Registrar dismissed the Plaintiff’s action for delay (the “First Dismissal Order”). The First Dismissal Order was subsequently set aside with the Defendant’s consent and, under the terms of the order to set aside the dismissal, the Registrar was to issue a second status notice to both parties forthwith. However, the Plaintiff never received the second status notice and in December 2011, the action was dismissed for delay for a second time (the “Second Dismissal Order”). The Defendant refused to provide its consent to set aside the Second Dismissal Order, and as a result the Plaintiff was required to bring a motion before a Master to have it set aside.
The Master ultimately decided in favour of the Defendant and dismissed the Plaintiff’s motion. While the Master acknowledged that the Plaintiff’s failure to set the action down for trial after it was initially restored was inadvertent, and that the motion to have the Second Dismissal Order set aside was brought promptly, he gave much more weight to the Reidfactors which related to litigation delay and prejudice.
In determining whether there was an adequate explanation for the litigation delay, the Master considered the entire time period from the date on which the action was commenced to the date on which it was dismissed for delay for the second time. Ultimately, the Master found that the Plaintiff failed to take any substantive action during the relevant time period and therefore, failed to meet this Reid factor.
With respect to the Reid factor relating to prejudice, which the Master considered to be the most significant of the Reidfactors, the Master determined that the presence of prejudice was strong. By relying strictly on the Plaintiff’s failure to adduce evidence rebutting the presumption of prejudice to the Defendant, the Master found that prejudice existed and dismissed the motion. In turn, the Plaintiff subsequently appealed to the Divisional Court.
The Divisional Court
Upon hearing the Plaintiff’s appeal, the Divisional Court determined that the Master erred in failing to consider rule 1.04 of the Rules, and in failing to consider how the Defendant’s actions had contributed to the issuance of the Second Dismissal Order.
The Divisional Court concluded that the Master should not have been so affixed with the Plaintiff’s inability to produce evidence rebutting the presumption of prejudice, but instead should have considered the entire context of the facts before him. At the time of the Second Dismissal Order, both parties were engaged in settlement discussions. The Plaintiff’s counsel had forwarded a settlement offer to the Defendant’s counsel, who subsequently advised the Plaintiff that it would respond to the offer within a week despite knowing that the second dismissal date was approaching. As the Plaintiff’s counsel waited for the Defendant’s reply which never came, the action was dismissed.
Not only did the Defendant fail to inquire about the Plaintiff’s intentions in lieu of the second status notice, but it also failed to respond to the Plaintiff’s settlement offer prior to the Second Dismissal Order being issued as it advised it would. Accordingly, the Divisional Court found that the Defendant’s own actions contributed significantly to the action being dismissed for delay for a second time.
In addition to the Defendant’s actions contributing to the dismissal of the claim, there was no evidence that the Defendant was in any way more prejudiced by the Second Dismissal Order than it had been when it consented to setting aside the First Dismissal Order, as there had only been a delay of approximately five months. Further, as the Divisional Court stated, being that the action was commercial in nature and involved documentary evidence, the Defendant was less likely to be prejudiced than it would have been if individuals’ memories were being relied upon.
The Master’s failure to consider the entire context of the facts before him ultimately led to the Divisional Court’s decision to reverse his decision. Both the circumstances of the case as well as the nature of the action indicated that the Defendant’s ability to defend the claim was not prejudiced as a result of the Second Dismissal Order. This in turn led to the Divisional Court’s conclusion that the action should be dealt with on its merits.
Subsequent to the Divisional Court reversing the Master’s decision, the Defendant appealed to the Court of Appeal.
The Court of Appeal
Upon reviewing the Divisional Court’s and the Master’s respective decisions, the Court of Appeal concluded that the Master relied on erroneous legal principals in deciding not to set aside the Second Dismissal Order.
The Court of Appeal disagreed with the Master’s conclusion that the presumption of prejudice arising from the expiry of a limitation period can only be rebutted if a plaintiff leads affirmative evidence. Instead, the Court of Appeal agreed with the Divisional Court and stated that when determining whether or not a defendant’s ability to defend an action has been prejudiced, the entirety of the circumstances must be considered, including the actions of the defendant.
In the circumstances of this case, although the Plaintiff did not adduce any affirmative evidence rebutting the presumption of prejudice, the Court of Appeal determined that the presumption was rebutted by the Defendant’s own actions. As the Divisional Court stated, less than six months before the Second Dismissal Order, the Defendant had consented to setting aside the First Dismissal Order without conditions, thereby confirming that it had not suffered any prejudice at that point in time. Consequently, because the Defendant had not suffered any prejudice at the time of the First Dismissal Order, the Court of Appeal agreed with the Divisional Court’s conclusion that the Defendant could not have suffered any more prejudice as a result of the Second Dismissal Order than it would have at the time of its initial consent.
Further, as stated above, at the time of the Second Dismissal Order, the parties were engaged in settlement discussions which, in the Court of Appeal’s opinion, provided further evidence rebutting the presumption of prejudice. Despite knowing that the second dismissal date was fast approaching, the Defendant nonetheless continued to engage in settlement discussions with the Plaintiff. Therefore, for all intents and purposes, the Defendant was not acting like a party that was being prejudiced by the Plaintiff’s delay. Instead, as the Court of Appeal found, the Defendant’s actions indicated no prejudice whatsoever.
Not only did the Court of Appeal find there to be an absence of prejudice, which it considered to be an important factor favouring the Plaintiff, it also found that the balance of the remaining Reid factors also favoured the Plaintiff. While the Plaintiff may not have moved the matter along as expeditiously as possible, the Court of Appeal found that it also did not intentionally disregard timelines. Further, once the Plaintiff became aware of the Second Dismissal Order, it moved promptly to have it set aside and therefore, the Defendant’s interest in finality was not engaged. Accordingly, the Court of Appeal agreed with the Divisional Court’s decision to reverse the Master’s order and dismissed the Defendant’s appeal.
It is important to note that the Court of Appeal came to its decision without considering the nature of the action itself. However, despite not considering the nature of the action, the Court of Appeal expressly stated that such a factor may be considered as part of the contextual analysis if need be.
As the Court of Appeal stated, plaintiffs are ultimately responsible for the advancement of an action. Consequently, if there is a delay in the progress of an action, the effect of the delay on a defendant must be considered. However, this decision confirms that before a finding of prejudice is made, both a plaintiff’s and defendant’s actions must be considered when determining whether the presumption of prejudice can be rebutted.
The decision also establishes that when determining whether an order dismissing an action for delay should be set aside, courts may consider the nature of the action itself as part of a contextual analysis. If the evidence in a case is predominantly documentary then its preservation is generally not as much of a concern, and a delay in moving the action forward would be less prejudicial to a defendant than one in which witnesses’ memories are heavily relied upon. If memories of witnesses serve as the primary source of evidence, it is reasonable to conclude that a defendant could be prejudiced by a delay as witnesses’ memories could likely be impacted with the passage of time. Accordingly, while the Reid factors continue to serve as the foundation on which motions to set aside dismissal orders are decided, the nature of the action is a logical contextual factor that can and should be used to assist courts in deciding whether or not to set aside a dismissal order.