Legal Issues: Dismissal for delay

By David I. Bristow, QC, LSM, C.Arb

In July 2016, the Ontario Court of Appeal delivered judgment in a bizarre case of dismissal of six construction lien actions, and one trust action, for a 15-year delay (Southwestern Sales Corporation Limited v. Spurr Bros. Ltd. et al., p. 132 OR [3D] 794). This was an appeal from an order of Justice Pamela 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 land of the defendants, Spurr Bros., in December 2000. Action was commenced in January 2001. Spurr Bros. paid approximately $330,000 into court and the liens were lifted. 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—it was eventually struck from the trial list. More status hearings were scheduled and adjourned at the defendants’ request. A status hearing set for October 6, 2014 was pre-emptory. No one appeared for the plaintiff, and the actions were dismissed by Case Management Master Lou Ann Pope.

The defendant obtained its money out of court, after it had been paid into court years before. It then tried to garnish the plaintiff’s bank account to satisfy its unpaid costs order.

The plaintiff obtained new counsel, who moved right away to set aside the dismissal of the plaintiff’s actions. The previous lawyer, Mr. I, had been representing the plaintiff until he surrendered his license to the Law Society of Upper Canada about two months before the status hearing, unbeknownst to his client.

The plaintiff advanced three grounds of appeal to the Court of Appeal:

The motion judge applied the wrong legal test in dismissing the actions.
She erred in failing to accept the appellant’s explanation for its delay.
She erred in finding the defendant had suffered prejudice.

The legal test

The Court of Appeal found the correct legal test had been met. It 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:

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 the plaintiff wanting to set aside the dismissal order made at the status hearing must demonstrate two things:

There was an acceptable explanation for the plaintiff’s delay.
If the action were allowed to proceed, the defendant would suffer no non-compensable prejudice.

Explanation for delay

The plaintiff explained its delay of 13 years was due to having been misled by its counsel about the progress of the action. It said it was not told a status hearing had been scheduled for October 2014. It also said it was unaware its counsel had been delaying the action or had surrendered his license.

The motions judge found 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 the plaintiff bore primary responsibility for its progress. Retaining a lawyer in the action did not lessen that obligation. The court stated:

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.

Therefore, there was no acceptable explanation for the 13-year delay.

Prejudice to the defendants

Since there was no acceptable explanation for the delay, the court held it was not necessary to deal with the issue of non-compensable prejudice to the plaintiff. The Appeal Court did review the prejudice matter without making a decision. It 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.

Conclusion

Judges have an uncanny instinct to find cases where the facts are so clear a new concept can be enunciated and take hold, greatly assisting our beleaguered judicial system. Master Pope, Justice Hebner, and the Court of Appeal were all correct, and they gave reasons in very clear and certain terms.

With this case in mind, 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. BristowDavid I. Bristow, QC, LSM, C.Arb., is a Toronto-based provider of alternative dispute resolution (ADR) services consisting of mediations, arbitrations, and early neutral evaluations. He is co-author of Construction Builders’ and Mechanics’ Liens in Canada. Bristow is a member of the American Arbitration Association’s (AAA’s) panel of arbitrators, a mediation and arbitration panel member of both the International Chamber of Commerce and the Centre for Public Resources Institute of Dispute Resolution, and a charter member of Mediators Beyond Borders. He can be reached at bristow@dibristow.ca.

 

 

Source: https://www.constructioncanada.net/

Industry News

ACTS Trade Definitions update – March 2017

ACA has responsibility to maintain Trade Definitions on behalf of the industry. As you may be aware, with the exception of minor changes in one scope in 2011, the Trade Definitions have not been comprehensively reviewed and updated since before 2004.

The Edmonton Construction Association, as a member of the ACA, has undertaken a comprehensive review to align the Trade Definitions with current practice and are inviting all trade associations to review the update and suggest any needed improvements prior to final ratification.

* A full copy of the updated Trade Definitions draft can be found here:

2017 Trade Definitions PDF

 

National Trade Contractors Coalition of Canada – September 2013

NTCCC Meets in British Columbia

ATCC
When Prompt Payment was progressing in Ontario, representatives from the NTCCC visited various provinces to propose that Provincial Trade Associations should also be formed. The first so called Alberta Trade Contractors Coalition (ATCC) meeting took place October 18, 2011 in Edmonton followed by a second meeting in Red Deer on February 21, 2012. Most recently, a session was held on September 17 in Red Deer with a number of trade associations represented. This joint task force presented recommendations to setup a Trade Coalition in order to address various issues, for example the current prompt payment issue. The focus at this time is in Ontario where the legislation has gone through the 1st and 2nd reading and is currently at committee. Once it goes through committee, it will go to 3rd reading which tends to be the most difficult to obtain approval. If it goes ahead in Ontario, it will set a positive precedent for the other provinces. There are similar laws in the US and UK, but nothing like this in place in Canada so it would be a positive initiative for industry.

The ATCC are hoping for a memorandum of understanding between the involved groups to create this Trade Coalition Association. APCA has indicated their support of this initiative and that they would agree to be involved. We will keep you updated as things progress.

Trade Definitions Promotional Video

The ACA and the ECA along with our Alberta local construction association partners are pleased to present this video to members. This video complements the 2016 Trade Definitions, and offers further insight into the Definitions and their usage.

ACA Chairman Paul Verhesen and a number of others were interviewed for the video which explains the benefits of Trade Definitions. Our hope is that the Trade Definitions will continue to be adopted by the Industry, and we encourage our members to both view and share the video amongst their networks.

Links: Trade Definitions Video
  Alberta Construction Trade Definitions

ACA, its member local construction associations and the 3000 plus member firms endorse adoption of the 2016 ACA Trade Definitions as a best practice. We encourage all tender authorities and their design consultants, specification writers, and contractors and suppliers to cite and utilize the 2016 ACA Trade Definitions for their projects.

Trade Definitions provide clarity to all construction project stakeholders as to the allocation of work to be bid and performed. This clarity in turn reduces confusion, error, disputes, and litigation.

The 2016 Trade Definitions represent a comprehensive update to reflect current technology and business practice, and are the consensus result of input from many industry volunteers. They are not a tendering system. Trade Definitions are a guideline and the allocation of work amongst trades on any given project remains the responsibility of the tender authority and general contractor.

All member companies and trade associations may request changes to any or all trade definitions by providing their request in writing to the Alberta Construction Association or the Edmonton Construction Association, care of the Trade Definitions Committee, before January 1st of each year. The request must include the change, reason for the change and the effect on the other scopes. The Trade Definitions Committee will review and rule on all requests. Changes to the definitions will be finalized and published on March 1st each year.

You may wish to put a reminder in your calendars to check the end of February each year for the latest edition.