Prejudice Trumps on Dismissal for Delay – By Alan Melamud

As a result of recent amendments to Rule 48.14, the Registrar will no longer issue status notices warning plaintiffs that their actions will be dismissed for delay. Given that even with a warning, plaintiffs would sometimes miss the deadlines and be required to bring a Rule 37.14 motion to set aside the dismissal, it can be expected that the amendments will result in a proliferation of motions to set aside. This makes MDM Plastics Limited v. Vincor International Inc., 2015 ONCA 28, where the Court of Appeal once again addressed the principles to set aside a dismissal for delay of even greater interest to litigators, who may find themselves bringing or responding to such motions.

In MDM Plastics, the Plaintiff failed to heed the warning of a status notice and impending dismissal of its $11 million breach of contract claim, not once but twice. The first time, the Defendant consented to an order restoring the action. The order provided that the registrar would issue a fresh status notice “forthwith”. Counsel for the Plaintiff did not receive the second status notice, and once again found itself holding a dismissal order. This time, the Defendant refused to consent to set it aside, resulting in the Plaintiff bringing a Rule 37.14 motion that worked its way up to the Court of Appeal.

The decision confirms that motions to set aside a dismissal for delay are governed by the factors identified in Reid v. Dow Corning Corp. (2001), 11 C.P.C. (5th) 80 at para. 41 (Ont. S.C.J.), rev’d on other grounds (2002), 48 C.P.C. (5th) 93 (Ont. Div. Ct.), as these factors were summarized by the Court in Marche D’Alimnetation Denis Theriault Ltee. v. Giant Tiger Stores Ltd., 2007 ONCA 695 at para. 12:

  • Explanation of the Litigation Delay: The plaintiff must adequately explain the delay in the progress of the litigation from the institution of the action until the deadline for setting the action down for trial as set out in the status notice. She must satisfy the court that steps were being taken to advance the litigation toward trial, or if such steps were not taken to explain why. … If either the solicitor or the client made a deliberate decision not to advance the litigation toward trial then the motion to set aside the dismissal will fail.
  • Inadvertence in Missing the Deadline: The plaintiff or her solicitor must lead satisfactory evidence to explain that they always intended to set the action down within the time limit set out in the status notice, or request a status hearing, but failed to do so through inadvertence. In other words the penultimate dismissal order was made as a result of inadvertence.
  • The Motion is Brought Promptly: The plaintiff must demonstrate that she moved forthwith to set aside the dismissal order as soon as the order came top her attention.
  • No Prejudice to the Defendant: The plaintiff must convince the court that the defendants have not demonstrated any significant prejudice in presenting their case at trial as a result of the plaintiff’s delay or as a result of steps taken following the dismissal of the action.

These four factors are not to be treated as a check list, but rather the Court must take a contextual approach, and “consider and weigh all relevant factors to determine the order that is just in the circumstances”.

Of particular note in this case was that the Defendant’s reasonable conduct in response to the first dismissal resulted in the Plaintiff’s success on the motion.

Justice van Rensburg, speaking for the Court, confirmed that prejudice to the defendant’s ability to defend the action will “invariably” be the key consideration of the four Reid factors. Prejudice can arise either from (1) steps taken after the dismissal or (2) the restoration of the action after the dismissal. The prejudice to the defendant must then be weighed against the prejudice to the plaintiff from having its case dismissed. As part of the analysis, the Court will also consider a defendant’s interest in finality. The weight of that interest will largely rest on the passage of time since the dismissal.

The Court acknowledged that a presumption of prejudice will arise from the passage of time and the expiration of the limitation period, but rejected the Master’s holding at first instance that the Plaintiff was required to lead affirmative evidence to rebut this presumption. Instead, the Court held that the extent of the prejudice can be determined from the surrounding circumstances. Here, the Defendant had (1) agreed to set aside the first dismissal order and (2) suggested that the parties discuss settlement. Justice van Rensburg found that the Defendant’s willingness to discuss settlement, notwithstanding the first administrative dismissal, effectively rebutted the presumption of prejudice:

In sum, any presumption of prejudice was rebutted by the defendant’s own conduct indicating that there was no actual prejudice to its ability to defend the action as a result of the plaintiff’s delay in prosecuting the action. Moreover, the defendant’s interest in finality was not engaged in the circumstances of this case, because the plaintiff acted promptly in seeking to set aside the second dismissal order. Accordingly, the master’s finding that the fourth Reid factor strongly favoured dismissing the motion cannot stand.

Effectively, by being reasonable, the Defendant had created the evidence against its position on the motion. The decision serves as an important reminder that absent evidence of real prejudice and/or a significant passage of time since a dismissal order, defendants are unlikely to find much sympathy with the courts.

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