A take on presumption of prejudice

A take on presumption of prejudice
As a litigator, there are many things that wake me at 2 a.m. Sometimes, it’s my arguments for an upcoming motion where I know I will have an uphill battle. Other times, it’s a pending meeting with a difficult client who is not going to like what I have to say, though I am duty-bound to say it. (And let’s be honest — a lot of the time, it’s my kids.)

And then there are the ostensibly “simple” things, like timetables, deadlines, and limitation periods, which are, in reality, the stuff of nightmares. Like all lawyers, I have systems and safeguards to keep on top of these things. But, like anything with a human factor, systems can breakdown and safeguards can fail. Hence, I sometimes wake in the night haunted by the possibility that I have overlooked a status notice and will show up at the office to find an administrative dismissal order on my desk.

Pursuant to Rule 48.14 in Ontario, the court registrar serves a status notice on counsel to any action, which has not been placed on the trial list or otherwise disposed of two years from the time the first defence was filed. The parties — namely the plaintiff — then have 90 days to take certain steps, failing which the action will be administratively dismissed.

Despite all precautions, I still fear that I will get one of these eventually.

Thankfully, I am able to take some comfort from the Ontario Court of Appeal’s recent decision in MDM Plastics Ltd. v. Vincor International Inc.

The facts of the case are relatively commonplace. The plaintiff commenced an action for breach of contract in 2009. The defendant delivered a notice of intent to defend and demanded particulars, which the plaintiff took almost a year to answer. A statement of defence was served. The defendant then wrote to demand security for costs from the plaintiff, an issue that remained unresolved when the parties received their first status notice on March 24, 2011.

I do not know the reasons but the plaintiff didn’t take any steps in response to the status notice. On July 13, 2011, the registrar issued an order dismissing the action. The plaintiff reacted almost immediately and, on July 26, 2011, secured the defendant’s consent to restore the action. An order setting aside the dismissal order was issued on Aug.18, 2011, and restored the action, but provided for the registrar to issue a fresh status notice “forthwith.”

The second status notice was issued Sept. 12, 2011. It would later emerge that the plaintiff somehow did not receive it (a common theme in my nightmares), and thus took no steps in response. The registrar dismissed the action for a second time on Dec. 21, 2011.

During the 90 days between the second status notice and the second dismissal order, the parties were engaged in settlement negotiations. In fact, at the time of the second order, the plaintiff was ostensibly waiting for a counter-offer from the defendant, who made no mention of the status notice. Nonetheless, when the second dismissal order was issued, the defendant refused to consent to set it aside.

Here’s the part that really gives me chills: although the plaintiff had not received the status notice and although it moved promptly to have the second dismissal order set aside, the motion was dismissed.

Applying the four-part test articulated in the 2001 decision Reid v. Dow Corning Corp. — 1) explanation of the litigation delay; 2) inadvertence in missing the deadline; 3) whether the motion is promptly brought; and, 4) the absence of prejudice to the defendant — the master hearing the motion concluded that the plaintiff had not provided an adequate explanation for its delay in advancing the action. And, more importantly, had not filed sufficient evidence to rebut the presumption of prejudice to the defendant.

Specifically, the plaintiff had not led evidence to establish that documents had been preserved and that witnesses were still available. In the absence of such evidence, the master presumed prejudice to the defendant and refused to set aside the dismissal order.

Fortunately for my anxiety levels, the Divisional Court reversed the master and the Court of Appeal upheld the decision. In its reasons, the court focused on the proper application and analysis of the prejudice issue, which it recognized as the “key consideration” in any motion to set aside a dismissal order.

The court found the master had focused too narrowly on the plaintiff’s conduct and had failed to balance the alleged prejudice to the defendant (in having the action restored) with the obvious prejudice to the plaintiff (from having the case dismissed).

Although the court acknowledged the legitimate need for more expeditious justice, it also confirmed that a resolution on the merits will still be generally favoured where the defendant would not be unfairly prejudiced by the matter proceeding.

In connection with prejudice, the court also considered the principle of finality. Once an action is dismissed, a defendant’s ability to rely on this principle grows stronger as time passes, even if the defendant remains capable of defending the action. Eventually, there comes a point where the defendant’s interest in finality trumps the plaintiff’s party’s plea for an indulgence.

It is for this reason that plaintiffs are required to move without delay. In this case, however, the plaintiff had moved promptly to set aside the second dismissal order. Accordingly, very little deference to the principle of finality was warranted.

Returning to the question of prejudice, the court concluded it must take a broad view of the case before it and found the master below had erred by imposing a “strict and narrow requirement” that the plaintiff file evidence to rebut the presumption of prejudice. Instead, the master should have considered all the circumstances, including the defendant’s own conduct in the litigation.

Here, the court observed, the defendant had consented to the action being restored without conditions less than six months prior to the second dismissal order being made. Furthermore, settlement discussions were ongoing at the time the second dismissal order was issued.

Both of these factors were found to be inconsistent with a presumption of prejudice in favour of the defendant. Thus, any presumption of prejudice was rebutted by the defendant’s own conduct.

For all these reasons, the second dismissal order was set aside and the action was restored.

This is the right result, in my opinion, and it might even help me sleep a little better at night. Now if there was only something I could do about my kids. . . .

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