TRANSPLATINUM v. FERGUSON, 2011 ONSC 2543

CITATION: TRANSPLATINUM v. FERGUSON, 2011 ONSC 2543 COURT FILE NO.: 08-CV-362939 MOTION HEARD: April 20, 2011 SUPERIOR COURT OF JUSTICE - ONTARIO RE: Transplatinum d.b.a. Fleetone LLC v. Hazel Ferguson BEFORE: MASTER R.A. MUIR COUNSEL: Kyle Magee for the plaintiff Steven Foster for the defendant REASONS FOR DECISION [ 1 ] The plaintiff brings a motion pursuant to Rule 3.02 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 (the “Rules”) for an order extending the time for the service of the statement of claim in this action from March 23, 2009 to October 17, 2010.

The plaintiff also seeks and order validating service of the statement of claim on the defendant. [ 2 ] The defendant has also brought a motion. In her motion the defendant seeks an order staying the plaintiff’s action based on the failure of the plaintiff to serve its statement of claim within six months from the date the claim was issued. BACKGROUND [ 3 ] The defendant is the former owner and president of a company known as Harrow Truck Lines Inc. (“Harrow”).

Pursuant to an agreement which appears to be dated June 27, 2007, Harrow agreed to purchase certain fuel services from the plaintiff from time to time and on certain terms and conditions. The plaintiff alleges that one of those terms and conditions was an agreement by the defendant to be personally obligated to the plaintiff for any amounts which may be owing to the plaintiff by Harrow. The defendant denies that she agreed to provide any such personal guarantee. [ 4 ] Harrow made an assignment in bankruptcy on March 26, 2008.

In the accompanying statement of affairs, the plaintiff is listed as a creditor of Harrow in the amount of $34,340.91. The statement of affairs was signed by the defendant on behalf of Harrow. The plaintiff delivered a proof of claim in the bankruptcy proceeding in the principal amount of $114,815.92USD, although it now appears from the statement of claim that the plaintiff is only seeking payment of $83,603.83USD.

Obviously, the quantum of Harrow’s indebtedness to the plaintiff, and the defendant’s corresponding liability, is in issue in this action. [ 5 ] The plaintiff issued its statement of claim on September 22, 2008. Pursuant to Rule 14.08(1), the statement of claim should have been served on the defendant by no later than Monday, March 23, 2009. In fact, the statement of claim was not served on the defendant until October 17, 2010, some 19 months after the deadline for doing so.

In the interim, the plaintiff had taken no steps to obtain an order for substituted service, or extending the time for service, and only brought this motion after the late service of the statement of claim on the defendant. [ 6 ] This is not, however, a situation where the plaintiff simply made no effort to serve the statement of claim within the time limit under the Rules . Attempts were made to serve the statement of claim on the plaintiff at her address as set out in Harrow’s corporation profile report and at another address in Milton.

Those attempts were made on at least five occasions between September 23, 2008 and April 6, 2009. On February 26, 2009, the plaintiff’s process server was advised by a neighbour that the defendant had moved. The process server was given the same information again on April 6, 2009 and no further attempts were made thereafter to serve the defendant at that address.

[7] In addition to those service attempts, the plaintiff retained the services of a skip tracer, who apparently could find no otheraddress for the defendant. [8] It appears that in the summer of 2009, the plaintiff learned that the defendant may have been living in the United States. Theplaintiff then elected to pursue the defendant in an action commenced in California rather than continuing with this Ontario action.However, no formal steps were taken to dismiss or discontinue this action.

It was simply left in abeyance. [9] The plaintiff obtained default judgment against the defendant in the California action on June 4, 2010. After learning of thejudgment, the defendant brought a motion in the California action to have the default judgment set aside. The plaintiff consented to suchan order, and the dismissal of the California action, on September 17, 2010. During the course of the California proceedings, the plaintifflearned that the defendant’s permanent address was 67 Seline Crescent, Barrie, Ontario.

Upon learning of this, it appears that a decisionwas made by the plaintiff to once again pursue the defendant in Ontario and the statement of claim in this action was then served on thedefendant at her Barrie address on October 17, 2010. [10] Following service of the statement of claim, the plaintiff initially attempted to obtain an order extending the time for service onan in-writing basis. Master Sproat refused to grant the relief on that basis and adjourned the motion without a date and ordered that it beheard orally.

The defendant then brought its motion for an order staying this action, first returnable January 7, 2011. The plaintiff thenserved its motion for an order extending the time for service, with an original return date of February 14, 2011. Both motions were thenadjourned on consent to be heard together on April 20, 2011. ANALYSIS [11] Rule 3.02 provides, in part, as follows: 3.02

(1) Subject to subrule (3), the court may by order extend or abridge any time prescribed by these rules or an order, on such termsas are just.

(2) A motion for an order extending time may be made before or after the expiration of the time prescribed. [12] Rules 1.04 and 2.01 are also applicable to this motion. They read as follows: 1.04

(1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civilproceeding on its merits. . . . 2.01

(1) A failure to comply with these rules is an irregularity and does not render a proceeding or a step, document or order in aproceeding a nullity, and the court, (

a) may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters indispute; or (

b) only where and as necessary in the interest of justice, may set aside the proceeding or a step, document or order in the proceeding inwhole or in part. [13] Both counsel referred to the decision of the Court of Appeal in Chiarelli v. Weins, (ON CA), [2000] O.J. No.296 (C.A.) as the leading authority on motions to extend the time for service of a statement of claim. The principles to be considered areset out at paragraphs 14 to 17 of that decision and can be summarized as follows:

a) the court should not extend the time for service if to do so would prejudice the defendant;

b) the plaintiff bears the onus of demonstrating that the defendant would not be prejudiced by the extension;

c) the defendant has an evidentiary obligation to provide some details of prejudice to it which would flow from an extension oftime for service;

d) the defendant cannot create prejudice by its failure to do something that it reasonably could have or ought to have done; and,

e) prejudice that will defeat an extension of time for service must be caused by the delay. See Khatun v. Perry, [2011] O.J. No. 418 (S.C.J.) at paragraph 12. [14] Ultimately, the role of the court on a motion of this nature is to exercise its discretion on the facts of each particular case focusingon whether the defendant has been prejudiced by the plaintiff’s delay. See Chiarelli at paragraph 17. The Rules and the relevantauthorities favour the just determination of civil proceedings on their merits. Relief from strict compliance with the Rules should begranted where it can be done without prejudicing a party’s ability to advance its claim or to defend itself.

[ 15 ] In my view, the facts of this case justify the granting of the relief sought by the plaintiff. This is not a case of a claim languishing in the back of a filing cabinet without any effort being made to pursue the defendant. The evidence is clear that the plaintiff never abandoned its intention to pursue the defendant for the amounts it alleges are owed by her. It made numerous attempts to serve the statement of claim at the address the defendant provided on Harrow’s filings with the Ministry of Consumer and Business Services.

In fact, the plaintiff had moved from her previous address in the summer of 2007 but had not updated her address with the Ministry, despite making an annual filing on behalf of Harrow on November 16, 2007. Had she done so, the plaintiff would have easily located the defendant’s proper address for service. The plaintiff only abandoned its efforts to serve the defendant after it learned (incorrectly it turns out) that she was living in the United States.

While the plaintiff’s efforts to serve the statement of claim were not exhaustive, it is my view that it did make reasonable efforts, given the circumstances. [ 16 ] The defendant argues that the plaintiff should be denied the relief it is seeking on its motion due to the fact that it commenced the California action, seeking the same relief, when this action was still pending. I agree that the evidence as to why the plaintiff chose to maintain two actions at the same time for the same relief is somewhat lacking. However, I do not see this as a relevant factor on this motion.

It appears that the plaintiff immediately agreed to set aside the default judgment in the California action and dismiss that action as soon as it learned that the defendant was still living in Ontario. The California action has been dismissed and only this proceeding remains active. I certainly do not view these actions as any indication of a deliberate decision by the plaintiff to abandon its claim against the defendant. Moreover, none of this has prejudiced the defendant in any way. [ 17 ] The defendant also argues that she has been prejudiced by the plaintiff’s delay.

When Harrow made its assignment in bankruptcy in March, 2008, all of its records were turned over to the trustee. The trustee then sold Harrow’s place of business to a third party in June, 2008. It appears that any remaining business records were discarded by the purchaser of Harrow’s place of business at that time. The defendant argues that she has been prejudiced in her ability to defend herself, as these documents are no longer available.

She submits that she will have to take the plaintiff at its word because she has no documentary evidence with which to defend herself. [ 18 ] The difficulty I have with this argument is that all of these events took place well before the statement of claim was even issued. The trustee took possession of the documents in March, 2008. The missing documents appear to have been discarded by the purchaser of Harrow’s place of business in June, 2008. The statement of claim was not issued until September, 2008, well within any applicable limitation period.

If the defendant had been served with the statement of claim within six months of September 22, 2008 she would have been in the exact position she finds herself in today. [ 19 ] The defendant argues that when the Court of Appeal in Chiarelli speaks of prejudice caused by delay on the part of a plaintiff, it is referring to delay generally and not just delay in relation to the service of the statement of claim. I do not agree with the defendant’s

interpretation of Chiarelli . In my view, the Court of Appeal was clearly referring to prejudice caused by the delay in serving the statement of claim. At paragraph 16 of Chiarelli , Justice Laskin states as follows: 16 Third, prejudice that will defeat an extension of time for service must be caused by the delay. Prejudice to the defence that exists whether or not service is delayed ordinarily is not relevant on a motion to extend the time for service. In this case the defence complains that the police officer's notes have been destroyed.

However, they were destroyed within two years of the accident under a local police policy. Thus, the notes would have been unavailable to the defence even if the statement of claim had been served on time. [ 20 ] This is precisely the same situation the court faces on this motion. Harrow’s records would have been unavailable to the defendant even if this statement of claim had been served on time.

The delay referred to in Chiarelli is delay in the service of the statement of claim, and not delay in commencing an action or pursuing a defendant in the first place. [ 21 ] If I were to accept the defendant’s argument, the plaintiff would have been required to issue and serve its statement of claim, or at least put the defendant on notice of the claim, within three months of Harrow’s bankruptcy, despite there being no legal or contractual requirement that it do so. Moreover, the plaintiff would have had no idea that Harrow’s records had been discarded or when that may have taken place.

The defendant is deemed to be aware of applicable limitation periods in Ontario and should have acted prudently to ensure that she would be in a position to defend any claims that may have been brought against her arising from the bankruptcy of her business. Had she kept Harrow’s records, or at least requested the trustee to do so, for 30 months or so from the date of its bankruptcy and then discarded them, her prejudice argument would be far more compelling.

CONCLUSION [ 22 ] In my view the plaintiff has met the onus placed upon it and I have therefore concluded that it is just in the circumstances of these motions to grant the relief requested by the plaintiff in its notice of motion. It follows from that conclusion that the defendant’s motion should be dismissed. COSTS [ 23 ] Ordinarily a successful party is entitled to costs. I have concluded, however, that it is fair and reasonable on the facts of these motions that there be no order as to costs. The plaintiff is seeking an indulgence from the court.

While it did make satisfactory efforts to serve the defendant and was misled by Harrow’ inaccurate corporate filing, it does appear that more could have been done. In September, 2008, the plaintiff’s process server was advised by the new owner of the defendant’s former property that the defendant had either returned to California or Barrie, Ontario. However, no effort appears to have been made to conduct a search of the relevant land registry office for Barrie to determine whether the defendant owned any real property in that jurisdiction. A search would have revealed that she did.

Instead, the plaintiff continued to try to serve the defendant at an address it had good reason to believe she had moved from. In addition, the plaintiff failed to adequately explain why it maintained two outstanding actions against the defendant in different jurisdictions for the same relief. No explanation was provided for why the Ontario action was not discontinued when the plaintiff decided to pursue the defendant in California. As well, no effort was made by the plaintiff to obtain an order to extend the time for

service prior to serving the statement of claim on October 17, 2010. Finally, I would note that there is no specific request for costs in the plaintiff’s notice of motion. For these reasons there will be no order as to the costs of either motion. ORDER [ 24 ] I therefore order as follows: (

a) the time for service of the statement of claim on the defendant is hereby extended to October 17, 2010, nunc pro tunc ; (

b) service of the statement of claim on the defendant on October 17, 2010 is hereby validated as of that date; (

c) the defendant shall deliver her statement of defence by no later than May 31, 2011; (

d) the defendant’s motion is dismissed; (

e) there shall be no order as to the costs of either motion. __________________________ Master R.A. Muir DATE: April 21, 2011