The Ontario Court of Appeal, in its judgment dated June 22, 2020, upheld Justice Dietrich’s decision to dismiss for delay Deutsche Postbank’s 2010 action against the defendants in Deutsche Postbank AG v Kosmayer (the Postbank Decision). In its claim, the plaintiff primarily alleged that the defendants made fraudulent misrepresentations. The fact that such allegations typically rely on witnesses’ evidence, which is assumed to decline over the passage of time, was a significant factor in this motion.
The Court of Appeal’s decision was very brief in dismissing the appeal, but the detailed underlying decision is well reasoned and a notable precedent for future delay motions. Dismissals for delay are relatively rare, with many courts favouring plaintiffs’ rights of action over specific and systemic prejudice to defendants and the court system from inordinate and inexcusable delay. The Postbank Decision confirms that plaintiffs’ rights are not unbridled. Whilst recognizing that each motion is fact specific, the Postbank Decision may be indicative of a culture shift in how courts address such motions, particularly given the motion judge’s reference to recent law citing the Supreme Court of Canada decision in R. v. Jordan, where the court held that “we operate now in a litigation climate where complacency is no longer tolerated.” The Postbank Decision is also notable for being a commercial list matter; the fact that the commercial list is typically used for matters that need to be expedited was acknowledged by Justice Dietrich in her decision.
The plaintiff, a large German financial institution, commenced a claim against the defendants in November 2010. The plaintiff alleged that, amongst other things, the individual defendants’ made fraudulent misrepresentations in a meeting with the plaintiff’s representatives in Germany in 2009.
After the litigation commenced, although there was initially some delay in pleadings, it appeared to progress as usual through documentary discovery. When the defendants made requests for translations of German documents in the plaintiff’s productions, the action stalled for years with the plaintiff failing to respond to the defendants’ many requests. The translation requests were ultimately determined to be reasonable when the Court ordered the translations more than four years after the initial request was made. After further multi-year delay in producing the Court-ordered translated documents (numbering a few hundred) and proceeding with the litigation, the defendants brought a motion to dismiss the action for delay (at the time of the hearing of the motion, the action was almost nine years old).
Application of the legal test
Rule 24.01 provides that a defendant may move to have an action dismissed for delay where the plaintiff has failed to set the action down for trial within six months after the close of pleadings. This motion for delay relied on the second of two situations specified by the Ontario Court of Appeal in Langenecker v. Sauvé – a court should dismiss an action if the delay is inordinate and inexcusable such that it gives rise to a substantial risk that a fair trial of the issues in the litigation will not be possible because of the delay.
To determine whether a delay has been “inordinate” the court is required to review the time that has passed from the commencement of the proceeding to the dismissal motion. Nearly nine years had passed since the claim was commenced and documentary discovery was ongoing for approximately eight years. This was sufficient to find the delay inordinate.
Whether a delay is “excusable” requires the court to assess the reasons for the delay and whether those reasons afford a “reasonable and cogent” or “sensible and persuasive” explanation for the delay in its totality. Despite alleging this delay was due to internal personnel issues, a corporate restructuring, a corruption in its database, and the defendants’ requests for translated documents, Justice Dietrich concluded that such reasons did not meet the threshold required to justify the delay. She considered the plaintiff’s failure to communicate these excuses to the defendants in a timely manner and noted that the alleged causes for the delay were not atypical nor something a large financial institution could reasonably cope with. With respect to the translation requests, the motions judge found that “[t]ranslation of documents to be used in examinations can fairly be, what the lower court in Sauvé, 2011 ONSC 867, at para. 16, referred to as, a “usual hurdle” in litigation, which does not provide a reasonable or persuasive explanation for inordinate delays”. Even if these delays were accepted, Justice Dietrich noted they could account for a delay of weeks or months, not years.
Despite the defendants not alleging any actual prejudice, which is not required, Justice Dietrich concluded that the presumed prejudice inherent in such a lengthy delay was sufficient to give rise to a substantial risk that a fair trial would not be possible. The presumption of prejudice was recognized by the Ontario Court of Appeal in Sauvé as a result of the passage of time, “[m]emories fade and fail, witnesses become unavailable, and documents and other potential exhibits are lost. The longer the delay, the stronger the inference of prejudice to the defence case flowing from that delay.”
In coming to this conclusion, Justice Dietrich noted that the plaintiff bears the onus of rebutting the presumption of prejudice from the unexplained delay by showing that documents have been preserved, that the issue in dispute does not require the recollection of witnesses, or that the necessary witnesses are available and have a detailed recollection of the events at issue.
Despite the plaintiff completing documentary production, Justice Dietrich concluded that this was not a case that would rely solely on such evidence. Because the fraud alleged in this case involved representations made at a meeting some 10 years ago, the testimony of witnesses would be critical to the adjudication of the case. Justice Dietrich concluded that “there is a fair presumption that [the witnesses’] recollection would be significantly compromised by the passage of considerable time.” As there had not yet been examinations for discovery, these witnesses could not even rely on the discovery transcripts to refresh their memories. No evidence was before Justice Dietrich on what the witnesses recalled.
What this may mean for fraud claims moving forward
Justice Dietrich adopted the Alberta Court of Appeal’s holding in Humphreys v Trebilcock – a litigant that alleges fraud may be obliged to advance an action at a faster pace. Allegations of fraud are inherently more harmful in nature as such allegations undermine the defendant’s character, exasperate the stress of litigation, and create fear that these unsubstantiated allegations may dissuade possible business opportunities. Further, such allegations will likely rely on witness testimony.
This conclusion follows a similar line of reasoning as applied by the Ontario Court of Appeal in Ticchiarelli v Ticchiarelli where the Court recognized that allegations of conspiracy, misrepresentation, unconscionability, and undue influence rely significantly on viva voce evidence. The status of witnesses and evidence of their recollections are a key element in assessing prejudice.
What this may mean for stalled litigation
Although a motion to dismiss is highly fact specific, Justice Dietrich’s decision underscores the importance of timely resolution of cases. In quoting the Supreme Court of Canada’s decision in R v Jordan, she affirmed that “we operate now in a litigation climate where complacency is no longer tolerated.” This case, along with decisions such as Trebilcock and Ticchiarelli, follow the Supreme Court of Canada’s strong disapproval of litigation delay. Despite the importance of a plaintiff having its day in court, in commencing an action a plaintiff has an obligation to move the case forward with a reasonable amount of expediency. The plaintiff’s right of action must be balanced with the defendant’s right not to suffer prejudice from inordinate and inexcusable delay.
This claim was brought on the Commercial List. Justice Dietrich recognized that the very purpose of the Commercial List is to expedite the determination of applicable commercial matters. Plaintiffs must bear in mind that bringing a matter on the Commercial List may affect the expected expediency at which the dispute is adjudicated.
 2019 ONSC 6997 aff’d 2020 ONCA 410.
 2016 SCC 27.
 2011 ONCA 803, at paras. 6-7.
 2011 ONCA 803, at para. 11.
 2017 ABCA 116.
 2007 ONCA 1.
 2016 SCC 27.