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In a recent Ontario Court of Appeal decision, a real estate case was allowed to proceed despite a nine-year delay.

What Happened?

The action was based on an Agreement of Purchase and Sale dated September 6, 2011, for a 12-unit apartment building in Toronto for the sum of $1.28 million. 

The agreement called for a $50,000 deposit and was conditional on the buyer obtaining financing. The buyer was allegedly unable to do so and purported to terminate the agreement.

On December 6, 2011, the buyer commenced an action for recovery of his $50,000 deposit. He claimed an additional $50,000 for loss of opportunity to invest the deposit.

On January 11, 2012, the sellers delivered a statement of defence and counterclaim, claiming damages of $100,000 for breach of contract. Nine months later, the buyer delivered a reply and defence to counterclaim.

At that point, the action stalled: no steps were been taken by any party to move the action forward for over four years until 2017 when the buyer requested a status hearing to prevent an administrative dismissal, at which the Master allowed the proceeding to continue. However, the buyer still took no steps to move the action forward.

As a result, in January 2018, the sellers served a motion to dismiss the action for delay or, in the alternative, for summary judgment dismissing the buyer’s claim and granting the sellers judgment on the counterclaim.

On March 20, 2018, a motion schedule was set for a return date for the sellers’ motion on September 11, 2018. However, the motion did not go ahead because the matter had not been listed. 

Finally, on February 27, 2019, the buyer’s counsel appeared in court to schedule a motion to vary the timetable set by the Master and for summary judgment. The motion, which resulted in the order at issue, was scheduled for July 24, 2019.

Both parties delivered materials on the July 24, 2019 motion. The sellers’ materials addressed both the merits of the claim and counterclaim and responded to the buyer’s request for variance of the timetable. 

Lower Court Decision

The motion judge noted the buyer’s failure to take any steps to move the action forward for several years after the exchange of pleadings. 

In considering the motion to vary the timetable, the motion judge made reference to the test in Reid v. Dow Corning Corp. and laid out the four Reid factors, namely: 

  1. the explanation for the litigation delay; 
  2. inadvertence in missing the deadline; 
  3. efforts to move promptly to set aside the dismissal; and 
  4. absence of prejudice to the defendant.

Considering the Reid factors, the motion judge found that the buyer:

  1. had not provided a satisfactory explanation for the delay;
  2. did not demonstrate that he failed to prosecute the action due to inadvertence;
  3. did not move promptly to bring a motion to vary the timetable; and
  4. had not proven that the sellers would not suffer prejudice.

On September 23, 2019, the motion judge therefore dismissed the buyer’s action for delay. She did not address the sellers’ counterclaim.

On October 21, 2019, after the dismissal of the action, the sellers served a notice of election to proceed with their counterclaim.

The buyer appealed.

Court of Appeal Decision

The Court of Appeal found that while the motion judge identified the need for a contextual analysis, she failed to consider a critical contextual factor: the dismissal of the buyer’s claim left the sellers’ counterclaim alive. The court stated:

“[I]t was not in the interests of justice to dismiss the [buyer]’s claim while permitting the [sellers] to litigate the very same issues in their counterclaim. The order did not promote the timely and efficient resolution of the proceeding. While the claim and counterclaim were well past their “best before” dates, neither party had displayed any diligence in moving the proceedings forward and there was no evidence of prejudice. When the litigation was finally ready for determination, the motion judge erred in failing to consider the fact that dismissing the claim would leave the counterclaim outstanding, exposing the [buyer] to liability in relation to the very same issue he was litigating.”

As a result, the appeal was allowed, the dismissal of the action was set aside, and the matter was remitted to the Superior Court for determination. 

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At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

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