



COURT OF APPEAL FOR ONTARIO

CITATION:
Laczko v. Alexander, 2012
    ONCA 803

DATE: 20121120

DOCKET: M41762

Weiler J.A. (In Chambers)

BETWEEN

Janos Laczko

Plaintiff (Responding Party)

and

Edwin Alexander and Mercedes Property Management
    Ltd.

Defendants (Moving Parties)

William G. Scott, for the moving parties

Richard A. Wellenreiter, for the responding party

Heard: November 13, 2012

On a motion to extend the time to appeal the order of
    Justice Jane A. Milanetti of the Superior Court of Justice, dated May 22, 2012.

Weiler J.A. (in chambers):

[1]

The moving parties seek an order to extend the time for filing a notice
    of appeal from an order striking out their statement of defence.

[2]

In deciding whether to extend the time, the following factors are
    relevant:
(1) whether the moving parties formed an intention to
    appeal within the relevant period; (2) the length of and explanation for the
    delay; (3) any prejudice to the responding party; (4) the merits of the appeal;
    and (5) whether the justice of the case requires it:
Kefeli v.
    Centennial College of Applied Arts and Technology
(2002), 23 C.P.C. (5th)
    35 (Ont. C.A.).

[3]

The individual moving party, Edwin Alexander, is a paralegal and a real
    estate agent.  He is also the directing mind of the corporate moving party,
    Mercedes Property Management Ltd.  The moving parties are the defendants in the
    underlying action.

[4]

The responding party, Janos Laczko, a carpenter and handy man, did work
    on a number of properties managed by the moving parties.  He says he was not
    paid for this work. In addition, the responding party owns rental property in
    partnership with Alexander. He claims to have performed repair and renovation
    services on those properties for which he has also not been paid. The
    partnership properties are managed by Alexander and his company, Mercedes. The
    responding party is the plaintiff in the underlying action.

[5]

The underlying action primarily involves a claim by Laczko against
    Alexander for breach of their partnership agreement. In addition, Laczko was
    permitted to amend his statement of claim to incorporate eight small claims
    court actions for services provided and four construction lien claim actions he
    had previously brought against the moving parties.

[6]

On May 22, 2012, Milanetti J. struck the moving parties statement of defence
    due to the failure of the Defendants to comply with outstanding orders for
    disclosure and the Defendants failure to comply with their disclosure
    obligations under the
Rules of Civil Procedure
(as well as Justice
    Lococos costs order). An order striking out a statement of defence is final
    for purposes of appeal:
Four Seasons Travel Ltd. v. Laker Airways Ltd.
(1974),
    6 O.R. (2d) 453 (Div. Ct.).

[7]

The moving party, Alexander, failed to file his notice of appeal within
    the requisite time period for final orders. He explains the delay on the
    grounds that his lawyers erroneously believed that Milanetti J.s order was
    interlocutory, and therefore subject to a longer time frame for filing. He has
    provided an affidavit from his lawyer to this same effect. He did file a notice
    of motion for leave to appeal on June 20, 2012, within thirty days of Milanetti
    J.s order.

[8]

For the purposes of this motion, I am prepared to accept that the moving
    parties formed an intention to appeal within the time for bringing an appeal,
    and that a satisfactory explanation for the delay in filing a notice of appeal
    has been given. The motion, therefore, turns on the remainder of the factors in
    the
Kefeli
test: whether the responding party would be prejudiced, the
    merits of the appeal, and the justice of the case. In order to discuss these
    factors, it is necessary for me to review the history of the proceedings. After
    doing so, I will comment on each factor in the circumstances of this case.

[9]

In March, 2010, the responding party Laczkos lawyer wrote to both
    Alexander and James Scott, Alexanders lawyer at the time, requesting certain
    disclosure relating to the dispute between the parties. On April 8, 2010, he
    again wrote Mr. Scott, requesting the annual financial statements relating to the
    partnership and the operation of the property so that his client, Laczko, could
    complete his income tax returns. Laczko alleges that at that time no statements
    had been produced by the moving parties since 2008.

[10]

On
    June 28, 2011, the Laczkos lawyer sent Mr. Scott a report dated June 27, 2011
    prepared by Larry Joslin, a forensic accountant.  The June Joslin report
    provided a detailed list of required disclosure.

[11]

On
    October 24, 2011, the Laczkos lawyer brought a motion to compel production of
    the moving parties affidavit of documents.

[12]

In
    response to the motion to compel, Alexander swore an affidavit in November,
    2011 disputing the relevance of certain productions. In that affidavit, he
    expressly acknowledged the June Joslin report.

[13]

At
    the return of the Laczkos motion to compel on November 24, 2011, the two
    parties signed Minutes of Settlement. The Minutes substantially incorporated
    the disclosure outlined in the June Joslin report, and set a new production
    deadline of January 31, 2012. Although Alexander states in his affidavit that
    he was not provided with a copy of the Minutes of Settlement until December 20,
    2011, he personally signed the Minutes of Settlement on November 24, 2011. He,
    therefore, must have been aware of the January 31, 2012 deadline, as well as
    the fact that the June Joslin report had been substantially incorporated into
    the Minutes. Alexander also knew of the June Joslin report as of early
    November, 2011. He did not need to wait for a copy of the Minutes of Settlement
    to know what production he was required to make.

[14]

Alexander
    turned over 1,500 pages of disclosure to his lawyer, Mr. Scott, either on
    Sunday, January 29, 2012 (according to Scott) or four or five days prior to
    the January 31 deadline (according to Alexander). Alexander states that his
    lawyer did not tell him a significant amount of time would be required to
    organize and bind the disclosure. The deadline was missed.

[15]

Despite
    follow-up correspondence between Laczkos lawyer and Mr. Scott, production was
    not made. As a result, on February 24, 2012, Laczko brought a motion returnable
    March 13, 2012 to strike the moving parties statement of defence or to compel
    production.

[16]

On
    the return date, Lococo J. granted a further indulgence to the moving parties
    and adjourned the motion to March 22, 2012, peremptory to the Defendants,
    subject to availability of Plaintiffs counsel, thereby allowing further time
    for production.  He also ordered costs payable to Laczko in the amount of $1,500
    for delay.

[17]

The
    Alexander asserts that he did not attend the motion, and again blames his
    lawyer for not advising him of the outcome.

[18]

On
    March 21, 2012, Laczko received an unsworn affidavit of documents from the moving
    parties. The responding partys affidavit reflects that the motion was
    adjourned
sine die
to be brought back, if necessary, once Laczko had
    had an opportunity to review the disclosed documents.

[19]

On
    April 3, 2012, Joslin provided a second report detailing omissions in the
    affidavit of documents provided by the moving parties.  The April Joslin report
    indicated that Alexander had failed to produce a substantial number of the
    documents agreed to in the Minutes of Settlement, including bank statements and
    financial statements relating to the partnership property. In addition, very
    few copies of negotiated cheques were provided to substantiate expenses charged
    to the partnership property.

[20]

Laczko
    brought the motion to strike back on May 8, 2012.  According to Laczko, it was
    adjourned from May 8 to May 22, 2012 at the request of the moving parties
    lawyer.  Although Alexander was aware that the motion was being heard May 22,
    he provided no responding material.

[21]

Alexander
    swears that his lawyer told him it would be a good idea for him to attend the
    May 22 hearing, but that he did not say why. He also swears that his lawyer
    never gave him a copy of the April Joslin report. According to his affidavit,
    Alexander was simply aware that the motion to strike was coming back before the
    court, by reason of alleged deficiencies in disclosure.

[22]

However,
    he was aware of the disclosure required by the June 2011 Joslin report and the
    November 2011 Minutes of Settlement, which he had signed. More generally,
    Alexander should have been aware, as a paralegal, of his obligation to provide
    disclosure in relation to an ongoing litigation. Even if he did not have a copy
    of the April 2012 Joslin report, he must therefore have known, for example,
    that he had not produced such basic disclosure as the financial statements for
    the joint venture for 2008.

[23]

In
    her endorsement, the motion judge made the following statement:

[N]o sworn statement is provided by the defendant explaining
    why the doc. has not been provided.  If Mr. Joslin is wrong in his assessment,
    a response should have been filed by the defendant; it was not.  When the
    parties sign Minutes, it should not be so difficult to obtain compliance. The
    defendant is not proceeding in a fair or appropriate fashion.

[24]

She
    granted the motion, and ordered that the statement of defence of Alexander and
    of Mercedes be struck. As discussed in greater detail below, I do not believe
    she erred in principle in exercising her discretion to grant the motion.

[25]

Alexander
    filed a further affidavit in support of this motion in which he says that he
    does not specifically recall when his lawyer gave him a copy of the April
    Joslin report, but that he did not have sufficient time to respond to it by way
    of further production or other answer prior to May 22, 2012. He provides no
    explanation as to why he did not file materials on the motion to this effect.

[26]

In
    his further affidavit, Alexander undertakes to produce all of the additional
    documents specified in the April Joslin report in his possession or control. He
    states that he emailed the financial statements for the joint venture to 2008
    to the Laczkos lawyer on October 31, 2012. The respondent acknowledges receipt
    of some financial documentation relating to 2008 in early November, 2012. No
    explanation has been provided as to why these documents werent provided
    earlier.

[27]

Alexander
    also states that the first time he learned about the outstanding $1,500 costs
    order of Lococo J. was at the May 22 hearing. He says that his lawyer told the
    court that he would need another sixty days to pay the costs order, and that
    his attempt to speak to his lawyer to correct this misstatement was rebuffed.

[28]

Alexander
    left before Milanetti J. delivered her decision. He alleges that despite
    attempts to find out the result of the May 22, 2012 hearing from his lawyer, it
    was not until June 5, 2012 that he learned his defence had been struck.

[29]

The
    non-payment of the costs order clearly figured in the decision of the motions
    judge, considering the following statement in her endorsement:

Each time the plaintiff has to come back to Court, he has to
    pay his LLB [lawyer].  Even if I did not strike, Id need to impose timelines
    and costs of today would be payable.  Based on the track record before me, I
    have no confidence that such Orders would be complied with.  The defendant
    provided me no solace in this regard; seeking, rather an additional 60 days to
    pay the 1
st
costs Order.

[30]

The
    order of May 22 was a document of public record that Alexander, as a paralegal,
    certainly would have known how to access had he cared to do so. Further,
    although a lawyers conduct may be relevant in assessing a partys explanation
    for delay, the opposing party is not responsible for the alleged shortcomings
    of the other partys lawyer.

[31]

A
    solicitor is an agent of his client:
Birjasingh v. Coseco Insurance Co.
(2000), 182 D.L.R. (4th) 751, at para. 11. This principle is often invoked in
    support of a lawyers capacity to act on behalf of his or her client. However,
    it also means that, vis-a-vis the other party, it is generally the client who
    is responsible for the actions of the clients lawyer. This is not an overly
    harsh approach, especially in the circumstances of this case. As noted by this
    court in
Machacek v. Ontario Cycling Assn.,
2011 ONCA 410, at para.
    10, the appellants are not left without a remedy as they still have recourse
    through an action in solicitors negligence.

[32]

Alexander
    states that the striking of his statement of defence has deprived him of a
    legitimate defence in the matters originally before Small Claims Court, and
    that he has now become personally liable for the payment of these contested
    invoices. He is prevented from bringing third party actions against the owners
    of property where the plaintiff alleged he had done work in his invoices.

[33]

Insofar
    as the merits of the small claims matters are concerned, Alexander made the
    following statement in a letter to Laczko, dated June 18:

If you retract your last two claims I will pay you for all of
    the invoices that you have submitted to me to this day.  We both know that you
    deserve to be paid for the work invoices you submitted to me, but the last two
    small claims are nonsense and I am not paying for them.  Otherwise, expect to
    gain nothing without a fight and be ware [sic] that I will refute all your
    claims whatever they may beexpect these lawsuits to go on for years and get
    nothing from Cathcart!

Cathcart is a partnership property. These statements
    diminish, to say the least, the strength of Alexanders position with regard to
    the small claims matters.

[34]

As
    to prejudice, the moving parties submit that the motion
judge failed to consider the question of prejudice to the responding party  or
    lack thereof, according to the moving parties  before striking their statement
    of defence and exposing them to a claim for $50,000. I disagree. The motion
    judges comments concerning the cost to Laczko of the court appearances
    necessary to enforce its right to disclosure in the Minutes was an assessment
    of prejudice. One might also infer that the motion judge was of the opinion
    that prejudice was accruing from her comment that [t]he defendant is not
    proceeding in a fair or appropriate fashion.

[35]

Indeed,
    there is significant evidence before me that the moving parties failure to
    make timely disclosure has caused and is causing prejudice to the responding
    party. Alexander states that the joint venture has been insolvent since August
    4, 2009. The documentation to support this statement has not been provided. The
    certificate of outstanding realty taxes on the property shows taxes in arrears
    of $32,316.87. Alexander states that he has an arrangement in place with the
    City of Hamilton to pay $750 a month, which he has been doing. While the joint
    venture may be insolvent, why make these payments unless there is some equity
    in the property?

[36]

Alexander
    also states in his supplementary affidavit:

In order to complete the original purchase of the property, I
    borrowed $52,000 on a line of credit.  This was registered in the form of a
    second mortgage on the joint venture property. The project did not generate
    sufficient funds to make payments on this mortgage.  I assigned this mortgage
    to a numbered company owned by my wife who has issued a Notice of Sale.

[37]

While
    Alexander complains that the striking of his statement of defence has exposed
    him to a judgment for $50,000 and that his legitimate set-offs claimed will not
    be accounted for, the moving parties delay and lack of disclosure has denied
    the responding party the opportunity to finalize his actions against them. It
    has also exposed the responding party to a continuing deterioration of his
    interest in the partnership property.

[38]

When
    this history is considered as a whole, I am of the opinion that to grant the
    relief requested by the moving parties would cause prejudice to the responding
    party, that there is little merit to the appeal, and that the justice of the
    case does not require that leave be granted.  Accordingly, for the reasons
    given, the motion to extend the time to appeal is dismissed.

[39]

The
    responding party is entitled to his costs of the motion before me and may make
    submissions in writing of no more than two pages concerning its bill of costs.
    The responding partys submissions are to be made within five days of the
    release of these reasons. The moving parties shall have five days from the
    filing of the responding partys submissions to respond in writing and shall
    similarly limit their submissions to two pages.


