Executive Summary: Key Legal and Evidentiary Issues

• Canafric Inc. brought a motion to set aside a registrar's order dismissing its insurance coverage action for delay, dated September 18, 2024.
• The underlying dispute concerns the denial of insurance coverage by Economical Mutual Insurance Company for an equipment failure loss that occurred in October 2014.
• Several periods of unexplained delay were attributed primarily to Canafric's former counsel, J. McLaughlin, who ceased legal representation in September 2023 following an administrative suspension by the Law Society of Ontario.
• Applying a contextual four-factor test, the court weighed the plaintiff's explanation for delay, intent to prosecute, promptness in bringing the motion, and absence of prejudice to the defendants.
• Prejudice to the defendants was not established, given that affidavits of documents had been exchanged, examinations for discovery had been conducted, and transcripts remained available.
• Canafric acted promptly upon learning of the dismissal, with new counsel serving a draft notice of motion on December 23, 2024, approximately five weeks after being notified.

Facts of the case

Canafric Inc., operating as Mortimer's Fine Food, runs a food processing facility in Burlington, Ontario. In October 2014, the business suffered a loss arising from an equipment failure. Its insurer, Economical Mutual Insurance Company (Economical), denied coverage under the applicable insurance policy. Canafric commenced this action by notice of action on October 1, 2015, with a statement of claim filed on October 29, 2015, and amended on December 1, 2015. The defendants — Economical, insurance brokerage Utter-Morris Insurance Brokers Limited, and insurance adjuster Greg Meyer — delivered a statement of defence on or about April 21, 2017.

Prolonged pre-trial history and delays

The litigation history spanning nearly a decade is marked by repeated delays, largely on Canafric's side. From 2017 onward, defendants' counsel made numerous attempts to advance the discovery process, including requests for a discovery plan, affidavits of documents, and examination dates. Three separate motions were brought by the defendants to compel compliance. On April 26, 2018, a motion for a discovery plan proceeded on consent; Canafric failed to meet the resulting deadlines. A second motion on November 6, 2018, resulted in an amended discovery plan, with costs ordered against Canafric. A third motion on March 5, 2020, ordered Canafric's representative to be examined for discovery on April 8, 2020, failing which the defendants would be entitled to dismissal of the action with costs. Examinations for discovery of Canafric's representative took place on April 9 and September 30, 2020, during which Canafric gave 52 undertakings and took three questions under advisement. Meyer was examined on October 5, 2020, personally and on behalf of Economical. Canafric confirmed it would not pursue an examination of Utter-Morris.

Despite counsel reaching an agreed timetable in 2021, no court order was obtained to formalise it. Answers to undertakings were provided only in part — 25 of the outstanding undertakings and one question under advisement were answered on June 28, 2022. An expert report calculating alleged losses under the policy was obtained and dated October 17, 2022. In or about September 2023, Canafric's then-counsel, J. McLaughlin, ceased acting following an administrative suspension by the Law Society of Ontario. Canafric retained new counsel, M. Makki, in mid-September 2024. On September 18, 2024, the registrar dismissed the action for delay. Neither Canafric nor its new counsel received a copy of the dismissal order. M. Makki learned of the dismissal on November 18, 2024, and served a draft notice of motion to set it aside on December 23, 2024.

Policy terms and contractual clauses at issue

The document does not set out the specific terms or clauses of the insurance policy issued by Economical. The coverage dispute, arising from the October 2014 equipment failure, forms the backdrop to the litigation, and an expert was retained to calculate losses in the context of the policy wording. The court's decision deals solely with the procedural motion to set aside the dismissal and does not analyse the substantive policy terms.

Court's reasoning and analysis

Associate Justice McAfee applied the contextual approach confirmed in Prescott v. Barbon, 2018 ONCA 504, as cited in Piedrahita v. Costin, 2023 ONCA 404. This approach requires the court to weigh four factors drawn from the Reid test: (i) whether a satisfactory explanation for the delay was provided; (ii) whether the plaintiff always intended to prosecute the action but failed through inadvertence; (iii) whether the plaintiff moved promptly to set aside the dismissal once aware of it; and (iv) whether the defendants suffered significant prejudice in presenting their case at trial.

On the first factor, the court acknowledged several periods of unexplained delay — particularly the failure to respond to discovery requests between April and November 2018, delayed answers to undertakings, and the period prior to the filing of the statement of defence. The delay from September 2023 to September 2024 was, however, adequately explained by J. McLaughlin's administrative suspension and Canafric's need to retain new counsel. The court also noted that despite the delays, the action had meaningfully progressed: affidavits of documents had been served, examinations for discovery had been completed, some undertakings had been answered, and an expert had been retained. The court was guided by the principle stated in H.B. Fuller Company v. Rogers, 2015 ONCA 173, that the preference for deciding matters on their merits is especially strong where delay results from counsel's error, and by the principle in Marché d'Alimentation Denis Thériault Ltée. v. Giant Tiger Stores Ltd., 2007 ONCA 695, that an innocent client should not suffer the irrevocable loss of the right to proceed due to solicitor inadvertence.

On the second factor, the court was satisfied that the dismissal was not intentional, given that J. McLaughlin had been suspended at the time and M. Makki had not yet been formally retained. On the third factor, once M. Makki learned of the dismissal on November 18, 2024, a draft notice of motion was served on December 23, 2024, satisfying the promptness requirement. On the fourth factor, the court found no actual prejudice to the defendants. Meyer's faded memory was offset by the availability of his examination transcript and adjuster notes. Neil Howard of Utter-Morris, while lacking independent recollection, had been involved from the outset and had access to documents listed in the affidavit of documents dating to 2014. To the extent that further answers to undertakings had not been fully reviewed by defendants' counsel, the court found that any prejudice from missing documentation would fall on Canafric, not the defendants.

Ruling and overall outcome

Associate Justice McAfee set aside the registrar's order dismissing the action for delay. Mandatory mediation was ordered to take place on or before December 18, 2026, and the action is to be set down for trial on or before January 15, 2027. Canafric was the successful party on the motion; however, because it was seeking an indulgence, the court declined to exercise its discretion to award costs. Each party is to bear its own costs, and no monetary amount was awarded.