The legal term prejudice surfaces in many areas of the law and has been described in several different ways. The courts employ the concept of prejudice to aid in the remedying of injustice. Applied loosely, however, it can create procedural and substantive injustices. Care must, therefore, be taken in its application. Consequently, a hard look at the merits of the allegations of prejudice is very important.
Pleadings Motions
The term prejudice has regularly surfaced in pleadings motions. In King's Gate Developments Inc. v. Drake1 the Ontario Court of Appeal reversed the lower court's decision not to allow amendments to a statement of defence on the eve of trial because the amendments would have necessitated productions and discovery and an adjournment of tire trial. The Court of Appeal held that the amendments should have been allowed, but on terms, as no "non-compensable" prejudice had been established. The court offered examples of non-compensable prejudice, such as the death of a material witness or the destruction of essential files. Accordingly, prejudice may be compensable or non compensable. Although the death of a material witness and the destruction of files do not make up an exhaustive list of non-compensable prejudice, they are clear examples of the type of prejudice that must be present to be considered non-compensable.
The primary obligation to establish non-compensable prejudice under r. 26.01 of the Ontario, Rules of Civil Procedure, R.R.O. 1990, Reg. 194, is on the party who alleges that it exists: Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co.2 That party should expect that the court will scrutinize the allegation of prejudice to determine whether the prejudice is apparent or real. A hard look at the merits of the prejudice allegation is in order as aloose application of this concept can prevent legitimate claims or defences from being advanced and may yield serious injustice. Prejudice is a powerful tool that must be carefully considered on a case by case basis to determine whether it is really non-compensable.
1(1994), 23 CPC (3d) 137, (sub nom. Kings Gate Developments Inc.
v. Colangelo) 17 O.R. (3d) 841, 70 O.A.C. 140 (C.A.)
2(1995), 25 O.R, (3d) 106, 41 CPC (3d) 75 (Gen Div.), at p. 85 CPC
In MacDougall v. Royal Insurance Canada3 the court denied a request by the defendant to amend its pleadings, having found non-compensable prejudice. One of the parties had died and thus could not answer the substance of the proposed amendments, which related specifically to her.
Another example of non-compensable prejudice is illustrated by Churly v. Budnick.4 In this case the defendant moved to amend his statement of defence. The court denied his request based on its finding that if the amendment was allowed and the defence succeeded at trial because of the proposed amendment, the plaintiff would suffer prejudice in that he would lose a remedy. The lost remedy would be the right of the plaintiff to sue another person to recover the loss he would suffer by virtue of the successful proposed defence. The remedy would be lost as a result of the passage of a six-year limitation period. In Kamei Sushi Japanese Restaurant Ltd. v. Epstein5 the British Columbia Court of Appeal granted the plaintiffs leave to amend their statement of claim, finding that the defendants would not be prejudiced by the proposed amendments to the extent that leave should not be granted. The court noted (at p. 391, 1 CPC (4th)):
... it appears that the evidence is available to the parties so that the factual issue raised by the proposed amendment can be fairly and properly litigated and determined at trial.
The amendment proposed raises a triable issue that ought to be tried in the interest of justice...
The court took a hard look at the merits of the allegation of prejudice.
A case in which a hard look at the merits of the prejudice allegation was seriously lacking in the first instance was in Hanlan v. Sernesky.6 In this case the court dismissed the motion for leave to amend the statement of defence.
3(1996). 31 OR (3d) 109, 42 C.C.L.I. (2d) 4, 18 O.T.C. 224 (Gen.
Div.)
4(1997),34 OR (3d) 729 (Master)
5(1996), 25 B.C.L.R. (3d) 366, 1 C,P,C. (4th) 381 (S.C.)
6(1996), 37 C.C.L.I. (2d) 262, 1 CPC (4th) 1, 7 OTC 269 (Gen.
Div.), reversed (1996), 39 C.C.L.I. (2d) 107, 95 O.A.C. 297, 3 CPC (4th) 201
(C.A.)
The case was appealed to the Ontario Court of Appeal. The Ontario Court of Appeal stated (at p. 202, 3 CPC (4th)):
The motions judge refused an amendment to the statement of defence to plead the law of Minnesota which, as a result of the decision of the Supreme Court of Canada in Tolofson v. Jenson, [1994] 3 S.C.R. 1022, might apply to the case, rather than the law of Ontario, where the parties reside. The motions judge based his decision on what he considered to be prejudice to the plaintiffs resulting from the application of Minnesota law.
The Ontario Court of Appeal also stated ( at p. 202):
With respect, we see no prejudice resulting from the amendment. The only prejudice is that which would be inevitable as a result of any successful plea. Such prejudice is not the type referred to in Rule 26. If it were, only unmeritorious amendments would be allowed - an obviously ludicrous proposition.
The appeal is allowed...and leave is granted to amend the statement of defence to plead Minnesota law.
In Mele v. Titorne Riddell7 the court allowed the plaintiffs to amend their statement of claim after 44 days of trial relating to negligent misrepresentations. The court noted that the factual situation that gave rise to the allegations of negligent misrepresentations had always been contained in the statement of claim. The court, however, disallowed the plaintiffs' request to make other amendments that would have given new life to the claim and found that prejudice would result.
Construction Lien Cases
Prejudice has also surfaced in the construction lien context. In Atlas-Gest Inc. v. Brownstones Building Corp.8 under the Construction Lien Act, R.S.O. 1990. c. C.30, it was held that prejudice could be inferred unless there was sufficient proof to the contrary. The appellant bank had sought to amend its pleadings on the eve of trial before the case management judge. The court noted that s. 67(2) of the Construction Lien Act prohibits interlocutory motions without the court's consent, unless the interlocutory motion is necessary or will expedite the resolution of the issues. The Divisional Court held that the case management judge did not err in law or in principle in refusing the requested amendment in light of the summary procedure under the Act and, in particular, the requirements of s. 67(2) of the Act.
7(1997), 32 OR (3d) 459, 26 OTC 99 (Gen. Div.)
8(1996), 46 CPC (3d) 366 (Ont. Div. Ct.)
The court stated (at p. 368, 46 CPC (3d)):
We rely upon s. 67(2) to illustrate the policy of the legislation that prejudice for the purposes of Rule 26 is to be inferred unless there is sufficient proof to the contrary
Accordingly, prejudice may be presumed to exist unless the contrary can be proven. In one context, the person alleging prejudice may be forced to prove it, before consequences will follow. In another, it is simply presumed to exist and it must be disproved: the onus shifts. Regardless on whom the onus lies, the court should take a hard look at the alleged prejudice before it.
Dismissal for Delay Motions
The term prejudice has also appeared in want of prosecution motions. In Sehdev v. Moss, Lawson & Co.9 the Ontario Court of Appeal heard an appeal from an order dismissing a proceeding for delay. The Court of Appeal dismissed the appeal. The manifestly unacceptable delay was not explained to the motions judge or the Court of Appeal. The court noted that the delay was so lengthy that it gave rise to a presumption of prejudice. Accordingly, prejudice can be presumed to be present depending on the context.
No reasonable justification for the delay in the Manitoba case of Ferencaba (Next Friend of) v. Esau10 was offered. The plaintiff had been injured in a motor vehicle accident in 1983. She unreasonably delayed the prosecution of the action as there was virtually no litigation activity by her during the first six years after the accident and she failed to provide sufficient documents to support a settlement demand to allow the defendant to respond. The plaintiff failed to respond to repeated demands from the adjuster for information and the court found that the delay caused significant prejudice to the defendant. This case depended on findings of credibility in respect of an event that Occurred 13 years before the defendant's motion to strike out the statement of claim. Accordingly, the action was dismissed for delay.
9(March 25, 1996), Doc. CA C18346, Osborne, Abella and Moldaver
JJ.A. (Ont. C.A.), 62 A.C.W.S. (3d) 261
10(1996), (sub nom. Ferencaba v. Esau) 112 Man. R. (2d) 202
(Master)
The plaintiff's action in Bostrum v. Kumar Estate11 was not dismissed for want of prosecution even though the delay was inordinate. Prejudice from the delay did not exist because adequate records and written materials were available to try the case. The plaintiff's action was, however, dismissed on the ground that no evidence supported a triable issue regarding whether the defendant had met the proper standard of care in this medical malpractice action. The Ontario Court of Appeal dismissed the appeal from the lower court's decision.
In Specialty Underwriting Services Ltd. v. Lloyds Underwriters12 the plaintiff made a deliberate tactical decision not to commence proceedings until several years after the cause of action arose. The delay gave rise to a presumption of prejudice. The delay was inexcusable and inordinate, and the action was dismissed for want of prosecution.
The nature of the allegations advanced in an action will be considered by the court in want of prosecution motions to determine whether serious prejudice has been caused by the delay. In Kern v. Watson13 the action was commenced in 1991 against former lawyers. The allegations included the allegation of fraudulent misrepresentation. The court held that the plaintiffs had a duty to proceed without inordinate and inexcusable delay, and that the delay had caused serious prejudice.
Prejudice may be described as "non-compensable," "serious," or " significant," and may be presumed to be present. Regardless of what adjective is used to describe prejudice, care must be taken not to forget the nature and the purpose of this concept. The concept is supposed to be invoked to prevent procedural and substantive injustices, not to create them. Thus, allegations of prejudice must be scrutinized, as should the merits of the allegations.
In another case involving the issue of want of prosecution the court reversed a master's findings in the first instance of inherent prejudice. In Country Lane Superett Ltd. v. Royal Insurance Co. of Canada14 the court was faced with an appeal from a master's dismissal of an insurance claim. The master considered the defendant's anxiousness to have the matter proceed to be significant in dealing with the question of delay.
11(December 29,1994), Doc. Kitchener 5404/82, Salhany J. (Ont. Gen. Div.), 52 A.C.W.S. (3d) 521, 6 W.D.C.P. (2nd) 42, affirmed (April3, 1996), Doc. CA C20786, Carthy, Labrosse and Austin JJ.A. (Ont. C.A.), 61 A.C.W.S. (3d) 1071
12(March 6, 1996), Doc. Vancouver C900899, Baker J. (B.C.S.C.), [1996] B.C.W.L.D. 862, 61 A.C.W.S. (3d) 651
13(1997), 32 B.C.L.R. (3d) 398 (S.C.)
14(1996), 50 C.P.C. (3d) 105, 108 Man. R. (2d) 315 (Q.B.)
The master held that the plaintiff's failure to proceed in light of the defendant's requests made the delay unreasonable and the defendant suffered inherent prejudice. The Manitoba Court of Queen's Bench, however, disagreed with the master's finding. The court noted that witnesses of the defendant insurance company were experienced investigators who had made notes, and that they would be less affected by the delay than would "lay witnesses." The case was not one of non-compensable prejudice and was, arguably, one in which the lower court could have examined more closely the merits of the allegation of prejudice.
A successful appeal from a master's order dismissing an action for want of prosecution also occurred in Mortel Factory Sound Enterprises Ltd. v. Able Bailiffs Ltd.15 The master had dismissed the action on the bases of inordinate delay and findings of serious prejudice to the defendant. The appellate court, however, disagreed, noting that the limitation period for the claim was six years and that the plaintiff could have started proceedings at any time before October 1995. If the action was not commenced until shortly before the limitation period expired, the action would not be heard for at least one or two years in any event. In this context the delay was not inordinate. Moreover, it was likely that the main claim advanced would be verified by documents and, accordingly, the defendant would not be seriously prejudiced. The appellate court took a hard look at the merits of the allegation of prejudice.
Neither did the court dismiss the plaintiff;'s action in Canada (Attorney General) v. Boeing Co.16 in spite of a total delay of almost 17 years. The court found that both parties had contributed to the delay and that, although numerous witnesses had died or left the defendant's employ, no cogent evidence established real prejudice to the defendant because of actions caused solely by the plaintiff. The court analyzed the merits of the allegation of prejudice to the point of transcending the initial appearance of non-compensable prejudice: the analysis did not stop with knowledge that witnesses had died.
The existence of written documents in Monahan v. Jowsey17 was a significant factor in determining the extent to which a complaining party has been prejudiced.
15(March 19, 1996), Doc. Victoria 90/0201, Hutchinson J. (B.C.S.C.), [1996] B.C.W.L.D. 1332
16(1996), 30 O.T.C. 147 (Gen. Div.)
17(1995), 132 Sask. R. 201 (Q.B.)
Inaction on the part of plaintiff's counsel resulted in the statement of claim not being served within the time allowed by an order extending time in accordance with the Saskatchewan, Queen's Bench Rules. A second order was obtained to extend further the time for service. The defendant physicians claimed that, as a result of a 14-month delay, they could no longer remember material details. Nevertheless, the court noted that because the defendants had prepared written reports at the time of treatment, they would suffer little prejudice. The defendants' motion to set aside the order extending the time for service was dismissed. The court saw through the appeal of the defendants' position on prejudice. The allegation of prejudice did not survive a close examination.
Delay in and of itself should not automatically lead to a conclusion of prejudice but significant delay can produce a presumption of prejudice. Application of the concept of prejudice too broadly could lead to matters being decided only on their procedural merits, which could pose a grave substantive injustice. The reasons for a delay and the genuine, as opposed to apparent, effect of the delay on the other party must be carefully scrutinized before prejudice is invoked to bar an adjudication of claims on their merits. But if a party is guilty of causing significant delay, he or she should be prepared to explain the reasons for the delay. Otherwise, the presumption of prejudice will be converted into a finding of prejudice, with the same consequences as if the alleged prejudice was truly non-compensable. In the end, the court should investigate the merits of an allegation by a party that he or she has suffered prejudice.
The courts have inspected the merits of cases before finally disposing of those cases in summary judgment proceedings. It is logical to apply the same rigorous scrutiny to parties who are seeking to invoke prejudice to prevent the adjudication of claims or defences on their substantive merits. The court may invoke the term prejudice to achieve a particular result without an adjudication on the substantive merits of the claims or defences. If courts are expected to examine closely claims and defences on their merits before summarily disposing of them in the context of a summary judgment, then the same can be expected of the courts when prejudice is invoked to prevent an adjudication of claims or defences on their substantive merits.
Limitation Periods
In relation to the concept of delay, a classic example of when prejudice has been presumed is upon the passage of a limitation period. In Roscoe v. Lewis18 the plaintiff applied to add a defendant to a personal injury action after the limitation period expired. The court found that the plaintiff was not able to offer a reasonable explanation of why the proposed defendant had not initially been named in the claim; it also found the delay inordinate. There was presumed prejudice after the expiration of the limitation period that was not satisfactorily rebutted. Accordingly, the plaintiff's joinder motion was dismissed.
In Smallwood v. Hill,19 however, the Ontario Court of Appeal upheld the lower court's decision to extend the limitation period for commencing an action arising from a boating accident. The two-year limitation period prescribed by s. 572(l) of the Canada Shipping Act, R.S.C. 1985. c. S-9, expired on August 4, 1992. The plaintiffs' claim was not issued until January 26, 1995, about 16 months after the defendants insurer notified plaintiffs' counsel that he had missed the two-year limitation period. 'The lower court considered the defendants' argument of prejudice and found (at p. 772, 31 O.R. (3d)):
".. the defendants will sustain no real prejudice in their ability to defend the claim if an extension is granted. The defendants received early notice of the claim and their insurers entered into settlement negotiations with the plaintiffs' lawyer and, indeed, made an offer to settle. The insurers had, in my view, completed their investigation at the time they closed their file in October, 1993. They have preserved the results of their investigation and have offered no evidence that they have been deprived of any evidence necessary to defend the claim." [emphasis in original]
The Court of Appeal held that there was no reason to interfere with the conclusion that the defendants would sustain no real prejudice. In Smallwood the word real is attached to the term prejudice. The court investigated the merits of the defendants' allegation of prejudice and found that the prejudice was more apparent than real.
The British Columbia Supreme Court's decision in Hnidan v. Auto Marine Electric Ltd.20 is another example of the court investigating an allegation of a party being prejudiced. The plaintiff claimed that in November 1991 he had injured his knee when he was struck by a door while entering the defendant's business premises.
18(1995), 40 C.P.C. (3d) 112 (B.C.S.C.)
19(1997), 96 O.A.C. 278 (sub nom. Smallwood (Litigation Guardian of) v. Hill) 31 .O.R. (3d) 769 (C.A.), leave to appeal to S.C.C. refused (1997), 104 O.A.C. 319 (note), 223 N.R. 223 (note)
20(October 2, 1995), Doc. New Westminster S104427, Master Joyce (B.C. Master), [1996] B.C.W.L.D. 174, 59 A.C.W.S. (3D) 589
The plaintiff spoke to the manager of the defendant's business on at least two occasions and issued a writ of summons in November 1993, before the expiration of a two-year limitation period. The plaintiff, however, failed lo serve the defendant with the writ until November 1994, by which time it had expired. The plaintiff sought to renew his writ on the basis that he had mistakenly believed that he had three years from the day of the accident to have the writ issued and served. A mechanical response to this situation would be that ignorance of the law is no excuse. The court, however, did not rule in that manner. The court granted the plaintiff's request to renew the writ because the defendant knew of the incident and knew that the plaintiff was seeking compensation. The court found that the defendant had not been prejudiced by the delay. The prejudice was more apparent than real.
Undertaking Motions
The term prejudice has also made appearances in motions relating to unanswered undertakings. In Landry v. Pollock21 the Ontario Court of Appeal allowed the appeal by the plaintiff from the dismissal of his action for failing to comply with undertakings given at his examination for discovery. The court disagreed with the lower court's finding that the plaintiff was in contempt of earlier court orders, and held (at p. 143, 44 CPC (3d)), in addition, that "there was no evidence of, or even the appearance of, prejudice to the defendant." The appeal court took a hard look at the merits of the prejudice allegation.
Default Judgment Motions
Prejudice has also been referenced on motions to set aside default judgments. In Andrew Paving & Engineering Ltd v. Folino22 the court refused the defendant's motion to set aside a default judgment. The court found that the plaintiff would clearly have been prejudiced if the default judgment was set aside. The plaintiff creditor had been trying lo collect its overdue accounts for several years and the defendant had been procrastinating and had chosen to ignore the default judgment.
21(1995), 44 CPC (3d) 140 (Ont. C.A.)
22(1995), 37 CPC (3d) 99 (Ont. Gen. Div.)
Prejudice was also found in Nipissing Helicopters Inc. v. Eagle Copters Maintenance Ltd.23 The court dismissed the defendants' motion to set aside a default judgment on account of prejudice. The defendants had refused to attorn to the jurisdiction of the Alberta court in 1990 but litigated the jurisdiction of the Alberta court in enforcement proceedings attempted in Ontario by the plaintiffs. The defendants waited until 1994 to apply in Alberta to set aside the 1990 judgment against them. In this case the defendants made a deliberate choice. Prejudice was assumed to be present after the long delay.
Divided Discovery Motions
The concept of prejudice has also been invoked on motions to determine whether there should be divided production and discovery. In this area, however, prejudice has been dressed with the adjective serious. In Kinbauri Gold Corp v. Iamgold International African Mining Gold Corp.24 the court, on a motion by the defendant for an order for divided production and discovery, held that if it found that the issues of liability and damages could clearly be severed, then it also had to be satisfied that the moving party would suffer "serious prejudice" if production and discovery were not divided and delayed on the subsequent issue. The court accepted that "'the disclosure of secret processes, special advantages pertaining to a particular competitor in the market, or know- how, that cannot commonly be acquired and known by competitors generally through commercial intelligence"' (from L.C.D.H. Audio Visual Ltd. v. I.S.T.S. Verbatim Ltd. (1986), 8 CPC (2d) 141, 54 OR (2d) 425 (H.C.), at p. 156, 8 CPC (2d)) are factors that might lead to serious prejudice. The court made an order granting leave to the defendant to withhold information relating to damages until the issue of liability had been tried and determined.
Affidavit Evidence
Prejudice has also been discussed in cases involving judicial discretion as to whether a party should be allowed to file affidavit material. In AB Hassle v. Canada (Minister of National Health & Welfare25 the Federal Court of Appeal considered an appeal of a decision of a trial judge to permit a respondent to file affidavits.
23(1996), 187 A.R. 29, 127 W.A.C. 29 (C.A.), leave to appeal to S.C.C. refused (1997), 214 N.R. 320 (note), 212 AR 21 (note), 168 W.A.C. 21 (note)
24(1995), 43 CPC (3d) 128 (Ont. Gen Div.)
25(1995), 64 C.P.R. (3d) 78, 189 NR 394 (Fed.C.A.)
The appellate court dismissed the appeal, holding that the lower court properly had regard for the requirements of justice and protected the appellants from further prejudice by permitting them to deliver more evidence in reply.
Accordingly, the court can invoke terms to ameliorate the effects of prejudice or to protect a party from being prejudiced, to ensure that a case is fully canvassed and heard on its substantive merits. A rigorous investigation of the merits of an allegation of prejudice may lead a court to the conclusion that, by the employment of creative terms, the allegation of prejudice is not as serious as they appear.
Jury Notice Motions
The term prejudice has also been raised in jury notice cases. In Tsang v. Vermerris.26 an application was heard for the extension of time to file a jury notice in an action for personal injury and economic loss. The court dismissed the application, which, if granted, would have delayed the trial. The court found no evidence that harm or prejudice would be suffered if a jury trial was denied.
In Manuel v. Fernades,27 a medical malpractice case, the plaintiffs' motion to extend the time for delivery of a jury notice was dismissed. The motion was launched after the action had been set down for trial. The defendants argued that they would be prejudiced by the imposition of a jury trial. They submitted that a trial by jury would take substantially longer than a trial by judge alone and that the plaintiffs were persons of modest means from whom the defendants would be unable to collect the costs of a jury trial. The court found those submissions persuasive in dismissing the plaintiffs' motion.
Extending Appeal Deadlines
The Ontario Court of Appeal has referred to the term prejudice in extension of time to appeal motions. In Cody v. Armitag28 the moving party was granted an order extending the time for filing her notice of appeal from two related orders.
26(January 16, 1996), Doc. Vancouver B950691, Master Brandreth-Gibbs (BC Master), [1996] B.C.W.L.D. 739
27(1996), 2 CPC (4th) 72, 6 O.T.C. 1 (Gen. Div.)
28 (November 3, 1995), Doc. CA M16596, Osborne J.A. (Ont. C.A. [In Chambers]), 58 A.C.W.S. (3d) 1957
The court found that the moving party had an intention to appeal well within 30 days of the second order. The court further noted that the respondents were not prejudiced by the failure of the moving party to file her notice of appeal in time. The moving party was given another 15 days to file her notice of appeal on the condition that she pay the costs of the motion, which were fixed at $1,000.
Arbitration Cases
Prejudice has also been considered in the arbitration context. In I.F. Propco Holdings (BC) 3 Ltd. v. Discovery Parks Inc.29 the petitioner failed to appeal an arbitrator's award under the Commercial Arbitration Act, S.B.C. 1986, c. 3, within the 60-day limit set out under that Act. The petitioner applied to extend the time limit to appeal. The court found no prejudice to the respondent, who was well aware that the petitioner had intended to appeal the award. The petitioner's intention to appeal had been formed and communicated within the appeal period and the appeal raised a substantial ground. The alleged prejudice was more apparent than real.
Human Rights Cases
The concept of prejudice has also been referenced in human rights cases. In McKinley v. BC Tel30 the plaintiff was dismissed from his employment by the defendant while on disability leave. The plaintiff sued for Wrongful dismissal and also filed an information with the Canadian Human Rights Commission based on the same allegations of fact as he raised in the wrongful dismissal action. The defendant moved to stay the on action pending the completion of the Human Rights Commission proceedings. The court found that the situation did not warrant an automatic stay of proceedings. The plaintiff was entitled to maintain both proceedings. The plaintiff had undertaken not to pursue double recovery and the court found that there was no possibility of prejudice.
Hard Look Criteria
Is there a useful test or criteria that could be applied by courts taking a hard look at the merits of prejudice allegations to ensure that the allegations are real as opposed to apparent?
29(1996), 4 CPC (4th) 50 (B.C.S.C.)
30(1996), 1 CPC (4th) 152 (B.C.S.C.), additional reasons at (1996), 25 B.C.L.R. (3d) 255 (S.C. ), affirmed (1997, 31 C.C.E.L. (2d) 214 (B.C.C.A.)
To answer that question, reliance is placed on Henry J.'s decision in Pizza Pizza Ltd.v. Gillespie.31 In that case, in the context of summary judgment proceedings, the court summarized the principles to be considered on a summary judgment motion. Those principles were as follows (at pp. 238-239, 75 O.R. (2d)):