Canada: Court Denies Request To Dismiss Action For Want Of Prosecution

Fennelly v Lloyd's Underwriters , 2016 NLTD(G) 1.

Fennelly's fishing vessel suffered physical damage in January, 2006. He sought payment under a Marine Insurance policy, issued by Lloyd's Underwriters. The policy insured the vessel for $500,000 against total loss, whether actual or constructive. Lloyd's denied coverage, stating that the repair costs were less than $500,000.

Background

In October, 2008, Fennelly commenced his action against Lloyd's. The parties exchanged documents in 2009, and oral discoveries occurred in 2010. Fennelly filed additional documents in 2011. In 2011 and 2012, there were disagreements between counsel about discovery undertakings. Lloyd's complied with the undertakings in 2013. There was also disagreement as to which party should obtain and produce documents from Transport Canada. Between 2011 and 2013, counsel discussed the decommissioning of the vessel, which was in a deteriorated condition. Lloyd's asked that portions of the vessel's damaged frames be retained, as evidence. The vessel was decommissioned in 2013, but portions of the vessel caved in, preventing removal for further inspection. In 2014, Fennelly met with a proposed expert, however, this was not communicated to Lloyd's.

Decision

The application by Lloyd's to dismiss the action for want of prosecution was heard in September, 2015. The court applied the principles set out in Penney v. Lush, [1996] N.J. No. 73 (CA): was there inordinate delay; was the delay inexcusable; and was the defendant likely to be seriously prejudiced by the delay. Delay, from the date of the loss, had previously been found to be inordinate in the following cases: Penny v Lush (7 ½ years); Dawe v. Brown, [1994] N.J. No. 153 (TD) (5 years); Halifax Insurance Co. v. Hunt, [1992] N.J. No. 154 (TD) (16 years); and Kilfoy v. Shanahan's Investigation and Security (December 16, 2010, unreported) (8 years). In the case at hand, the court concluded that the delay of more than 9 years was inordinate.

In seeking to explain the delay, Fennelly referred to his limited financial resources, and the disagreements between counsel as to how to advance the matter. The court, however, noting that any disagreements could have been dealt with by court application, concluded that there was no valid excuse for the delay.

As is common in these applications, the key issue was whether Lloyd's had been prejudiced by the delay. Lloyd's faced the onus of establishing such prejudice. In the presence of inordinate and inexcusable delay, prejudice may be assumed. Nevertheless, "it is still incumbent upon the court to carefully consider all the circumstances of the case" to determine whether there would be actual prejudice. This could include the death of a witness (Halifax Insurance v. Hunt), or the destruction of records coupled with a lack of independent memory of the events (Morice v. Toronto-Dominion Bank, 2014 BCSC 380).

Here, Lloyd's pointed to the vessel's hull which had been destroyed during decommissioning, preventing further examination. This was critical, given that the determination as to whether there was coverage would be affected by the value of the loss, and whether the vessel was salvageable. On the other hand, Lloyd's had already examined the vessel, through multiple experts. As for the damage to the vessel, this was the result of an accident during decommissioning, not the delay itself, and the risk of such damage was known to Lloyd's. Furthermore, Lloyd's had received notice, in 2011, of the proposed decommissioning of the vessel, yet the process did not take place until 2013, leaving "ample opportunity to carry out necessary investigations".

In the end, the court concluded that any prejudice was not caused by Fennelly's delay. In addition, the delay, while being in excess of nine years, was not of "such length as to, in and of itself, constitute sufficient evidence of prejudice". As a result, the application to dismiss the action for want of prosecution was denied.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.