Death of a Party and the Unwanted Lawsuit

In our last blog, we reviewed the procedural steps that need to be taken upon a litigant’s death and what steps a litigant’s executor must take in order to continue a lawsuit.

But what happens if a litigant’s executor (the “Trustee”) (and/or the beneficiaries) has a sober second look at the lawsuit and decides that the deceased litigant’s case is not particularly strong and they don’t want to obtain an order to continue with the proceeding?

Can a Trustee just “walk away” from an action unscathed? What about the defendants who always thought that the claim should never have been pursued against them by the now deceased litigant? What about the costs they had to incur? Who’s going to compensate them now that the Trustee has decided not to continue the action?

The short answer is that the Trustee cannot simply “walk away” from a matter commenced by the deceased plaintiff.   Specifically, Rule 11.02(1) of the Rules of Civil Procedure permits “any interested person” to obtain the order to continue, which includes plaintiffs, the deceased litigant’s trustee, and the defendants.¹

In essence, defendants have two options if a Trustee is not taking steps to continue the action:

Option A: the defendants can obtain the order to have the action continued under Rule 11.02(1) themselves. The Trustee is required to be named in substitution for the deceased litigant, and would then be compelled to decide whether or not she wishes to continue or discontinue the claim (and thus be subject to the same Rules that apply to any party, accompanied with the same costs exposure);² or

Option B:  the defendants could move under Rule 11.03 which states that:

Where a transfer or transmission of the interest of a plaintiff takes place while an action is pending and no order to continue is obtained within a reasonable time, a defendant may move to have the action dismissed for delay, and rules 24.02 to 24.05 apply, with necessary modifications.

The case law states that a Rule 11.03 motion for dismissal is only available where no order to continue has been obtained and does not give rise to a ground upon which a party can move to set aside or vary an order to continue.³

At first blush, it may appear logical for defendants to pursue a motion under Rule 11.03 when they are embroiled in a claim they believe is without merit and no order to continue has been obtained. However, a recent decision of the Divisional Court, Outfront Media Canada LP v. Clarity Outdoor Media Inc. clarified the test that will be applied under Rule 11.03 and for the reasons set out below, this decision may discourage parties from pursuing this option.

At paragraph 66 of Outfront Media Canada LP v. Clarity Outdoor Media Inc., Justice Wilton Seigel explains that,

while it may appear convenient to consider that the general principles governing dismissal of an action for want of prosecution should apply, I do not think such an approach is correct. Such a reading renders Rule 11.03 not only irrelevant but also perverse

[…]

The reality argues very strongly for a more limited test that addresses prejudice that is causally related to the failure by a party to obtain an order to continue”.

His Honour concludes that the appropriate test is as follows,

I am of the view that the test for dismissal of an action [under Rule 11.03] must be a demonstration that the failure to obtain an order for continuance of an action has prejudiced a party to the action in some manner that is related to the fairness of a trial in the action.

This would appear to be an extremely onerous test to meet, because a delay in obtaining an order to continue is highly unlikely to add any significant consideration of prejudice to whatever other prejudice can be demonstrated to have resulted from a plaintiff’s failure to prosecute an action.

Assuming that a party can get over the initial hurdle of establishing that the delay in obtaining the order to continue has caused prejudice itself (for example, if during the delay in obtaining the order to continue a key witness or party with important evidence has passed away), Rule 11.03 (like a similar Rule 24) still requires that the moving party establish that the delay was unreasonable.

The Courts take a contextual approach to determining whether the delay will be sufficient to warrant a dismissal pursuant to Rule 11.03, but there is not much guidance as to the length of delay necessary to invoke Rule 11.03.⁴There are, however, several important factors to keep in mind in determining whether a delay has been unreasonable.

1. The case law suggests that an order to continue should not be obtained until a certificate of appointment has been issued.⁵It takes time to prepare the application for a certificate of appointment of estate trustee with/without a will and, in Toronto, the current wait time for the registrar review the application and issue the corresponding certificate is not less than 4 months assuming that the application does not require any corrections⁶;
2. If there is an intestacy, it may take time to locate the appropriate party(ies) to take over the deceased’s litigant’s interest in the lawsuit;⁷ and
3. Any legitimate explanations for the delay.

As such, it would appear that a more prudent response to a Trustee’s delay in applying for an order to continue, may be for defendants to pursue Option A above and obtain the order to continue themselves. A party should, however, seek legal advice when considering any of these issues.

If an order to continue is obtained by a defendant, the Trustee will then be forced to make a decision as to how he or she wishes to proceed. If the Trustee remains inactive at this stage, the defendants could then pursue a dismissal of the action for delay under Rule 24, which may make it slightly easier to obtain the dismissal order than under Rule 11.03 and would trigger cost consequences against the Estate if they are successful on the motion.

In Yedlinski v. Kasha,⁸ the Trustee attempted to circumvent potential costs exposure to the Estate of continuing an action by bringing a motion to discontinue the action commenced by the now deceased plaintiff on a without costs basis. The Trustee argued that the party’s death was an intervening event and justified an order permitting the plaintiff to discontinue the action without attracting cost consequences. The Master rejected this argument and noted that the plaintiff’s death did not affect the cause of action in a legal sense, but that this was a case “where the plaintiff’s representative has decided not to pursue the action, for whatever reason”. As a result, the Master dismissed the application for leave to discontinue on a without costs basis and invited the Trustee to discontinue the action in the normal course (which would trigger cost consequences to the Estate) or pursue the litigation in accordance with the Rules.

In other words, it was a nice try, but the Estate did remain exposed to potential cost consequences in resolving the litigation commenced by the deceased plaintiff.

In our next blog, we will look at a unique subissue regarding what happens when a Trustee has no legal right to continue an action and has to discontinue. Who bears the costs in that scenario?