Alberta’s Recent Interpretation of the “Drop Dead” Rule

By: Marco Marrelli

As Alberta courtroom availability grows increasingly strained, the rules concerning delays in reasonably advancing lawsuits have received greater attention. Our blog returns from a short break with a two part summary of how these rules have been applied; specifically, Rule 4.33 which calls for mandatory dismissal of lawsuits that have not been significantly advanced for over three years. The first part covers the courts’ application of Rule 4.33 up to the end of 2018. The second part will cover the courts’ application of Rule 4.33 in 2019.

Application of Rule 4.33 to the end of 2018

The Courts recognize that the Alberta Rules of Court (the “Rules”) embody the dual purposes of fairness and efficiency. Rule 1.2 states:

1.2(1) The purpose of these rules is to provide a means by which claims can be fairly and justly resolved in or by a court process in a timely and cost effective way.

This guiding principle colours the Court’s interpretation of the Rules. The Rules use a functional approach that de-emphasizes trial as the primary mechanism for resolving civil disputes in favour of procedures such as summary dismissal and alternative dispute resolution.

In the overall scheme, the Rules provide mechanisms to dispose of litigation that has died, become inactive, or is unreasonably and prejudicially slow. Rules 4.33(2) and (4) state:

4.33(2) If 3 or more years have passed without a significant advance in an action, the Court, on application, must dismiss the action as against the applicant, unless

(a) the action has been stayed or adjourned by order, and order has been made under subrule (9) or the delay is provided for in a litigation plan under this Part, or

(b) an application has been filed or proceedings have been taken since the delay and the applicant has participated in them for a purpose and to the extent that, in the opinion of the Court, warrants the action continuing.

4.33(4) The period of time referred to in subrule (2) does not include the following, whichever ends earlier:

(a) the period of time between the service of a statement of claim on an applicant and the service of the applicant's statement of defence;

(b) the period of one year after the date of service of a statement of claim on an applicant.

From a trilogy of cases in 2016[1], we know that a court must analyze the steps taken using a functional approach, to determine whether a “litigation step” significantly advances the action.

In deciding this, the Courts will look to see whether the step in question helps to narrow the issues, provide new information, or invoke the litigation process - generally, whether these steps are seen to bring the action closer to a resolution.

From the trilogy we know that:

·       Rule 4.33 is a strict rule which says that any 3 years of inactivity will result in dismissal for long delay upon an application;

·         Mandated and informal steps in litigation will be judged using a functional approach;

·         Steps taken during the delay period cannot be of pure form and lack substance; and

·         The plaintiff in the action bears the ultimate responsibility for prosecuting its claim.

In 2018, there were numerous decisions reported that surround Rule 4.33 which speak to the strictness of the rule, and the application of the functional approach.

In Preston v. Bent Developments Co Limited, a successful application to dismiss the action for long delay was heard. It was held that a cross-examination and a single answered undertaking did not significantly advance the lawsuit or move it forward in a meaningful way. The cross-examination conducted by the Plaintiff was extremely limited and no information was ascertained that significantly advanced the plaintiff’s claim.

The Court reiterated that the functional test will consider the nature, value and quality, genuineness, timing, and in certain circumstances, the outcome of the steps in question to determine if there has been meaningful progress in the action.

This case sets out the current state of the law on questioning and answers to undertakings. For answers to undertakings, it must significantly assist in determining one or more of the issues raised in the pleadings, or to ascertain further evidence that would have this result. It is not significant just because it is asked.

Sutherland v Brown was an appeal to determine whether the Chambers Judge erred in dismissing an action for long delay pursuant to Rule 4.33. More specifically, the issue was whether a settlement offer significantly advanced the action and restarted the clock for the purpose of the three-year period contemplated in Rule 4.33. The appeal was dismissed.

The issue was whether the settlement offer represented a significant advance in the action. The settlement offer was a 12-page letter that reviewed statements provided to the police, transcripts from questioning, and case law on damages and their apportionment. It also summarized the plaintiff's injuries, and provided an assessment of the plaintiff's general damages and estimates of his loss of earnings since the accident, lost earning capacity, cost of future care, loss of housekeeping/yardwork capacity, retraining costs, special damages and costs. The offer proposed that liability be shared equally between the plaintiff and the defendants.

The Court of Appeal explained while the outcome of a step should not be over-emphasized, outcomes are not irrelevant. Rather, the functional approach to Rule 4.33 requires that the Court assess the step by reviewing the “whole picture of what transpired over the three year period”. In some cases, this necessarily includes the outcome of the step.

The Court of Appeal noted that progress towards settlement, including the exchange of settlement offers, may constitute a significant advance in an action. However, in this case the failure of the defendant to counter-offer clearly indicated that they were not prepared to enter into negotiations, and as a result no advance in the settlement process was made.

Next, Deja Vu Holdings Ltd v Securex Master Limited Partnership involved a debt action where the defendant applied for an Order dismissing the Plaintiff’s action under Rule 4.33. At issue was a Statement of Defence to Counterclaim filed by the Plaintiff and a Supplemental Affidavit of Records served by the Plaintiff.

In the analysis, the Court reiterates that the functional approach should be used, and that the effects of the steps should be examined instead of its form. The Court also cites Sutherland, and reinforces that the outcomes of steps should not be overstated, but they are not irrelevant, because we must look at the “whole picture of the periods of delay with a qualitative assessment in mind”.

The decision applied the law based on the trilogy of cases above and indicated that “not all mandated steps in an action will significantly advance an action”. The specifics of the steps must be examined to ensure that a significant advance did actually occur. In this case, the Statement of Defence to Counterclaim consisted of five short paragraphs. It adopted the allegations in the Statement of Claim and set out a general, boilerplate denial. As a result, the Statement of Defence to Counterclaim did not significantly advance the action.

Also at issue was a Supplemental Affidavit of Records, which usually assists in discovering new information or documents. The Court applied the functional analysis to the Supplemental Affidavit of Records in question and examined the nature of the documents produced and their importance to the litigation. The Court noted that the a document that should have been produced in the original Affidavit of Records was produced. This didn’t convince the Court that the Supplemental Affidavit of Records significantly advanced the action. Therefore, the Court is looking not only for new and relevant information, but also information that should be discovered at that time in the litigation process (not 10 years earlier).

Finally, Ivkovic v Tingle Merrett LLP again cites Sutherland and emphasizes the importance of facilitating the litigation process, and that a culture shift is required to create an environment promoting timely and affordable access to the justice system.

In this case, a form called a Request to Schedule a Trial Date, was completed and trial dates were scheduled. However, neither party confirmed the dates with a further required form, called a Confirmation of Trial Dates.

The Plaintiff’s explanation for not filing the second form was because his lawyer's office had recently gone through extraordinary and unusual circumstances.  First,  co-counsel went into early labour. Her work was spread amongst other lawyers.  Second, Plaintiff's first counsel was ill and was to have surgery, which could have impacted the trial dates.

The Plaintiff argued that completing and filing a the first form was a step significantly advancing the action. However, the Defendant argued that without the second form actually confirming the trial dates, the step remained incomplete and nothing had been accomplished. Finally, the Plaintiff argued that the Defendant could have filed the necessary form and yet failed to do so. However, the Court maintained that it is the Plaintiff’s obligation to advance their claim, not the Defendant’s. As a result the Court concluded that no significant advance in the action took place, and the action was struck. The Court concluded by stating that while the Plaintiff in this action maintained certain reasons/excuses for the failure to file the required form, Rule 4.33 does not permit excuses. Once there has been a three year delay without the Plaintiff significantly advancing the action, the Court must dismiss the action.

Based on this case law surrounding Rule 4.33 it is crucial for a Plaintiff to ensure that steps being taken are truly significant. They must narrow the issues, provide new and relevant information, or advance the action toward resolution.

Defendants have little obligation to advance a claim, and so long as they are not directly interfering with the Plaintiff advancing their action they can bring forward an application to dismiss an action for long delay.

Finally, looks can be deceiving. When deciding whether an application under Rule 4.33 is appropriate, it may not be enough to simply look at the procedure card (the list of filed documents in a lawsuit) or rely on knowledge of mandatory litigation steps that have been conducted, such as questionings or cross examinations.  Just because the procedure card indicates that there has been activity, it does not mean that this activity significantly advanced the action. Looking into the content of these steps, such as the specifics of pleadings or transcripts, may indicate the step had no function and was merely a formality.

The Courts’ recent decisions can be summarized by saying that while the filing of pleadings, questioning, and the answering of undertakings all appear to significantly advance an action, each must be examined to ensure that such an advance did in fact occur.

With a strong reputation in commercial litigation, McLennan Ross LLP is well positioned to provide you with the exceptional advice and representation. If you have any questions or concerns with respect to the application of Rule 4.33, or any other litigation matter, please do not hesitate to contact a member of our Commercial Litigation Team.

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[1] Ro-Dar Contracting Ltd. v Verbreek Sand & Gravel Inc., 2016 ABCA 123; Ursa Ventures Ltd. v Edmonton (City), 2016 ABCA 135; Weaver v Cherniawsky, 2016 ABCA 152