Vincent v. Moduline Industries (Canada) Ltd., 2011 ABQB 571

Court of Queen ’ s Bench of Alberta Citation: Vincent v. Moduline Industries (Canada) Ltd., 2011 ABQB 571 Date: 20110921 Docket: 0012 000289 Registry: Wetaskiwin Between: Kathy Vincent and Todd Howkins Plaintiffs - and - Moduline Industries (Canada) Ltd. and Moduline International Inc. Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice J.L. Foster _______________________________________________________ Application [ 1 ] Moduline Industries (Canada) Ltd. seeks dismissal of this action on the grounds that:

a. relying on Rule 15.4 (1) (

b) of the Alberta Rules of Court, A.R. 124 / 2010 , more than five years have elapsed since the last thing that was done that significantly advanced the action; or b. alternatively, relying on Rule 4.3, there has been an inordinate, inexcusable delay by the Plaintiffs in pursuing this action which has resulted in significant prejudice to the Defendants. [ 2 ] Except where otherwise indicated, reference in this decision to the Alberta Rules of Court refers to the Alberta Rules of Court , A.R. 124 / 2010.

Facts [ 3 ] May 8, 2000, the Plaintiffs filed a Statement of Claim seeking damages from the defendants, Moduline Industries (Canada) Ltd. and Moduline International Inc. The claim pertains to a mobile home the Plaintiffs purchased in December 1997. [ 4 ] May 11, 2000 the Statement of Claim was served on the defendant, Moduline Industries (Canada) Ltd. and the Affidavit of Service pertaining to this was filed on May 31, 2000. [ 5 ] May 12, 2000 a lawyer with McCarthy Tétrault faxed a letter to the Plaintiffs’ solicitor (Ms.

Wald) acknowledging McCarthy Tétrault had been served with the statement of claim as registered office for Moduline Industries (Canada) Ltd. The letter said they were obtaining instructions and asked not to note in default without first advising them. [ 6 ] May 31, 2000, a Praecipe to Note the Defendant Moduline Industries (Canada) Ltd. in Default, was filed. [ 7 ] The only evidence of any communication between counsel following the May 12, 2000 letter is the Affidavit of Mr. Hadwen (then service manager for Moduline Industries (Canada) Ltd.).

The solicitor for Moduline Industries (Canada) Ltd., advised him that the Plaintiffs’ solicitor made “no request … for the Defendants to file a defence in this action” and “several attempts were made in May and June 2000 by Moduline’s solicitor to contact the solicitor for the Plaintiff.” The particulars provided of such attempts are the following letters appended as exhibits to Mr. Hadwen’s affidavit: a. the May 12, 2000 letter from McCarthy Tétrault (already described). b. a letter dated June 5, 2000 from McCarthy Tétrault to the Plaintiffs’ solicitor. The subject line lists three actions, including this one.

It states that McCarthy Tétrault acts for both defendants. The defendants seek to transfer the actions to a different judicial district in Alberta, and the writer advises she has instructions to seek the Plaintiffs’ consent or make application to the court for the transfer. The letter also says, but with respect to one of the other actions, that the Plaintiffs’ counsel required a defence by May 26, 2000, the writer tried unsuccessfully to contact Plaintiffs’ counsel by phone concerning this, and that she trusts Plaintiffs’ counsel will extend the deadline to address the issue raised in this letter.

c. a letter dated June 21, 2000, from the Defendants’ counsel to counsel for the Plaintiffs, asking whether the Plaintiffs’ lawyer has obtained her clients’ instructions with respect to the June 5, 2000 letter. d. a letter dated August 9, 2000 from the Defendants’ counsel to the Plaintiffs’ counsel. The subject line lists the 3 actions. The letter says that no response was received to the June 5 and June 21, 2000 letters. It states that if Ms. Wald’s clients still intend to pursue their claims, Moduline Industries (Canada) Ltd. would like to inspect the mobile homes in question.

It advises that arrangements have been made with a company to conduct these inspections, and asks Ms. Wald to confirm that her clients will cooperate. e. A letter dated August 12, 2000 from the Plaintiffs’ counsel to the Defendants’ counsel. The subject line is “Moduline X 3” and the letter says that Ms.

Wald will canvass the proposal regarding the inspections with her clients, but “will be advising them that they should insist that defences be filed before the inspections”. [ 8 ] There is no evidence Moduline Industries (Canada) Ltd. or its solicitors were told or knew it had been noted in default, until August 2001. January 9, 2001 Ms. Wald served a Notice of Intention to Cease to Act as counsel for the Plaintiffs, on the Defendants’ counsel. Mr.

Hadwen’s Affidavit (sworn November 2, 2001) says the Defendants’ solicitor advised him that they did not have any contact with the Plaintiff after service of the Notice. [ 9 ] August 2001, a search was done of the procedure record at the Courts and from this, the Defendants’ solicitor learned Moduline Industries (Canada) Ltd. had been noted in default on May 31, 2000. [ 10 ] November 21, 2001 the Defendants filed a Notice of Motion seeking: (

a) to set aside the Praecipe Noting the Defendants [sic] in default; (

b) an order that the Plaintiffs pay $21,700. into court as security for costs. The motion was returnable December 18, 2000, but was adjourned sine die . [ 11 ] March 26, 2002, a Consent Order was granted setting aside the May 31, 2000 Praecipe to Note in Default. The Plaintiffs' second counsel, Snyder and Associates, signed the consent order. Mr.

Flanagan is listed as counsel for the Defendants. [ 12 ] July 11, 2005 an Affidavit of Records was filed by each of the Plaintiffs. [ 13 ] The only evidence of what occurred between July 11, 2005 and July 9, 2010 is the Affidavit of Don Sarpalius (the service manager for Moduline Industries (Canada) Ltd.) It provides copies of the following letters: a. The Plaintiffs’ lawyer sent a letter to Mr. Flanagan dated July 26, 2007, which states (in part): “We note that we have not received a Statement of Defence and as such, are putting you on notice. Please serve us with a filed Statement of Defence by August 13, 2007.

Failure to do so will result in us noting you in default.”

b. July 30, 2007 Mr. Flanagan sent a letter to the Plaintiffs’ lawyer, which states (in part) that no steps have been taken in the action that materially advanced it and that he is seeking instructions to apply to dismiss the action, and that the Defendants will apply for an order requiring the Plaintiffs to post security for costs if they intend to proceed. The Affidavit says Mr.

Flanagan advised he did not receive any correspondence from the Plaintiffs’ solicitor from the time he sent the July 30, 2007 letter until he was served on June 23, 2010, with a Notice that Snyder and Associates LLP intended to cease to act for the Plaintiffs. [ 14 ] July 8, 2010, the Plaintiffs filed a Praecipe to Note in Default pertaining to both defendants, Moduline Industries (Canada) Ltd. and Moduline International Inc. The Praecipe shows a new solicitor for the Plaintiffs, Mr. Sussman. [ 15 ] Mr. Sarpalius is the current service manager of the defendant, Moduline Industries (Canada) Ltd.

In this application, Moduline Canada relied on the Affidavit of Mr. Sarpalius and an Affidavit filed by Jim Hadwen in 2001. [ 16 ] The defendant, Moduline Industries (Canada) Ltd. (“Moduline Canada”) manufactures wood frame homes at its facility in Medicine Hat, Alberta. The homes are transported to and set up on the purchaser’s property. [ 17 ] Mr. Sarpalius’ unchallenged evidence is that purchasers do not buy the homes directly from Moduline Canada. Moduline Canada has a number of authorized dealers, who sell the homes to purchasers.

The contract of purchase and sale is a contract between the purchaser and the dealer. The dealer custom orders a home from Moduline Canada containing the specifics ordered by the purchaser. [ 18 ] Moduline Canada provides a limited warranty to the customer with respect to the home. [ 19 ] Transportation of the home to the purchaser’s property and setting up the home when it is delivered to the purchaser’s property, are arranged by, and are the responsibility of the dealer. [ 20 ] Mr.

Sarpalius’ affidavit describes the home that was purchased by the Plaintiffs as a double-wide, which means the two halves of the home would be transported separately to the purchaser’s location and then assembled on-site. The roof on each hinges so that the roof is down during transportation and then is lifted and the two halves are put together on site. The home was placed on a lot at Fort St. John, British Columbia. Mr.

Sarpalius deposes that the amount of work that must be done on site to put together the two halves of the double wide is extensive and that this is the responsibility of the dealer. [ 21 ] The Plaintiffs have not brought any claim against the “dealer”. [ 22 ] The Statement of Claim alleges that at the time of delivery of the home, the home was unfinished and contained defects in structure and workmanship as well as latent defects. It asserts the Plaintiffs accepted the home on the assumption that the non- conformity and defects would be cured, based on assurances and representations by the Defendants.

It alleges breach of contract, negligence and that defects have rendered the home unfit for the intended purpose, not of merchantable quality and not safe or fit for habitation. Paragraph 14 of the Statement of Claim states that particulars include but are not limited to: (

a) floor joists incorrectly installed; (

b) supporting joists not bearing support; (

c) nails through sub-floors missing joists; (

d) electrical wiring incorrectly installed; (

e) uneven floor, floor damage and floor covering damaged; (

f) uneven walls, doors, cupboards; (

g) structural damage, warping of walls, ceiling and floors; (

h) holes in walls and ceiling; (

I) windows leaking; (

j) inadequate roofing; (

k) defective windows, wiring, lighting, appliances; (

l) water leakages and water damage. [ 23 ] Mr. Sarpalius became aware of this action in July 2010, when Moduline Canada received from its solicitors the documents sent by the Plaintiffs’ current lawyer, Mr. Sussman.

[ 24 ] Mr. Sarpalius swears he has searched extensively for records at Moduline Canada that relate to this claim and the construction of the home. He has also made numerous inquiries internally to determine if there are any employees who still work at Moduline who may know anything about this matter. He deposes that he has been unable to locate any of the “original home files or records relating to this home” and cannot find any “current Moduline employees” who have any recollection of this home or this claim. [ 25 ] Mr.

Sarpalius deposes that Moduline Canada always keeps a separate file for each home “that contains a variety of documents relating to the construction of the home as well as any warranty work”. He has searched for such a file: he has gone through “a bunch of different storage areas” and talked to some older employees to try to find it, and during a shutdown he and two other employees went through storage areas and trailer looking for it. They have not been able to locate the “home file”. Mr.

Sarpalius says he has been advised by two people (one being the general manager of Moduline Canada) that Moduline Canada previously used a semi-trailer unit kept in their yard, for storage of files. In the spring of 2004 it was discovered that this trailer had been leaking for some time and a full pallet of files were destroyed by the flooding. No inventory of the destroyed files was ever made, so no-one knows if the file for the Plaintiffs’ home was one of the files destroyed by the water damage. However, Mr.

Sarpalius deposes that he believes this is likely what happened to the file, as otherwise they should have been able to find it. In any event, Moduline Canada does not have the “home file” for this unit. [ 26 ] Mr. Sarpalius deposes that Moduline Canada has “almost no records of any kind with respect to this home”. Mr. Sarpalius’ affidavit (at paragraph 6 and 8) refers to a “legal file” which Moduline Canada’s general manager “inherited from the previous general manager”.

The Affidavit does not say what (if any) non-privileged information is in that file, other than 3 letters appended to his Affidavit (which appear to be letters the Plaintiffs sent to the Better Business Bureau dated November 9, 1998, January 18, 1999 and February 16, 1999). [ 27 ] Specific documents Mr. Sarpalius’ affidavit identifies as missing and why he asserts they would assist Moduline Canada to defend this action are: a. the bill of lading for the home. Moduline Canada does not deliver the homes.

The normal process is to have the bill of lading identify any issues, problems or deficiencies before the home leaves the Medicine Hat yard. b. Moduline Canada has none of the original construction plans and diagrams, thus they cannot determine what specifications the home was to have when it was built. [ 28 ] Mr. Sarpalius describes one of Moduline Canada’s current dealers as “Manufactured Homes of Dawson Creek” [sic]. He says he telephoned their office on March 25, 2011 and spoke to one of the sales managers who said she would see if she could find any documents regarding this home and would fax them to him.

When Mr. Sarpalius swore his Affidavit on March 31, 2011, he had not received anything from her. On March 26, 2011 he received a call from Ken Tarrnow, the owner of “Manufactured Homes of Dawson Creek” when the home was sold to the Plaintiffs. Both the current sales manager and Mr. Tarrnow were able to confirm that “Manufactured Homes of Dawson Creek” sold the unit to the Plaintiffs. However, Mr.

Tarrnow advised he did not think there were any records relating to the home as they normally keep records for 7 years and then destroy them. [ 29 ] Jim Hadwen, then service manager of Moduline Canada who swore the November 2001 Affidavit, has not worked for Moduline Canada since November 29, 2004. Mr. Sarpalius deposes that has not been able to contact Mr. Hadwen and so does not know what Mr. Hadwen remembers of any of this. No particulars were provided of attempts made to contact Mr. Hadwen. [ 30 ] Mr.

Sarpalius deposes that he does not know who the former employees are who could assist, other than perhaps Jim Hadwen.

[ 31 ] Mr. Sarpalius is a certified plumber and gas fitter. He worked at Moduline Canada from August 2005 to July 2007 on the production line, and from July 2007 – 2008 as a foreman. He has been a service manager at Moduline Canada since September 2008. His Affidavit asserts: a. The claim alleges deficiencies in the home.

If the home has been lived in for 14 years, he does not believe it will be possible for Moduline Canada to ever determine if there are issues covered by the warranty, as even normal wear and tear on a home after 14 years, would make it impossible to figure out what the condition of the home was like after it was set up. b. Normal wear and tear on the home, after 14 years would make it practically impossible to determine what was a warranty issue and what was a dealer issue. The dealer is responsible to correct any issues that arise from transportation and set up.

The issues in paragraph 14 of the Statement of Claim appear to be issues that would be the responsibility of the dealer, but after this length of time it will be very difficult for Moduline to defend itself and prove that. c. If there was neglect in the upkeep of the home or any renovations or repairs done to the home, that would make it practically impossible to determine what issues were 14 years ago. d. Over time, other things can change or have an effect on a home. For example, settling of the ground on which the home was erected is common.

There could be many issues that are the result of settling and have nothing to do with the manufacture of the home. Wood can dry out over the years and the impact can be movement of the wood through twisting, shrinking or bowing. If a humidifier is used improperly, the wood can also be affected by too much moisture. e. Since Moduline does not know the state of the home in 1998, and does not have the original construction plans and diagrams, it will not be able to determine what specifications the home was to have when it was build.

Therefore Moduline will not be able to determine what issues “are related to the manufacture of the home when it was built and assembled.” [ 32 ] No evidence was provided regarding the defendant, Moduline International Inc. Mr. Flanagan’s written brief and oral submissions state that he is acting for Moduline Industries (Canada) Ltd. Issues [ 33 ] The following issues are raised by this application: a. Should the action be dismissed against Moduline Industries (Canada) Ltd. pursuant to Rule 15.4 (1) (

b) because more than 5 years has elapsed since the last thing done to significantly advance the action? Did the following significantly advance the action:

I. the Praecipe to Note in Default filed May 31, 2000? ii. the Consent Order setting aside the May 31, 2000 Noting in Default? iii. the Affidavit of Records filed July 11, 2005? b. Should the action be dismissed against Moduline Industries (Canada) Ltd. pursuant to R. 4.3? Rule 15.4 – Dismissal for Long Delay [ 34 ] Moduline Industries (Canada) Ltd. relies first, on Rule 15.4 (1)(

b) of the Alberta Rules of Court , A.R. 163/2010, which came into effect on November 1, 2010. It states [emphasis added]: Dismissal for long delay: bridging provision 15.4

(1) Unless subrule (2) applies, the Court, on application, must dismiss the action as against the applicant if (

a) after the coming into force of this rule, 2 years has elapsed since the last thing done to significantly advance the action, or (b) 5 years has elapsed since the last thing done to significantly advance the action , whichever comes first.

(2) The Court must not dismiss the action if (

a) the parties to the application agreed to the delay, (

b) the action has been stayed or adjourned by order or an order has extended the time for doing the next thing in the action, or (

c) 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 an extent that, in the opinion of the Court, warrants the action continuing. [ 35 ] R 1.7 (1) and (3) of the Alberta Rules of Court , A.R. 163/2010 state: 1.7

(1) The meaning of these rules is to be ascertained from their text, in light of the purpose and intention of these rules, and in the context in which a particular rule appears. (2) ….

(3) Headings in these rules may be considered in ascertaining the meaning of these rules. [ 36 ] Rule 1.2 states:

Purpose and intention of these rules 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.

(2) In particular, these rules are intended to be used (

a) to identify the real issues in dispute, (

b) to facilitate the quickest means of resolving a claim at the least expense, (

c) to encourage the parties to resolve the claim themselves, by agreement, with or without assistance, as early in the process as practicable, (

d) to oblige the parties to communicate honestly, openly and in a timely way, and (

e) to provide an effective, efficient and credible system of remedies and sanctions to enforce these rules and orders and judgments. … [ 37 ] Rule 244.1(1) of the former Alberta Rules of Court, A.R. 360/68, sometimes described as the “drop dead rule”, said [emphasis added]: 244.1

(1) Subject to Rule 244.2, where 5 or more years have expired from the time that the last thing was done in an action that materially advances the action, the Court shall, on the motion of a party to the action, dismiss that portion or part of the action that relates to the party bringing the motion. and Rule 243.1(1) stated: 243.1

(1) Two or more parties to an action may by express agreement exclude or vary in whole or in part the application of any portion of this

Part in relation to themselves. … [ 38 ] Rule 4.33 [Dismissal for long delay], comes into force 2 years after November 1, 2010 (Rule 15.15) at which time Rule 15.4 (the bridging rule) will expire. Rule 15.4(2) was amended effective July 14, 2011 (O.C. 322/ 2011), however the amendment does not effect this decision. Argument [ 39 ] The Plaintiffs argue that the following significantly advanced the action within the meaning of Rule 15.4: a. May 8, 2000 – Filing of the Statement of Claim b. May 11, 2000 – Serving the Statement of Claim

c. May 31, 2000 – Filing the Praecipe to Note in Default d. March 26, 2002 – Granting of the Consent Order to set aside Noting in Default e. July 11, 2005 – Filing the Plaintiffs' Affidavits of Records f. July 8, 2010 – Filing the Praecipe to Note in Default [40] The Applicant, Moduline Industries (Canada) Ltd, argues that no “thing” has been done which meets the requirement underRule 15.4, that it significantly advance the action, since service of the Statement of Claim. [41] The cases relied on by counsel interpret former Rule 244.1, A.R. 360/68, namely: a. The Applicant (Defendant) provided: Morasch v.

Alberta 2000 ABCA 24;Bilawchuk v. Lorie Management & Holdings Ltd. 2007 ABQB 395; Haekel v.Canada 2008 ABQB 701; Ricky’s Billiard & Sports Bar Ltd. v. EltonConstruction Ltd. 2001 ABQB 530; Mathews v. Great-West Life Assurance Co.2002 ABQB 297. b. the Respondents (Plaintiffs) provided: Filipchuk v. Ladouceur 2001 ABCA 26and Gresiuk v. Wawanesa Mutual Insurance Co. (AB KB),[2002] A.J. No. 948 (ABQB).

Analysis [42] The Applicant referred to “avoiding the footrace to the court” when describing the correct approach to R. 15.4. [43] Under former Rule 244.1 A.R. 360/68, the Alberta Court of Appeal described the following as the appropriate approach todismissal applications (Trout Lake Store Inc. v. Canadian Imperial Bank of Commerce 2003 ABCA 259 at para 32; Nelson v.Emsland 2008 ABCA 387, 440 A.R. 297 at para 9): 1. The proceedings should be examined as at the date of the applicationto dismiss for want of prosecution pursuant to Rule 244.1. 2.

If at any time in the action there has been a gap of five years or morewhere no "thing" has been done to materially advance the action, thejudge shall examine what has occurred since that five-year gap. 3. If the delaying party has not done a thing to materially advance theaction since the five-year gap, the action shall be dismissed, absentagreement to the delay.

4. If the delaying party has done a thing to materially advance the action after the five-year gap, and the other party objected and applied for a dismissal, the action shall be dismissed, absent any agreement to the delay. 5. If the delaying party has done a thing to materially advance the action after the five-year gap, and the applicant has participated in that thing, continued to participate in the action, or otherwise acquiesced in the delay, the action shall continue, and the application for dismissal refused.

These steps will avoid the foot race to the courthouse and it will encourage the party seeking to process its claim to proceed in an expeditious manner throughout. At the same time, it will encourage the non-delaying party to act in a timely basis and, at a minimum, to object to any further action taken by the delaying party at the first opportunity. [ 44 ] In Trout Lake Store Inc. supra the issue was whether a party to an action can extend the lawsuit by a unilateral action, taken without the other party’s consent, when nothing had been previously done to materially advance the action for five years or more.

One of the arguments advanced by the Respondent in that case was that Filipchuk v. Ladouceur 2001 ABCA 26 allowed the lawsuit to continue, even after an extensive delay, if the delaying party can do something meaningful to advance the action before the other side brings an application under R. 244.1. [ 45 ] It is not necessary for this application to address if and to what extent, Rule 15.4 mirrors its predecessor – former Rule 244.1.

However, I agree that if there is a gap in the action where the time prescribed in R. 15.4(1) has elapsed since the last thing done to significantly advance the action and Rule 15.4(2) does not apply, the court must dismiss the action as against the applicant. Praecipe to Note in Default (May 2000) and the Consent Order Setting it Aside [ 46 ] Moduline Canada argues that neither (

i) the Praecipe to Note in default filed May 31, 2000; nor (ii) the Consent Order setting the Noting in Default aside, significantly advanced the action (R. 15.4(1) ). [ 47 ] It argues these things did not advance the action at all: it returned to where it was when the Statement of Claim was served (May 11, 2000) and in exactly the same state it was at that time. [ 48 ] The Praecipe to Note in Default did not significantly advance the action, argues the Applicant, as it was filed “in the face of correspondence from counsel for Moduline requesting the usual professional courtesy of taking no steps against Moduline without providing a notice to counsel for Moduline.” [ 49 ] The Order Setting Aside the noting in default did not significantly advance the action, submits the Applicant, because of the following context: A request not to note in default without reasonable notice was made by the Defendants’ solicitor on May 12, 2000 and was followed up by letters on June 5, June 21 and August 9, 2000.

On August 12, 2000 the Plaintiffs’ Counsel indicated that she was seeking instructions from her client, but then didn’t respond. Unknown to the Defendants, while letters were being exchanged, the Plaintiffs had already noted the Defendant in default. The Plaintiffs’ solicitor did not advise the Defendants’ solicitors of the Noting in Default. The matter was then dormant. In August 2001, Moduline discovered it had been noted in default and brought a motion [in November 2001] to have it set aside.

The consent order setting the Praecipe to Note in default was filed March 27, 2002. [ 50 ] The next thing that occurred was that the Plaintiffs filed an Affidavit of Records on July 11, 2005. Thus, the Applicant argues, more than 5 years elapsed since the last thing to significantly advance the action, namely when the Statement of Claim was served (May 11, 2000). [ 51 ] Rule 15.4(1)(

b) is worded: “if 5 years has elapsed since the last thing done to significantly advance the action”. Former R.

[ 51 ] Rule 15.4(1)(

b) is worded: “if 5 years has elapsed since the last thing done to significantly advance the action”. Former R. 244.1 spoke of: “where 5 or more years has elapsed from the time the last thing was done in an action that materially advances the action.” Neither counsel suggested the two terms were different: counsel agreed that cases interpreting the words “materially advanced” in former Rule 244.1 AR 360/68 can be used to interpret the words “significantly advanced” in Rule 15.4 (pg 23 transcript). [ 52 ] The Plaintiff relied on Filipchuk v.

Ladouceur 2001 ABCA 26 at para 2 , as authority that the procedural step of noting in default was considered as a “thing” that “materially advance[d] the action” pursuant to former Rule 244.1(1). [ 53 ] Moduline Canada relied on Morash v. Alberta 2000 ABCA 24 at para 13 , and argued that under former Rule 244.1, the “thing” must move the law suit closer to trial in a meaningful way. Advancing the action was not sufficient – the action must be materially [now significantly ] advanced. [ 54 ] Morash v. Alberta supra provided guidelines for the

interpretation of former Rule 244.1 Such guidelines included (at para 6 - 14): 2. A procedural step required by the Rules of Court will always be a thing which materially advances the trial. 6. … Because the Rules require that the step be taken, it is considered a step which is necessary to advance an action and its completion is deemed to materially advance the action. The court need not inquire whether the step actually caused the action to advance. The completion of the required step is sufficient, in and of itself, to restart the five-year clock. 7.

The step must be completed, however, not just commenced… 8. … The Rule does not exclude consideration of things done by the complaining party… 3. Procedural steps contemplated by the Rules, although not required by the Rules, may also be enough, in and of themselves, to materially advance an action. 9. … In each case the step must be examined in light of the purpose of R. 244.1 10. A procedural step which replaces a step required by the Rules will qualify.

For example, suppose the Rules prohibit taking any step without leave of the court, but the parties enter into a consent order permitting further steps to be taken. The consent order, in and of itself, materially advances the action, because it supplants an otherwise required procedural step, obtaining leave … As such a step is deemed to materially advance the action, the court need not inquire whether it, in fact, caused the action to advance.

11. Acts which satisfy prior commitments, such as deliveringdocuments one has previously promised to supply, are often not thingswhich, in and of themselves, materially advance an action. The spirit ofR. 244.1 would be circumvented if one party delayed completion of anagreement or undertaking and thereby restarted the five-year clock at alater date. See Smith v. Alberta (1996), 49 C.P.C. (3d) 94 (Alta.Master) in which complying with an undertaking in one's own lawsuitdid not materially advance an action. 4. An action may be materially advanced by other things, even thoughthey are not procedural steps. 12.

Rule 244.1 refers to "things", not steps, which broadens the scopeof activities that might materially advance an action… It is thereforeopen to the court to decide, looking back, that a thing materiallyadvanced an action and restarted the five-year clock. 13. Most "things" will be grounded in the Rules, even if they are notactual procedural steps. The thing must "move the law suit closer totrial ... in a meaningful way"… Advancing the action is not sufficient;the action must be materially advanced.

For example, an agreement tolimit discovery of documents or examinations for discovery, which theparties acted upon, might well qualify as such a "thing". Setting a datefor an examination for discovery, by itself, probably would not. InAppleyard v. Reed (1997), (AB KB), 55 Alta. L.R.(3d) 279 (Alta. Q.B.) the exchange of expert reports in advance of theminimum time set out in R. 218.1, in a complex commercial dispute,was a thing which materially advanced the action. This was so eventhough the agreement and exchange were not procedural stepscontemplated or required by the Rules. 14.

Unlike procedural steps, the five-year clock will not restart unlessthe thing done, in fact, caused the action to materially advance. Clearlya court must look back to make this determination. [55] The argument that the noting in default or “thing” alleged to significantly advance the actions was obtained by a flawedprocess and the effect of it being set aside, was not present in Filipchuck or Morash . [56] That it was set aside, by itself, in my view, does not resolve whether the Noting in Default was a “thing” that significantlyadvanced the action.

A Praecipe to Note in Default could, at the material time, be set aside on two grounds (Earnest & Young Inc. vCooke 2008 ABQB 437 at para 5): a. where the defendant was able to establish there was a flaw in the judgment or theprocedure leading to it. In such a case the defendant was normally not required toshow he had a good defence to the claim, though great delay could remove hisright to open up; and

b. where the judgment was regularly obtained, but the court was asked to exercise its discretion to set it aside. In that case, the defendant was seeking an indulgence. To get the judgment opened up, such defendant must show by sworn evidence that: (

i) he has an arguable ground of defence with fairly specific evidence; (ii) he did not deliberately let judgment go by default; and (iii) after he learned of the default judgment, he moved promptly to open it up. Here the court usually imposed terms and conditions on the defendant. [ 57 ] The applicant provided Haekel v. Canada 2008 ABQB 791 , stating that it could provide “guidance on the approach the court should take on an application of this nature”.

In Haekel , six days after the statement of claim was served on the Defendants, the Plaintiff’s counsel, in a brief telephone discussion with the Defendant’s counsel, confirmed she would not note the Defendant in default. The court did not accept the plaintiff’s argument that this avoided the operation of former Rule 244.1 A.R. 360/68, because former Rule 243.1 applied (this was a “standstill agreement”) or alternatively, that the defendant was estopped from bringing the dismissal application. [ 58 ] The issues in Haekel supra are different.

There is no question of agreement or reliance by the Plaintiff in the present case - the Plaintiff noted the defendant in default. Haekel (at para 28) adopts the statement of Belzil J. in Calliou v. Bouchard 2006 ABQB 925 at para 22 that “the proper characterization of letters from counsel requesting notification prior to any noting in default does not amount to any form of standstill agreement, but is more properly characterized as a courtesy request from one lawyer to another, which could be terminated on notice ” [emphasis added].

However I am mindful of the context in which the statement was made – in both Haekel and Calliou it addressed whether there was a standstill agreement that satisfied the requirements of R 243. [ 59 ] The Law Society of Alberta, Code of Professional Conduct online: Law Society of Alberta <www.lawsociety.ab.ca/lawyers/regulations/code.aspx> sets out the following rules and commentary (at

Chapter 4): Rule 4 - A lawyer must agree to reasonable requests by another lawyer for extensions of time, waivers of procedural formalities and similar accommodations unless the client’s position would be materially prejudiced. Commentary under this rule includes the following: An important element of the duty of courtesy to other lawyers is willingness to accede to reasonable requests that do not affect the client’s position in any material respect. What is reasonable in any given case will depend on all of the circumstances.

For example, a sole practitioner who is suddenly incapacitated, or a lawyer who has received instructions to defend an action on the eve of the deadline for responding, would in most cases be acting reasonably in requesting an extension of time to file a statement of defence. … cooperation of this nature assists in expediting the clients’ business. Forcing one’s opponent to make a court application that will surely be granted not only antagonizes opposing parties, but causes additional delay and expense for both sides.

Rule 5 - A lawyer … must respond on a timely basis to all communications from other lawyers that contemplate a reply. [ 60 ] The obligation to grant an extension of time to opposing counsel under the Professional Code of Conduct refers to: “reasonable requests” and “unless the client’s position would be materially prejudiced.” My ruling is not a decision about whether the requested time extension should have been granted.

[ 61 ] Instead, what is troubling, is that counsel for the Plaintiffs did not reply to the May 12, 2000 request. Consequently, the Plaintiffs’ counsel did not provide reasonable notice to the Defendant before noting it in default. Also troubling is that the Plaintiffs’ counsel, despite the correspondence from Moduline Canada’s counsel, did not advise Moduline Canada’s counsel that she had noted Moduline Canada in default. [ 62 ] Counsel’s professional responsibilities are relevant in an application to set aside a noting in default. ( Moose Mountain Buffalo Ranch, a Limited Partnership v.

Green Farms Drilling Limited 2010 ABCA 56 at para 10 and Hubert v. Outlaws Groups Inc. 2007 ABCA 352 at para 14 ) . [ 63 ] In the circumstances, to find the noting in default and the order setting it aside significantly advanced the action, would be inconsistent with: a. the purpose of the Rules set out in Rule 1.2 (1), "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"; and b. that the Rules are intended to be used: i. to identify the real issues in dispute R. 1.2(2)(

a) ii. to facilitate the quickest means of resolving a claim at the least expense R. 1.2(2)(

b) iii. to encourage the parties to resolve the claim themselves, by agreement ... as early in the process as practicable R. 1.2(2)(

c) iv. To oblige the parties to communicate honestly, openly and in a timely way R. 1.2 (2)(d) [ 64 ] Did the Order setting aside the default judgment “significantly advance” the action? The Plaintiffs argue that if noting in default is considered by the Court to significantly advance an action, a fortiori, an order setting it aside must be treated similarly. [ 65 ] The Applicant referred to Bilawchuk v. Lorie Management & Holdings Ltd . 2007 ABQB 395 at para 3 as authority that whether a motion moves the lawsuit closer to trial in a meaningful way, depends on the nature of the motion.

In Bilawchuk the Plaintiffs brought a motion dispensing with examinations for discovery of the Plaintiff. The motion was unsuccessful. Master Smart considered that had the motion been successful, it clearly would have moved the matter significantly towards finalizing the action. On the other hand, because the application was unsuccessful, it did not follow that it did nothing to advance the action. The inability of the Plaintiff to testify as a result of his medical condition was not a trifling matter and was fundamental to the conduct of the lawsuit.

It was a live issue which needed to be determined to advance the lawsuit. Accordingly, notwithstanding that the Plaintiff’s motion was unsuccessful, the court concluded that it was a thing which materially advanced the action for the purposes of Rule 244.1. [ 66 ] In this case, I do not find the Order setting aside the praecipe to note in default, to be a thing that “significantly advanced” the action. Further, counsel did not argue (nor would I have found) that R 15(2)(

c) was engaged. As argued by counsel for the Applicant, the order returned the action to where it was when the Statement of Claim was served. It did not, for example, also require a statement of defence to be filed within a specified time. Even if one assumes this may have been because the defendant was entitled to the order as of right, it is instructive that the plaintiff did not require a statement of defence from the Applicant until almost 5 years later (in the July 25, 2007 letter to Moduline’s counsel). When the praecipe to note in default was set aside, the action simply languished.

[ 67 ] In the circumstances I find that neither the noting in default, nor the subsequent order setting it aside, significantly advanced the action. Neither party argued (nor do I find) that subrule 15.4(2) applies. More than 5 years having elapsed since the last thing was done that significantly advanced the action, the action against the defendant, Moduline Industries (Canada) Ltd. is dismissed pursuant to R. 15.4. Issue 1(c): Affidavit of Records and Issue 2 : Rule 4.3 Application [ 68 ] Given the foregoing ruling, it is not necessary to address these issues.

Conclusion [ 69 ] The action against Moduline Industries (Canada) Ltd. is dismissed. [ 70 ] No submissions were made with regard to the court’s authority to dismiss the action against the defendant Moduline International Inc. While the Praecipe to Note in Default purports to also note the defendant Moduline International Inc. in default, I note that there does not appear to be a filed Affidavit proving that Moduline International Inc. was ever served with the Statement of Claim. This ruling does not deny dismissal of the action against the defendant Moduline International Inc.

That issue was simply not addressed by the application. [ 71 ] If counsel are unable to agree on costs, they may speak to me on that issue within 60 days of the granting of this Judgment. Heard on the 28 th day of April, 2011. Dated at the City of Red Deer, Alberta this 20th day of September, 2011. J.L. Foster J.C.Q.B.A. Appearances: Brian S. Sussman, Q.C., Biamonte, Cairo & Shortreed LLP for the Respondents Kathy Vincent and Todd Howkins

James P. Flanagan McLennan Ross LLP for the Applicant Moduline Industries (Canada) Ltd.