Stackard v. Harrington, 2016 ABQB 357

Court of Queen’s Bench of Alberta Citation: Stackard v. Harrington, 2016 ABQB 357 Date: 20160627 Docket: 0801 07656 Registry: Calgary Between: John Harrington, John Harrington doing business as Eagle Graphics, David Comeau, Phil Glaze and 1297174 Alberta Inc. Appellants - and - John Arthur Stackard and Suburban Journals Publishing Ltd. Respondents _______________________________________________________ Reasons for Decision of the of the Honourable Madam Justice M.R. Bast _______________________________________________________

Appeal from the Decision by A.R. Robertson, Q.C., Master in Chambers Dated the 3 rd day of September, 2015 [ 1 ] This is an appeal from the decision of a Master to dismiss an application, under Rule 4.33 of the Alberta Rules of Court , AR 124/2010, as amended. Factual Background [ 2 ] The factual background is quite simple. A number of steps were taken after the filing of the Statement of Claim in June 2008.

The uncontested facts relevant to the application before the Master and on this appeal relate to whether there was a “significant advance” in the action after November 29, 2011, when the Defendants’ filed their Statement of Defence to the Derivative Claim. [ 3 ] On December 31, 2011, the Plaintiff, John Arthur Stackard passed away, and the action was automatically stayed by operation of Rule 4.34(1).

Letters of Administration were granted for Stackard’s estate on Jan 31, 2012, naming Rosa Elena Dorath as the personal representative of the estate. [ 4 ] On September 9, 2014, Dorath obtained an Ex Parte Order ending the stay and permitting the action to continue, as specifically permitted by Rule 4.34(2). Rule 4.34(3) requires that any Ex Parte Order authorized by and obtained under that Rule be served on each of the other parties as soon as it is received.

Dorath only served the Order on previous counsel for the Plaintiff. [ 5 ] On July 15, 2015, 3 years and 7.5 months after November 29, 2011, the Defendants filed their application under Rule 4.33 for an order dismissing the action for long delay. [ 6 ] On August 10, 2015 counsel for the Defendants received a fax copy of the Order ending the stay. [ 7 ] The Defendant’s application to dismiss the action for long delay was heard on August 21, 2015, and the Master delivered his oral decision dismissing the application on September 3, 2015.

Decision of the Master [ 8 ] The Master considered the question of whether the order lifting the stay of proceedings significantly advanced the action. The Master initially approached the question by taking a functional analysis, looking at “the real quality of what was done in the context of the real issues in dispute . . .” (citing Kahlon v Cheecham , 2015 ABQB 203 (Master) at para 45 ). He had “no hesitation in saying that merely lifting the stay by itself did not significantly advance the action.

The order lifting the stay did not advance the action at all in any functional sense; it simply removed an obstacle placed there by the plaintiff’s death” (Transcript, p. 39, lines 15-17). [ 9 ] The Master continued, however, stating if the step is “required” by the Rules , “it is considered a step which is necessary to advance an action and its completion is deemed to materially advance the action,” citing Alberta v Morasch , 2000 ABCA 24 , at para. 6 . [ 10 ] The Master distinguished the Plaintiff’s authorities, Carter v Sears , 2011 ABQB 732 , and the decision of Master Hanebury in Willard v Compton Petroleum Corporation , 2015 ABQB 8 , which, as will be discussed further below, was overturned on appeal subsequent to the Master’s reasons. [ 11 ] The Master concluded as follows at page 42, lines 9 to 25: The analysis then returns to the question of whether seeking an order lifting the stay and obtaining it was a "required" step and whether three years has actually passed without a significant advance in the action.

It might be argued that since the order was not served on opposing parties, the step was not completed because subrule 4.34(3) requires that, in order to continue, the action must be served on each of the other parties as soon as it is received by the party requesting the order. However, it is clear that the plaintiff's counsel intended to serve the other parties and, by inadvertence, he served previous counsel instead. But service of any order on the opposing parties is expected under the Rules . Subrule (3) merely adds the expectation that it is to be served "as soon as it is received".

The step was fundamentally completed when the order lifting the stay was obtained. Was getting an order lifting the stay a required step if the adminstratrix had intended to proceed with the lawsuit? It was a required step. Accordingly, we find this as an example of a step required by the Alberta Rules of Court that, by that feature, means it significantly advanced the action; notwithstanding that on a functional analysis, it did not to argue to defeat the argument that “three or more years has passed without a significant advance in an action.” [ 12 ] The appeal of the Master was heard on April 13, 2016.

Issues on Appeal [ 13 ] The grounds for appeal raised in this appeal are: 1) Whether the Master erred by relying on the “required step” analysis in holding that the Ex Parte Order significantly advanced the action; 2) Whether the Ex Parte Order was a “required step”; and, 3) Whether the “required step” was “completed.” Standard of Review [ 14 ] The standard of review on appeal from a Master on questions of law is correctness: Bahcheli v Yorkton Securities Inc. , 2012 ABCA 166 , at para 30 . The Law [ 15 ] This appeal raises an important issue as to the

interpretation of Rule 4.34 relating to stays following the death of a litigant and the effect of a stay on Rule 4.33, the “drop dead” rule. [ 16 ] In Willard Estate v Compton Petroleum Corp. , 2015 ABQB 766 , Mahoney J reversed the decision of Master Hanebury, cited above, after the Master’s decision in this case was issued.

It is worthwhile to summarize the decision, even though the Master in this case sought to distinguish the overturned decision in his reasons. [ 17 ] The relevant Rules are as follows: Dismissal for long delay 4.33(1) If 3 or more years has passed without a significant advance in an action, the Court, on application, must dismiss the action as against the applicant, unless . . . (

b) the action has been stayed or adjourned by order, an order has extended the time for advancing the action, or the delay is provided for in a litigation plan . . . Stay of proceedings on transfer or transmission of interest 4.34(1) If at any time in an action prior to judgment the interest or liability of a party is transferred or transmitted to another person by assignment, bankruptcy, death or other means, the action is stayed until an order to continue the action by or against the other person has been obtained.

(2) If a transfer or transmission of the interest or liability of a party takes place while an application or proceeding in an action is pending, an interested person may, on filing an affidavit verifying the transfer or transmission of the interest or liability and without notice to any other party, request the Court to order that the action continue.

(3) An order to continue the action must be served on each of the other parties as soon as it is received by the party requesting the order.

(4) If an order to continue an action is not made within a reasonable time after the date on which the action is stayed, the defendant or respondent may apply to the Court to have the action dismissed for delay under Rule 4.31. [ 18 ] Mahoney J explained that upon the death of a party, under Rule 4.34 the action is stayed and remains stayed until either party obtains an order for continuation.

The dispute was whether Rule 4.33 applies regardless of the plaintiff’s intervening death, that is to say, whether death “stops the clock” under that Rule (at para 15). [ 19 ] Mahoney J found that the legislative silence in Rule 4.34 does not translate into a legislative intent to remove the ability of a litigant to apply for relief under Rule 4.33 . The reference to Rule 4.31 refers to the fact that if a stay remains in place, and no order to continue the action is made within a reasonable time, a defendant may apply for relief under Rule 4.31 notwithstanding the stay.

The permissive language in Rule 4.34(4) does not displace the availability of an application under Rule 4.33 (at paras 27-31). [ 20 ] Considering the legislative history related to Rule 4.33, Mahoney J concluded that an automatic stay imposed under Rule 4.34(1) does not qualify as the type of stay and only a court-order stay is included in the exemptions listed in 4.33(1)(b) (at paras 34-38). [ 21 ] Finally, Mahoney J disagreed that it would be unjust to permit a drop dead application to be brought during the period of the

stay and found that the existence of Rule 4.33 provides a strong incentive to keep litigation moving along.

From a policy perspective,Mahoney J concluded that the assignee plaintiff should bear the burden where a claim is allowed to sit dormant for an extended period(at paras 45-49). [22] I am in full agreement with the reasons given by Mahoney J for finding that the existence of a stay under Rule 4.34 does notpreclude the bringing of a “drop dead” application under Rule 4.33. [23] In the circumstances of this case, unbeknownst to the Appellant Defendant, the stay had been lifted prior to the bringing of the“drop dead” application.

Even if the analysis of Mahoney J is mistaken, I agree with the Master that Willard is distinguishable on thebasis that there is no bar to an application under Rule 4.33 following the lifting of the automatic stay. [24] Subsequent to the arguments in this case, a pair of decisions of the Alberta Court of Appeal on the application of the dropdead Rule were released. The first, Ro-Dar Contracting Ltd. v Verbeek Sand & Gravel Inc., 2016 ABCA 123 (April 22, 2016) wasbrought to the attention of the Court and the Respondent Plaintiffs by letter from the Appellants’ counsel dated April 29, 2106.

Neitherparty sought to make additional submissions as a result of this new authority. The second decision is Ursa Ventures Ltd. v Edmonton(City), 2016 ABCA 135 (May 11, 2016), issued 19 days after the Ro-Dar decision. [25] In Ro-Dar, Slatter, McDonald and Bielby JJA writing for the Court found: [14] . . . An awareness of the legislative history of the Rule is helpful in its

interpretation. The most important lesson is that the2013 amendments, in effect, approved the functional approach in Phillips v Sowan, 2007 ABCA 101 at para. 5, 40 CPC (6th)378. The drop dead Rule now clearly requires a functional approach, without overemphasizing formalistic steps that might have beentaken.

The obiter statement in Morasch v Alberta, 2000 ABCA 24 at para. 6, 75 Alta LR (3d) 257, 250 AR 269 (that anythingrequired by the Rules is deemed or presumed to advance the action) does not correctly state the law. [26] Similarly, in Ursa, Rowbotham JA (Martin JA concurring) held that: [3] Morasch v Alberta, 2000 ABCA 24 , 250 AR 269 has been overtaken by changes in the Rules and the modernapproach to civil litigation.

Morasch considered the now-repealed r 244.1 of the Alberta Rules of Court, Alta Reg 390/68 and held that acompleted mandated procedural step was always a “thing” which “materially advanced the trial”. However, it is not in keeping with thefoundational principles underlying the current Rules and the modern approach to litigation in Hryniak v Mauldin, 2014 SCC 7 ,[2014] 1 SCR 87 and Windsor v Canadian Pacific Railway, 2014 ABCA 108 , 572 AR 317. It does not matter whether the laststep taken is mandated by the Rules or not: the analysis should be the same.

That is, did the substance of the step taken to advance theaction (not its form) significantly advance the action? [27] Rowbotham JA summarized the approach under Rule 4.33 as follows: [15] By removing the reference to “things,” the Legislature shifted the focus of r 4.33 to function and substance, rather than anapproach that looked at whether the act fitted into a specific category. Because of this change in focus, the applicability of cases decidedunder the repealed r 244.1 must be considered in the context of the language and focus of r 4.33. [16] Morasch considered Rule 244.1.

Fruman JA held at para 6: If the Rules of Court require that a step be taken, the completion of that step, in and of itself, materially advances the action: Bishop v.Grotrian (1998), 1998 ABCA 23 , 228 A.R. 73 at 78 (C.A.). Because the Rules require that the step be taken, it is considered astep which is necessary to advance an action and its completion is deemed to materially advance the action. The court need not inquirewhether the step actually caused the action to advance.

The completion of the required step is sufficient, in and of itself, to restart thefive-year clock. [17] She further concluded that a procedural step contemplated but not required by the Rules may also be a step which materiallyadvances an action. These steps were to be examined in light of the purpose of r 244.1. [18] The new Rules use a functional approach. Their purpose and intent, as emphasized in the foundational Rule 1.2, is to providefair and just resolution of claims in a timely and cost effective manner.

The foundational Rules parallel a cultural shift in litigation thatdeemphasises trial as the dominant mechanism of resolving civil disputes in favor of procedures such as

summary dismissal andalternative dispute resolution: Windsor at para 15; Ro-Dar Contracting Ltd. v Verbeek Sand & Gravel Inc., 2016 ABCA 123 ,2016 ABCA 123 (available on CanLII); Heurto v Canniff, 2014 ABQB 534 at paras 13-15, aff’d 2015 ABCA 316 . [19] Under the delay Rules the functional approach inquires whether the advance in an action moves the lawsuit forward in anessential way considering its nature, value, importance and quality. The genuineness and the timing of the advance in the action are alsorelevant. This analysis is undertaken in the context of the particular lawsuit.

The focus is on substance and effect, not form: St JeanEstate v Edmonton (City), 2014 ABQB 47 at para 19, 585 AR 81. [20] The argument in favour of ruling that a mandatory step must always significantly advance an action is that the litigationcannot advance without that step. However, the question under r 4.33 is whether there has been a significant advance in the action. Wasthe step essential to the resolution of the action? In many instances, the mandated step will not only advance, but will significantlyadvance, the action.

For example, a statement of defence will normally significantly or substantially advance an action because itnarrows the issues and enables the plaintiff to know the case it must meet. But not every mandated formalistic step will always meet thefunctional test. [28] Rowbotham JA concluded on this point as follows: [23] Rule 4.33 cases that have considered a particular advance in an action will be useful precedents, but they are notdeterminative. Each piece of litigation is unique and the content, value, and timing of the advance in the action said to “reset the clock”

must be assessed within the context of that lawsuit. This is the heart of the functional approach. [24] The chambers judge acknowledged the “sea change” in approach and adopted the functional approach when he concluded that a mandatory step under the Rules does not always “significantly” advance an action. Analysis [ 29 ] The Master’s reliance on the “mandatory step” analysis in Morasch was in error. This approach has now been explicitly overruled by the Court of Appeal in Ro-Dar and Ursa .

As a result, the issues identified in this appeal are no longer relevant, because they relate to a required or mandatory step analysis, which the two recent binding appellate decisions make clear, is no longer the correct law. [ 30 ] The Master, contrary to the suggestion of the Respondent, acknowledged on a functional approach, “[t]he order lifting the stay did not advance the action at all in a functional sense; it simply removed an obstacle placed there by the plaintiff’s death” (Transcript, p. 39, lines 16-17). [ 31 ] In making this determination, however, it is necessary to consider the “content, value and timing” of the action to determine whether it “significantly advanced” the action ( Ursa , at paras. 23-24). [ 32 ] Prior to the lifting of the stay on September 9, 2014, nearly two years and ten months had elapsed since the Statement of Defence was filed on November 29, 2014.

Even once the Ex Parte Order lifting the stay had been granted, nothing was done for the next eight months prior to the filing of the Appellants’ application for dismissal for long delay on July 16, 2015. [ 33 ] I adopt the comments of Mahoney J that the burden of a stale action should be borne by the assignee where the original litigant allowed a claim to sit dormant for a prolonged period of time. While the circumstances of the plaintiff’s death are unfortunate, the reasons for the further delay after John Stackard’s death are irrelevant.

Rule 4.33 is mandatory (see, paras. 51-52). [ 34 ] The stay of proceedings protected the estate from potential mischief created by the death of the Plaintiff and was only required to be lifted if the estate wished to proceed with litigation. That the estate did not proceed with litigation for over eight months once the Ex Parte Order was granted further satisfies me that the order did little, if anything, to functionally advance the litigation.

While it is not necessary to do so, I further find the failure to serve the Defendant with the Ex Parte Order also meant that the lifting of the stay did not functionally advance the action since the Defendants had no knowledge of the estate’s intention to continue the action. [ 35 ] Considering what transpired between November 29, 2011 and July 15, 2015 as a whole, I find the order lifting the stay in the context of the action as a whole did not significantly advance the action towards resolution. Conclusion [ 36 ] The total delay in this action without a significant advance is over three years and seven months.

This exceeds the three year limit for the “drop dead” rule. As a result this appeal is granted and the Plaintiff’s action is dismissed under Rule 4.33 by reason of long delay. [ 37 ] The parties are granted leave obtain a date to speak to costs, provided the date secured is prior to October 7, 2016. Heard on the 13 th day of April, 2016. Dated at the City of Calgary, Alberta this 27 th day of June, 2016. M.R. Bast J.C.Q.B.A. Appearances: Brent L. Robinson for the Appellants

James A. Smith and Charles Osuji for the Respondents