Humphreys v Hanne, 2016 ABQB 579

Court of Queen’s Bench of Alberta Citation: Humphreys v Hanne, 2016 ABQB 579 Date: 20161014 Docket: 0603 15792 Registry: Edmonton Between: V. Lorne Humphreys and Brodlor Foods Inc. Plaintiffs - and - Sebastian Hanne, Juergen Hanne, Ralph Walker, Barry Trebilcock, Casual Food Concepts Inc., All In Good Taste Inc., Calgary Ventures Inc., Contura Consulting Ltd., Bauland Inc.

Lux Real Investments Ltd., Troyvest Estates Ltd., ABC Corporation #1 Ltd., ABC Corporation #2 Ltd., ABC Corporation #3 Ltd., ABC Corporation #4 Ltd., ABC Corporation #5 Ltd., John Doe #1, John Doe #2, John Doe #3, Jane Doe #1, Jane Doe #2, Jane Doe #3 Defendants _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice P.B. Michalyshyn _______________________________________________________ Introduction [ 1 ] This is an application to strike the plaintiffs’ claim under Rule 4.31 on the basis of delay and alleged prejudice.

For reasons which follow, the application is dismissed. Background [ 2 ] The matter in question has been ongoing since 2006, and was referred to case management in September 2011. The plaintiffs’ delays appeared to begin after the departure of their initial counsel, for reasons quite beyond their control, in October 2012. It was not until September 2013 that new counsel gave notice of their representation of the plaintiffs. The plaintiff Lorne Humphries now

says in his affidavit sworn June 8, 2016 that since late 2012 the plaintiffs have struggled to obtain continuous representation of counsel. Humphries says that the plaintiffs “grew dissatisfied with the lack of continuity and sought out new counsel towards the end of 2015”. The plaintiffs’ current counsel was retained on January 1, 2016. A notice of change of representation was filed three months later, on March 30, 2016.

It took until April 2016 for the plaintiffs’ complete file to be transferred from the previous law firm to the solicitors currently on record. [ 3 ] On March 19, 2015, a case management order was made which obliged the parties to complete certain steps, after which the case was to be set for trial.

The March 19, 2015 order came after an application, filed on February 25, 2015 by the plaintiffs’ former counsel, seeking a procedural order to move the action toward trial. [ 4 ] Of particular importance to the motions now before me, I ordered that all parties were to complete their questionings on or before September 30, 2015. To date, none of the parties have complied with that order. However, the defendant Barry Trebilcock did write to then-plaintiffs’ counsel four times, all before the September 30, 2015 deadline, requesting that they make their corporate representatives available for questioning.

Then-plaintiffs’ counsel (not the counsel now on the record) did not respond to these requests. [ 5 ] Given that the parties did not comply with the September 30, 2015 deadline, subsequent deadlines set in the March 19, 2015 order were also not met. [ 6 ] At a case management meeting on June 29 th , 2016, the defendants applied under r 4.31 of the Alberta Rules of Court to dismiss the plaintiffs’ claim for delay. [ 7 ] In support of the applications, the defendant Trebilcock deposed to actual prejudice in the following terms, at para 7 of his June 16, 2016 affidavit: I verily believe that I am seriously prejudiced by the fact that this matter has not proceeded to trial, and is currently not set for trial.

I am in the agricultural research business and have been in this business for over 20 years.

The within law suit impacts my ability to apply for government grants for research and development related to agriculture, and it is affecting my employment opportunities, as its disclosure impacts my financial stability. [ 8 ] Trebilcock says further, at para 8, that his various defences to the plaintiffs’ action “will be more difficult for me to address” owing to the delay. [ 9 ] The defendant Sebastian Hanne deposed, in his affidavit of June 17, 2016, that he was questioned by plaintiffs’ counsel on May 8, 2015, and Juergen Hanne was questioned on July 9, 2015.

However, further correspondence from his counsel to the plaintiffs’ counsel relating to the March 19, 2015 case management order went unanswered. To the point, and without objection, emails of August 20, and September 2 and 14, 2015 were produced. [ 10 ] As to actual prejudice, Sebastian Hanne makes a number of claims in his June 17, 2016 affidavit, at paras 6 to 11. I will deal with them in what follows. [ 11 ] The plaintiffs saw fit not to respond to any of the allegations of actual prejudice, either by way of examination on the Trebilcock and Hanne affidavits, or by any affidavit in response.

Analysis [ 12 ] The Rules in question are as follows: Application to deal with delay 4.31

(1) If delay occurs in an action, on application the Court may (

a) dismiss all or any part of a claim if the Court determines that the delay has resulted in significant prejudice to a party, or (

b) make a procedural order or any other order provided for by these rules.

(2) Where, in determining an application under this rule, the Court finds that the delay in an action is inordinate and inexcusable, that delay is presumed to have resulted in significant prejudice to the party that brought the application.

AR 124/2010 s 4.31; 140/2013 [ 13 ] For reasons which follow, I am not persuaded that the allegations of actual prejudice satisfy the test of significant prejudice under Rule 4.31(1). [ 14 ] Nor am I persuaded that in all of the circumstances of this case, the delay in the action as a whole has been inordinate and inexcusable, such that under Rule 4.31(2) delay would be presumed to have resulted in significant prejudice to the defendants. Actual prejudice [ 15 ] As to the evidence of actual prejudice, I find that Trebilcock’s evidence as set out above is general in nature, not backed up by meaningful details.

[ 16 ] Sebastian Hanne makes a number of similarly vague allegations, but also brings more specific allegations of actual prejudice, including that certain individuals are deceased since 2008/09, or their whereabouts unknown, or are of advanced age. [ 17 ] As to the deceased individuals, it is relevant that the deaths occurred very soon after the proceedings commenced, and so are of limited relevance to a delay application brought in 2016.

What’s more, these deceased witnesses are to have had “substantial interaction with the plaintiffs in regard to the subject matter of this litigation”; one of them “prepared most of the agreements, resolutions, and minutes which are the subject of this litigation”. Without more, I do not find that such evidence supports the conclusion that the defendants are significantly prejudiced by the unavailability of these witnesses. [ 18 ] A number of further individuals are identified as having been executive assistants or corporate secretaries and “dealt with the subject matter of this litigation”.

Hanne deposes that the whereabouts of these witnesses are unknown. Again, without more, I do not find that such evidence supports the conclusion that the defendants are significantly prejudiced by the apparent unavailability of these witnesses. [ 19 ] Finally, Hanne says that the defendant Juergen Hanne and potential witness David Crombie are of advanced age.

Without more, I do not find that such evidence supports the conclusion that the defendants are significantly prejudiced by the age of the co- defendant and potential witness. [ 20 ] With regard to records, Hanne alleges that with the passage of time physical evidence has been lost, including that the defendant All in Good Taste (“AIGT”), in 2008, “misplaced …documentary evidence of [the plaintiff] Humphrey’s misappropriation of funds”. He says further that in 2009/10 certain archived computer-based data was lost.

Finally, he says that most of the corporate defendants’ original banking records, now past their 10-year archival period, are now or soon will be “inaccessible”. [ 21 ] The action was commenced by Statement of Claim issued December 14, 2006, and defended on February 6, 2007. Affidavits of records, under the Rules of Court as they then were, were filed in May 2007. Lengthy and detailed affidavits were filed by the parties in relation to applications for security for costs and/or

summary judgment against the plaintiffs. [ 22 ] The parties then having identified and/or produced relevant and material records, and having geared up for substantive applications as noted, it is hard to accept without more Hanne’s allegation now that records have been lost or will be inaccessible.

Or that records allegedly lost in 2008 or 2009/10 are relevant to a delay application brought in 2016. [ 23 ] Although stated in the 2017 Alberta Civil Procedure Handbook and thus in relation to the current Rules of Court , the following general admonition loses none of its force in the context of an action commenced under the former Rules : Each party is required to reveal under oath all the relevant and material records in its possession. The party’s solicitor has personal duties and liabilities here.

He or she must inform his or her client at once when the Rules create a duty to produce, and explain fully the nature and importance of the process involved… (Stevenson & Côté, Alberta Civil Procedure Handbook , vol 1 (Edmonton: Juriliber, 2017) at 5-14 [ Civil Procedure Handbook ]). [ 24 ] In this case, there is little reason to doubt that the parties and their then-counsel complied with their obligations under the former Rules by preparing, swearing and then filing affidavits of records as already noted. [ 25 ] In any event, what’s lacking here is evidence that satisfies the test articulated in the Civil Procedure Handbook at 4-59, that: The party moving to dismiss an action to want of prosecution should specify the type of prejudice suffered, and should give some particulars as to any steps taken to relieve that prejudice.

For example, it is not sufficient just to depose that a witness seems to be missing; it is necessary to outline the steps that were taken in attempting to locate the witness. It is also necessary to prove that the prejudice was caused by the delay, and not by some collateral factor. [ 26 ] In conclusion to this part, I find that the evidence placed before me fails to demonstrate significant prejudice. Rule 4.31(1) does not assist the applicants.

Presumed prejudice [ 27 ] As to prima facie prejudice (or presumptive prejudice: rule 4.31(2)) based on inordinate, inexcusable delay, the applicant Trebilcock cites Steparyk v Alberta, 2014 ABQB 367 , 57 CPC (7th) 359, aff’d 2015 ABCA 125 , 71 CPC (7th) 281 and Regco Petroleums Ltd v Gerling Canada Insurance Company, 2014 ABQB 459 , 591 AR 173.

But such inordinate, inexcusable delay must be ‘demonstrated’, and the whole of the action must be addressed: Steparyk at para 30; Regco at para 22. [ 28 ] Here, while counsel for Trebilcock agrees that I need to look at the whole of the action, Trebilcock’s brief affidavit fails to address the whole of the action, except in the most general terms. It revisits Trebilcock’s complaint that nothing in the litigation has involved him for a long time (a complaint considered at Humphries v Hanne , 2015 ABQB 143 , 71 CPC (7th) 102).

It mentions the plaintiffs’ delays in relation to the March 19, 2016 case management order. But as noted again by the court in Steparyk at para 30, “the analysis of the delay under Rule 4.31 is broader than merely a review of the last litigation activities”. [ 29 ] In conclusion to this part, I find that the evidence placed before me fails to demonstrate inordinate, excusable delay. Rule 4.31(2) does not assist the applicants. Further issues raised in the application [ 30 ] A number of issues arose during argument. Those issues are dealt with in what follows.

Do the defendants have a positive obligation to move the action along? [31] The foundational principles set out in r 1.2 of the Alberta Rules of Court emphasize efficient and cost-effective resolution ofclaims. Similarly, r 4.1 states that “the parties are responsible for managing their dispute and for planning its resolution in a timely andcost-effective way.” Rule 4.2 sets out specific obligations of the parties, including the requirement “to respond in a substantive way andwithin a reasonable time to any proposal for the conduct of the action.” [32] (The plaintiff referred to r 4.2(

c) dealing with complex cases and the obligation on the parties in a complex case to meet oradjust dates in a timely way in a complex case litigation plan. Be that as it may, as we were reminded in argument, this is clearly not acomplex case, and r 4.2(

c) is not in play.) [33] Generally, the plaintiff has responsibility for moving the action forward (Civil Procedure Handbook at 4-54). In LethbridgeMotors Co Ltd v American Motors (Canada) Ltd (1990), 1987 ABCA 150 , 79 AR 321 para 19, 40 DLR (4th) (CA), LaycraftJA found that the defendants’ failure “to spur the action on” was not relevant to a delay application. The Court commented that “it is forthe Plaintiff to keep his action moving; he cannot pass the blame to the defendant for delay of this kind” (para 19). This principle is nowwell-established in the case law: see e.g.

Brentech Services v Sunray Manufacturing, 2008 ABQB 301 at paras 14-15, 445 AR 278;Nelson v Emsland, 2007 ABQB 571 at para 34, 427 AR 262, aff’d 2008 ABCA 387, 440 AR 297. [34] While Laycraft JA’s comments were made in the context of the former delay rule under R. 244(1), the premise that it is theplaintiffs’ responsibility to move the action along remains true today. In Carter v Sears, 2011 ABQB 732 at para 29, 529 AR 394 theCourt of Queen’s Bench considered whether the foundational principles in

Part 1 of the revised Rules of Court altered the onus to movethe matter forward. The plaintiff argued that that the then-new Rules compel “parties to jointly and individually” move a matter ahead;thus, both the defendant and the plaintiff had an obligation to move the matter forward (para 29). The Court rejected this submission.

Hall J held that this was not the intention of the then-new Rules, and that the ultimate responsibility to prosecute and drive a claimforward lies with the party making the claim (para 30). [35] However, defendants should not encourage delay hoping that they will be successful in an application under Rule 4.31 or 4.33(Civil Procedure Handbook at 4-54). In Young v Dei-Baning (

A) Professional Corp (1996), 1996 ABCA 213 , 184 AR 209 atpara 10, 122 WAC 209 the Alberta Court of Appeal commented, “we do not endorse the notion that a defendant should nurture delay,with a view to discouraging diligent prosecution of an action”. A defendant should not be “rewarded for doing nothing...it is incumbenton both parties to attempt to keep the action moving” (para 19). [36] As explained in what follows, I do not interpret Young as generally imposing an onus on the defendant to take positive stepsin an action. The context of the Young decision is significant.

The Court made the above comments in considering the significance ofthe defendant’s application for case management to the delay application. In Young, the defendants applied to dismiss under R. 244(1)after the case management judge had directed that the matter be entered for trial. The Chambers judge denied the delay application.

The judge held that because the defendants had encouraged further case management and the matter was thus ready to proceed to trial,the defendants had acquiesced to the delay. [37] The Court of Appeal found that the Chambers judge had erred in determining that the defendants had acquiesced to the delayby applying for case management, and had also erred in failing to consider potential prejudice in the context of total delay (Young atparas 15, 17). While the Court of Appeal found that there was some prejudice as a result of the time elapsed, there was insufficientprejudice to warrant dismissing the action.

The Court noted that in addition to the delay caused by the plaintiff, the defendants had takena significant amount of time to complete their examinations. As such, the Court of Appeal held that the appropriate remedy was to awardcosts (para 22). [38] The Court of Appeal’s statements in Young regarding an onus on both parties have been interpreted quite narrowly insubsequent decisions. In Riviera Developments Inc v Midd Financial Corp, 2002 ABQB 954, 2002 CarswellAlta 1366, the defendantsapplied for dismissal due to delay, seven years after the proceedings began.

The last statement of defence had been filed five yearsbefore the delay hearing, and the plaintiff had not taken steps to begin examination for discovery, to demand documents, or to file anaffidavit of records. The plaintiffs suggested that the defendants’ failure to bring an application for delay earlier on in the process wasevidence that they acquiesced to the delay, as per the statements at paras 10 and 19 of Young.

Moen J did not accept that the Court ofAppeal “meant that a defendant was required to take steps when the plaintiff was doing nothing...the action is the action of the plaintiffand the primary responsibility for moving the action along is on the plaintiff” (Riviera at para 20). However, Moen J noted that thedefendants do have an obligation to respond to the plaintiffs’ actions in a timely manner. The defendants cannot rely on their own delayif they do not cooperate in the litigation. [39] Other decisions have supported Moen J’s

interpretation of the comments in Young: see e.g. Durnin v Snider, 2011 ABQB383 at para 14, 2011 CarswellAlta 1042; Heikkila v Apex Land Corporation, 2009 ABQB 12 at para 48, 467 AR 302, aff’d 2011 ABCA87, 502 AR 243. [40] It is also important to distinguish between a defendant’s refusal to cooperate in the process and a positive obligation to movethe litigation along. If the defendant refuses to cooperate with the plaintiff, this is a relevant factor to consider in a delay application, andmay negatively impact the defendant’s claim to dismiss for delay: see e.g.

Turek v Oliver, 2014 ABCA 327 at para 6, 13 Alta LR (6th)74; Dressler v Dressler, 2005 ABQB 93, 41 Alta LR (4th) 27; Maligne Lodge v Stuart Olson Construction, 2005 ABQB 451, 2005CarswellAlta 862; Kerr v McDonald & Bychkowski Ltd (CMB Insurance Brokers), 2016 ABQB 40 at para 29, 2016 CarswellAlta 991. [41] Here, neither the plaintiffs nor the defendants complied with the March 19, 2015 order. The defendants did, however, makesome efforts to comply.

As such, I find that their actions do not fall within the category of “non-cooperation”. [42] In sum, neither Young, nor any other authority coming to my attention, support the plaintiffs’ contention that in thecircumstances of this case as brought forward in this application, the defendants had any particular obligation to move the litigationalong. Contrary to the plaintiffs’ submission, in the circumstances brought forward here the defendants were perfectly entitled to be

“recumbent” in the face of the plaintiffs’ delay. Whether that can be said of the defendants’ conduct throughout the history of the action is not something the plaintiffs, on this application, saw fit to argue in any detail. It is the plaintiffs’ argument to make, failing which I can only conclude that on this application at least, the plaintiffs have made no case that the defendants have contributed to delay by failing or refusing appropriately to cooperate.

Does case management affect the delay application analysis? [ 43 ] It was suggested in argument by the plaintiff that successful delay applications are rare in the context of case management. No authority was referred to for that proposition, and none has come to my attention. [ 44 ] There are examples in Alberta case law where delay applications have been successful even though the file was in case management: see e.g.

Young ; Barrett v Barrett (Estate of) , 2002 ABCA 276 , 2002 CarswellAlta 1445; Haymour v Condominium Plan No 802 2845 , 2016 ABQB 393 at paras 5 , 29-49, 2016 CarswellAlta 1328 ; Howe v Joplet Resources Co , 2006 ABQB 772 , 2006 CarswellAlta 1379. [ 45 ] On the whole, there is nothing to indicate that participation in case management alters the approach to a delay application.

The appointment of a case management judge or justice does not relieve parties of their obligation to manage their dispute and plan for resolution “in a timely and cost-effective way as required by Rule 4.1” (Alberta Court of Queen’s Bench, Notice to the Profession and Public, NP #2016-03, June 27, 2016).

Similarly, in Haymour at para 45 , Ross J commented that “case management of an action does not remove the obligations imposed by the Rules of Court and the responsibility of the plaintiff to advance the action”. [ 46 ] Participation in case management may become part of the analysis when determining what substantive steps the parties have taken in an action, and whether the defendants have acquiesced to the delay.

In the context of a long delay application under r 4.33, Martin J (as she then was) considered the appointment of a case management justice and regular case management meetings as some of the “significant advances” in that action ( Vander Griendt v Canvest Capital Management Corp , 2014 ABQB 542 at para 103 , 596 AR 282). However, this is a fact-specific analysis.

For instance, in Barrett (Estate) v Barrett , 2000 ABQB 943 at paras 5-6 , 2000 CarswellAlta 1510 , aff’d 2002 ABCA 276 , 2002 CarswellAlta 1445, the parties had seven case management meetings, but there was no real progress in the litigation, so the court granted an application for dismissal due to delay. [ 47 ] In Young , the Court of Appeal indicated that case management should not necessarily be held against defendants as a sign of acquiescence or waiver: The appointment of a case management judge was prompted by frustration with the delay that had occurred till then.

It was only when it became apparent that process was not achieving the desired result, that the appellants felt compelled to take a different step. Their cooperation in case management should not have negative consequences for them. Rather, any delay on the part of the respondent occurring after the implementation of that process warranted special consideration and censure.

Thus, in our view, the chambers judge erred in concluding that the appellants had waived or acquiesced in the delay (para 15). [ 48 ] In the case at bar, the defendants’ participation in case management appears to be similar to that of the defendants in Young . Despite the March 19, 2015 order that arose from participation in case management, there has not been any substantive progress on the file since then, and the plaintiffs did not fulfil their obligations under the order. As such, the defendants’ participation in case management should not affect their application for dismissal due to delay.

Costs [ 49 ] The applications based on delay do not succeed. The plaintiffs’ application to vary the March 19, 2015 Order obviously succeeds. [ 50 ] This would ordinarily trigger costs in the respondent plaintiffs’ favour. That said, the plaintiffs acknowledge delay. As mentioned at para 15 in Young , delay by a party in case management may warrant special consideration and censure. What’s more, this is not the first delay application. The plaintiff responded to an earlier application, brought December 9, 2014, and decided February 27, 2015 ( Humphries ).

The context was quite different, and the application failed, yet one would reasonably expect the plaintiff respondent to have been chastened by the experience, and to have been motivated to get on with the litigation. In fairness, there was a burst of activity coincidentally two days before the February 27, 2015 reasons were filed.

As noted, then-counsel for the plaintiffs applied on February 25, 2015 and the case management order of March 19, 2015 was made. [ 51 ] These observations aside, the parties of course may speak to costs if they are unable to agree. [ 52 ] The parties are also directed to a further case management conference to revisit the March 19, 2015 Order, litigation planning, and a firm deadline for the entry of a Form 37. Heard on the 29 th day of June, 2016. Dated at the City of Edmonton, Alberta this 14 th day of October, 2016.

P.B. Michalyshyn J.C.Q.B.A. Appearances: Louis Belzil, Q.C. Rackel Belzil LLP for the Plaintiffs Kenneth Slupek Hladun & Company for the Defendants E. Mark Keohane Barrister & Solicitor for the Defendants