Middleton Energy Management Ltd v TransCanada Pipelines Limited, 2017 ABQB 669

Court of Queen’s Bench of Alberta Citation: Middleton Energy Management Ltd v TransCanada Pipelines Limited, 2017 ABQB 669 Date: 20171103 Docket: 0401 16013 Registry: Calgary Between: Middleton Energy Management Ltd. Plaintiff - and - TransCanada Pipelines Limited Defendant _______________________________________________________ Memorandum of Decision of A. R. Robertson , Q.C., Master in Chambers _______________________________________________________ Introduction [ 1 ] TransCanada Pipelines Limited applied in morning chambers to have this claim dismissed for long delay pursuant to rule 4.31.

TransCanada argues that the delay speaks for itself. It argues that the delay is inordinate and inexcusable, and that triggers the presumption of significant prejudice. Nonetheless, it tenders evidence of prejudice. [ 2 ] The plaintiff, Middleton Energy Management Ltd., argues that the delay is not inordinate, although significant, and it is not inexcusable. Middleton argues that TransCanada cannot rely on the presumption of prejudice. [ 3 ] But TransCanada argues that it has tendered actual evidence of prejudice, and that has been probed.

It argues that there is some evidence of prejudice and it was open to examination, but the presumption of significant prejudice has not been rebutted. [ 4 ] Middleton provided no evidence in reply to the application.

[5] I have concluded that the presumption of prejudice applies, it has not been rebutted, and the claim must be dismissed. Background [6] The foundational rules set out an expectation of the timely and cost-effective resolution of disputes: Steparyk v Alberta,2014 ABQB 367 at para. 34. The “delay and prejudice” rule, Rule 4.31, involves a review of the entire progress of the action from itscommencement to the date the application was brought: Steparyk at para. 30. [7] The claim relates to an application to assign a contract for capacity on TransCanada’s mainline from Enron to Middleton, inthe fall of 2002.

The claim is for $33,000,000 and $100,000 in punitive damages. [8] One might expect a plaintiff with a claim in excess of $33,000,000 would move it forward with some dispatch, but that hasnot happened here. [9] The statement of claim was issued in 2004, shortly before the expiry of the limitation period. It was not served for almostone year, or shortly before it would have expired for non-service.

When it was served, counsel for Middleton specifically toldTransCanada that a defence was not necessary at that time. [10] Part of the delay in that time frame is, I am told, because the corporate representative for Middleton was quite ill for about 18months. However, that was in the fall of 2006 and following. That does not address much of the time that has passed. [11] Almost 4 ½ years passed before a defence was called for, and once the defence was filed (within the requested time), theplaintiff did not provide its affidavit of records for almost 3 ½ years.

By this time it was September, 2012, or about 10 years after theevents that gave rise to the claim. [12] When the plaintiff called on TransCanada to provide its affidavit of records, it took approximately one year – it was providedin September, 2013.

However, by that time the lawsuit was already nine years old; it had been about eight years since the claim hadbeen served. [13] Questioning of TransCanada’s corporate representative took place October 7, 2014 and questioning of Middleton’srepresentative took place on November 5 and 6, 2014. [14] TransCanada delivered its undertaking responses from the questioning on March 5, 2015.

Middleton delivered its undertakingresponses – from the questioning in October, 2014 – on January 20, 2016, about one year and three months after the undertakings weregiven. [15] I am told that Middleton provided an expert report on damages in April of 2016. One explanation given for the delay is thatdamages were not easily capable of assessment when the lawsuit began, but counsel advises that this was no longer an excuse after 2007,and still no report was provided until 2016. [16] Earlier this year, in February, TransCanada applied to claw back some inadvertently-disclosed privileged documents.

Aconsent order was granted March 14, and an amended affidavit of records was served June 15, 2017. That did not move the case forwardor otherwise involve any decision on the merits. Factors for Consideration [17] Guidance in this area is given by Humphreys v Trebilcock, 2017 ABCA 116 . [18] Memories of the events are now 15 years old. TransCanada’s previous corporate representative retired in 2016. He assertsthat he has little independent memory of the events. Middleton argues that the evidence on this point is inadmissible, because it violatesrule 13.18(3).

This application is for an order that may dispose of the action, and the evidence of the previous corporate representative’swaning memory is relayed by the current corporate representative. Hearsay is not admissible in support of an application for final relief. [19] However, here the presumption is that there is prejudice. The deponent is simply reporting on the state of the evidencegenerally and anticipating an obvious undertaking – to ask the former corporate representative what the state of his memory is.

TransCanada finds itself trying to prove a kind of negative – that the memory of witnesses, not surprisingly, is poor 15 years after thefact. That is why there is a presumption of prejudice. If we ignore this part of the affidavit we are left with the presumption of prejudice. [20] TransCanada says that only two of 11 potential witnesses are current employees. [21] TransCanada asserts that there are significant documentary deficiencies on Middleton’s behalf because of a hard drive failurethat occurred at some point.

In pre-trial questioning on November 4, 2015, the representative for Middleton was asked about emails,spreadsheets “things like that”, and he said that some of those were lost due to a hard drive failure. He could not testify when that was,just that it happened and, “We lost a lot of data”. In argument, Middleton’s counsel said it was prior to 2005, but after thecommencement of the lawsuit. The only documentary evidence that Middleton has is apparently what was printed. [22] If the application to dismiss is not successful, Middleton asks for a litigation plan.

TransCanada has resisted the litigationplan, but in oral argument it was made clear that TransCanada has no difficulty with the concept in principle, but it did not consider thatit was appropriate to make any agreement while applying to have the claim dismissed. If it is not dismissed, counsel expects they couldagree upon a litigation plan. [23] TransCanada asserts prejudice resulting from the delay in that it is continually required to disclose the existence of this long-standing claim to its auditors as well as in the course of debt offerings or other corporate transactions.

Also, it asserts that the individualswho are now involved in defending the matter, including the current corporate representative, who is the Vice-President, Risk

Management, are in senior managerial and executive positions and “pulling” [them] away from their regular duties to reconstruct eventsthat took place 15 years ago amounts to a seriously inefficient use of company resources.” [24] In-house counsel for TransCanada – the defendant - tried in 2009 and again in 2010 to move the matter forward.

Counsel forMiddleton responded generally favourably, but nonetheless the email string reflecting their communications about moving forwardextends from September 18, 2009 to February 8, 2011. [25] In cross-examination on his affidavit provided in support of this application, TransCanada’s new corporate officer was notable to testify about what steps were taken to preserve relevant and material documents or information. He was not able to testify aboutany steps taken to locate the witnesses who no longer work for TransCanada.

Other questions were asked in an apparent effort to showthat TransCanada could have done a better job of preserving evidence, had it known at the outset that this lawsuit was still going to bedrifting towards trial 13 years later, 15 years after the events that gave rise to the dispute. [26] Middleton has chosen not to provide any evidence of its own. It relies only on the evidence put forward by TransCanada. Wehave no knowledge of the state of preservation by Middleton of its evidence except what was admitted in pre-trial questioning.

We onlyknow that there was a computer failure, “a lot of data” was lost, and records not printed are no longer available. Relevant emails mighthave been sent and received, not preserved, and if so they are now gone. Middleton’s representative did not know when that happened.

Counsel said it was before 2005. [27] Of course, it is a reasonable assumption that any memory of an email that might have been sent or received is long goneunless it was printed and preserved that way. [28] There is no argument that this is primarily a “documents” case, and the evidence and arguments suggest that oral testimonywill be important. As counsel for TransCanada points out, 15 years ago emails were much less common and more communication wasdone by telephone. Memories are important. [29] There is no evidence as to what Middleton has done to preserve evidence.

No argument was made about what importantevidence was preserved by conducting the questioning 10 years after the claim was filed. [30] The questions put to TransCanada’s representative and implicit submission contained therein that TransCanada could havepreserved its evidence does not take into account the reality that even when a party preserves its own evidence with memos to file or tocounsel, solicitors’ interviews with witnesses, and the preservation of critical records, it does not preserve memories that might be probedby cross-examination at trial. [31] Cross-examination questions tend to be about topics or details that are not supportive of the facts as presented by the witnessin direct examination, on topics that perhaps have not been chronicled by the witness in a memo made at the time, or a witness interviewconducted by counsel.

Memories are important not only to present a witness’ recollection of the facts, but to allow proper challenges tothe witness’ evidence. TransCanada’s ability to challenge a Middleton witness is compromised by memories fading with time. So isMiddleton’s vis-a-vis TransCanada’s witnesses. [32] Counsel for Middleton referred to Primewest Energy Inc v Texacana Turbines Inc, 2016 ABQB 715, where the Court foundthat general comments about lack of memory and the failure of that memory to be refreshed when documents were reviewed wereinsufficient to show prejudice.

However, comments by the Court at paragraphs 181 and 187 about the “extensive documentation” thathad been produced make it clear that the Court saw the case as a “documents case”, where memory lapses are less significant. [33] Of significance is that the Court considered the presumption of prejudice set out in rule 4.31(2) in the context of third partyproceedings - where the third party claim had to be considered in the context of the litigation as a whole, and the third party claimantaccordingly did not have control over the pace of the litigation generally.

She did not find the delay to have been inordinate andinexcusable, so the presumption did not apply and the burden to show prejudice remained with the applicant (the third party). [34] Concerns about litigation delay and the view of both the courts and Rules Committee have been expressed, repeatedly, for avery long time. [35] In 1987 the Court of Appeal addressed delay, yet again, while the limitation period generally was still six years, and not twoas it is now, and cautioned the bar and litigants generally about delay in Lethbridge Motors Co Ltd v American Motors (Canada) Ltd,1987 ABCA 150 : In 1978 the Court gave warning that after January, 1979 a sterner attitude would be adopted in these cases.

Chief Justice McGillivrayissued a practice note which stated: “While the Court has in the past shown a reluctance to deprive a litigant of a cause of action by reason of delay, it must be consideredthat the over-all harm to the practice generally, and to other parties, must not be lost sight of.

The Court feels obliged to notify the profession that after the 1st of January, 1979, while the court will still continue to exercise adiscretion to extend time, the discretion will be exercised more sparingly, and the matter looked at more strictly than has been thedeveloping practice.” The practical effect of this warning is difficult to measure. Prejudice to defendants caused by dilatory plaintiffs will be judged morestrictly against the plaintiffs than in the past. The fundamental rule, however, was not changed.

It is still necessary for a defendant toshow serious prejudice before the Court will exercise its jurisdiction to strike out an action for want of prosecution. In the variety ofcircumstances which may arise, a more specific rule is not possible. I wish to mention, for the purpose of dismissing it, one point made by the Plaintiffs. That is the statement by Mr. Vandenbrink in hisaffidavit that part of the reason for the delay was the failure of the defendants “to spur the action on”. In my view it is for the Plaintiff to

keep his action moving; he cannot pass the blame to the defendant for delay of this kind. I adopt the statement of Salmon L.J. inFitzpatrick v. Batger & Co, [1967] 2 All E.R. 657 at 659: “[The defendants] no doubt, however, were relying on the maxim that it is wise to let sleeping dogs lie.

They had good reason to supposethat a dog which had remained unconscious for such long periods as this one, if left alone, might well die a natural death at no expense tothemselves; whereas if they were to take out a summons to dismiss the action, they would merely be waking the dog up for the purposeof killing it at great expense which they would have no chance of recovering.

I am not surprised that they did not apply earlier, and I donot think that the plaintiff’s advisers should be allowed to derive any advantage from that fact.” [36] Furthermore, what are now rules 4.31 and 4.33 was the subject of a few amendments, both prior to 2010 (when the currentRules of Court were introduced) and afterwards. [37] Lengthy delay in the prosecution of an action is unacceptable. The Court of Appeal has being saying that since at least 1978,as quoted above.

Over the years, the rules have been tightened both by the legislature and in the Rules in a variety of ways: thelimitation for suing has been generally shortened; the specific minimum expectation for moving cases forward has been shortened; andthe introduction of the presumption that delay has caused prejudice.

With the passage of time we see fading memories, lost records, andchanging counsel (let alone losing track of witnesses) – all of which are factors here. [38] It is not an option for one sophisticated party unilaterally to simply keep a claim alive by taking occasional steps forward untilit finds it convenient to move it to trial.

It brings the administration of justice into disrepute by the lengthy delay alone, but also theeventual decision will be hampered by faint memories of witnesses who no longer remember or, when they have long retired or resigned,no longer have the same interest in assisting in the assembly of evidence. And when a witness is cross-examined on a detail that he orshe has not thought about for 13 or more years, the reply will at least be uncertain or otherwise subject to some doubt, through no fault ofthe witness or the party presenting the witness. [39] As commented by Laycraft J.A. in Costigan v.

Ruzicka, 1984 ABCA 234 , 13 D.L.R. (4th) 368 (C.A. 1984): Every trial judge is aware that stale claims with stale testimony produce bad trials and poor decisions. [40] Master Schlosser has suggested a 10 year “best before date” or “shelf life” for testimony, in Regco Petroleums Ltd v GerlingCanada Insurance Company, 2014 ABQB 459 at para. 43: To the extent that testimony is required, the evidence is bound to be stale. Its shelf-life has expired and we are beyond the ‘best beforedate’ suggested by the ten year cap in the Limitations Act. (Mintage Financial Corporation v.

Altenhofen, 2013 ABQB 486 ,at para 37 et seq.) [41] If the parties to a dispute collectively hold the view that prosecution should be put on hold for some reason – to allowdamages to be properly capable of assessment, or to await an expected decision of the Supreme Court of Canada on some critical point,as examples – they are open to making a standstill agreement.

If they do not agree, then one party can ask the court for one: rule4.33(9). [42] I do not rely on the assertion that having to explain the claim to TransCanada’s auditors is a serious form of prejudice,although Humphreys makes it clear that non-litigation prejudice may be the “prejudice” that results in dismissal of the action. Nor do Iplace much weight on the assertion that executives must be drawn away from their responsibilities to defend the case.

No doubt the timerequired to defend grows each year as witnesses leave and memories fade, but it is always a nuisance to have to defend a lawsuit. [43] Humphreys makes it clear that once delay is shown to be inordinate and inexcusable, the plaintiff has the burden to displacethe presumption of prejudice. Here, the delay almost completely lies at the feet of the plaintiff. The delay contributed to by thedefendant was a matter of many months, since it took about a year to deliver an affidavit of records when it had two months to provideit.

However, it appears to have been the defendant that tried to spur the matter on, although it had no obligation to do so: LethbridgeMotors. Conclusion [44] A 13 year delay in prosecution is inordinate, in the absence of some good reason taking into account such as the complexityof the matter; the number of parties; the proceedings that have been taken along the way; whether there have been long periods ofinactivity for good reason; and whether the delay has substantially been caused by a defendant who has obstructed the progress. Thereare only two parties here.

Little has happened in 13 years. [45] Humphreys indicates that the Court should consider the case relative to how long it generally takes other similar cases toproceed.

No case should normally take 13 years to get it to the point of being close to delivering a Form 37 to set it down for trial. [46] The delay here is inordinate. [47] Where there has been little effort by the plaintiff to move it forward, and no good reason for the delay, or at least most of it, itis inexcusable. [48] Accordingly, the presumption applies, and there is some evidence of prejudice by the evidence of failing memories and thecomputer failure at Middleton’s end.

In my view, the presumption has not been rebutted. [49] There is also discretion embedded in rule 4.31 to allow a claim to proceed even if the delay has resulted in prejudice, but I seeno reason to exercise that discretion in favour of the plaintiff.

Heard on the 22 nd day of September, 2017. Dated at the City of Calgary, Alberta this 2 nd day of November, 2017. A. R. Robertson, Q.C., M.C.C.Q.B.A. Appearances: Claire Himsl TransCanada Pipelines Limited for the Appellant (Defendant) Spencer Chimuk Burstall Winger Zammit LLP for the Respondent (Plaintiff)