John Barlot Architect Ltd v Atrium Square Investments Ltd, 2017 ABQB 749

Court of Queen’s Bench of Alberta Citation: John Barlot Architect Ltd v Atrium Square Investments Ltd, 2017 ABQB 749 Date: 20171206 Docket: 1301 02594 Registry: Calgary Between: John Barlot Architect Ltd. Plaintiff/Respondent - and - Atrium Square Investments Ltd. Defendant/Applicant _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice M.H.

Hollins _______________________________________________________ [ 1 ] The Applicant, Atrium Square Investments Ltd. (“Atrium”) has applied for an Order dismissing the claim of the Plaintiff, John Barlot Architecture Ltd. (“Barlot”) for delay under either Rule 4.33 or 4.31 of the Alberta Rules of Court. In the alternative, if the action survives this application, Atrium asks for an Order requiring Barlot to post security for costs. [ 2 ] The application for dismissal due to delay is denied.

Under Rule 4.33(2), I find that Barlot’s provision of its damages calculation and supporting documentation, which additional records were then included in its Affidavit of Records, were both steps that significantly advanced the action. Under Rule 4.33, although the delay has been both inordinate and inexcusable, Barlot has rebutted the presumption of prejudice arising from that delay. [ 3 ] I say at the outset that Barlot’s pursuit of its claim for damages arising from the termination of its commercial lease has been unsatisfactory.

While I cannot grant the relief sought in terms of dismissal, I am ordering security for costs and will be making a further procedural order with respect to next steps.

Dismissal for Delay [ 4 ] The Rules of Court provide two distinct tests for dismissal for delay. The first is in Rule 4.33, which requires me to dismiss Barlot’s claim if it has not taken a step within 3 years that significantly advances the action. The second is in Rule 4.31, which allows me to dismiss Barlot’s claim if there has been inordinate, inexcusable delay in the action as a whole, which has caused or is assumed to have caused significant prejudice to Atrium.

Rule 4.33 [ 5 ] The parties seem to agree and I find that the three-year period in question – in other words, the period of time in which Atrium contends that nothing significant was done - begins on May 30, 2014. [ 6 ] Barlot had initially commenced its action in the Provincial Court, Civil Division on June 8, 2011. The trial began in that Court in September of 2012 with Barlot presenting its entire case.

However, there was not time to complete the defence case and so the trial was scheduled to continue at a later date. [ 7 ] Between the beginning of the trial and the date scheduled for resumption of the trial, Barlot applied to amend its pleadings to revoke the abandonment of the amount of the claim in excess of the Provincial Court’s then monetary jurisdiction. The Provincial Court Judge granted that application. As the amendment took the claim out of her jurisdiction, she also transferred the action to Queen’s Bench.

Atrium appealed that Order but Justice Jones’ dismissed that appeal on May 30, 2014 (the “Jones’ Order”). [ 8 ] In other words, May 30, 2014 was the date on which the parties knew that the claim was proceeding in its current form and in this Court.

The question is thus whether any steps taken between May 30, 2014 and May 30, 2017 significantly advanced the action. [ 9 ] Barlot points to the following as steps fulfilling that requirement: September 11, 2014 Consent Order granted for the payment out of money July 27, 2015 Parties finalized the Jones’ Order July 26, 2016 Barlot provided a damages calculation to Atrium January 6, 2017 Barlot served its Affidavit of Records [ 10 ] Steps which narrow the issues for trial, define the positions of the parties or identify the evidence upon which they will be relying at trial have all been found to meet the test in Rule 4.33.

The Alberta Court of Appeal in Ursa Ventures Ltd. v. Edmonton (City) 2016 ABCA 135 said: “Under the delay Rules the functional approach inquires whether the advance in an action moves the lawsuit forward in an essential way considering its nature, value, importance and quality. The genuineness and timing of the advance in the action are also relevant.” (para.19) [ 11 ] The fact that a step is required to be taken by the Rules of Court does not automatically mean that it significantly advances the action.

The action taken must be reviewed to determine whether it, in fact, did significantly advance the action ( Ursa Ventures, supra at para.3) Things That Did Not Advance the Action [ 12 ] I find that the first two steps set out above did not significantly advance the action. The Consent Order for the payment out of monies posted as security for the appeal was a mere procedural consequence of the failed appeal.

It was not a step that advanced the action, much less significantly. [ 13 ] The parties were unable to settle the terms of the Jones’ Order until July 27, 2015, likely in part because Barlot retained new counsel during this period. I do not agree that formalizing the terms of an Order given some 10 months earlier was a step that significantly advanced the action. No evidence was offered for the failure to enter the order earlier and Barlot certainly had procedural options available to it to force that issue.

Further, the formal entry of the order was not required before Barlot could take further steps, including scheduling Questioning and finalizing document production. Things that Did Advance the Action [ 14 ] As steps that significantly advanced the action, Barlot also points to the provision of its damages calculation and supporting documentation and its subsequent Affidavit of Records which added these new documents to those relied upon by Barlot at the initial trial.

Atrium says that as Barlot had already presented its case before the Provincial Court Judge, it already knew the case it had to meet and nothing in the provision of the damages calculation or the Barlot Affidavit of Records changed that significantly. [ 15 ] Barlot’s amended Civil Claim, which has not been further amended, claims damages of $75,000 for “office furnishings taken by the Defendant”, “interference with contractual relations” and “destroying the Plaintiff’s files”. The damages quantification presented by Barlot to Atrium in July of 2016 was for approximately $5.6M.

The increase in the quantum of damages appears to be related to

Barlot’s loss of profits claim, arising from his inability to access existing architectural drawings he alleges were improperly seized and disposed of by Atrium. [ 16 ] The damages calculation of July of 2016 was accompanied by some documents which Atrium admits had not been referred to before, specifically financial statements of Barlot for the years 2007 to 2015 and fee schedules from the City of Calgary used by Barlot’s counsel to quantify the loss of profits claim. These documents were new to Atrium. When its officer was cross-examined on these documents, it was clear he was seeing them for the first time.

In fact, he expressed his opinion that these new documents demonstrated that Barlot had not actually suffered any financial losses. [ 17 ] In Ro-Dar Contracting Ltd. v. Verbeek Sand & Gravel Inc. ( 2016 ABCA 321 ), the main issue between the parties was the basis for calculating the plaintiff’s cost of crushing gravel for the defendant. The plaintiff provided some 44 pages of invoice summaries to the defendant and pointed to this as a step that significantly advanced the action.

The Court of Appeal agreed, confirming that where the provision of information is relied upon as a qualifying step, this Court must examine the nature of the documents and their importance to the litigation (para.22). [ 18 ] In Ursa Ventures Ltd , supra , the plaintiffs filed their Affidavit of Records just before the 3-year mark in Rule 4.33.

Although the City argued that the documents produced were already in its possession and therefore known to it, the Judge (upheld on appeal) pointed out that their inclusion within the Affidavit of Records did assist the City to understand the extent of the documentary record that Ursa intended to rely upon at trial. For example, the City was able to proceed to trial knowing that there were no other documents relied upon and no challenges to the authenticity of the City’s documents (paras.28-32). [ 19 ] In Franchuck v.

Schick 2013 ABQB 532 , Master Schultz provided some helpful questions to ask about the effect of providing new information; how important was the information? How much information was provided? Did it facilitate settlement or narrow/define issues? Will it be relied upon at trial? (paras.12-15) [ 20 ] The determination that a record is important, in other words, material and relevant, is not determined by whether the parties themselves agree that it is.

Atrium does not appear to place much stock in Barlot’s ability to turn this from a small claims’ action into a $5.6M lawsuit and therefore dismisses the impact of this disclosure. However, that is not my test. [ 21 ] As a result of the quantification of damages and the provision of documents that the plaintiff says support that claim, Atrium now understands the quantum of the claim that Barlot intends to pursue and the documentary basis upon which it bases that claim, all of which any reasonable party would want before trial.

These documents quantify Barlot’s claim in a way that could precipitate settlement discussions or at least crystallize issues for trial, whether or not Atrium considers the damages claim to be legitimate. [ 22 ] On January 6, 2017, Barlot served its Affidavit of Records on Atrium. The only new records were the documents referenced in these Reasons, above. Thus the provision of these documents, whether informally or in the Affidavit of Records, is functionally the same step; one which I find did significantly advance the Action for the reasons explained above.

Waiver under R.4.33(2)(b) [ 23 ] Was the Defendant’s filing of its Affidavit of Records “participation” as contemplated by Rule 4.33(2)(b)? While this is admittedly obiter as it is not required for my decision under Rule 4.33, I would not have found Atrium’s filing of its own Affidavit of Records to constitute waiver of delay. [ 24 ] First, we do not want to encourage moving parties to further delay matters by failing to comply with their own deadlines under the Rules. Second, the cases make it clear that the harm that Rule 4.33(2)(

b) seeks to address is where a defendant “lulls” a plaintiff into believing that it has waived any delay by taking steps of its own (see Forest Resource Improvement Association of Alberta v. Moore 2015 ABQB 588 at para.38). Here, Atrium’s counsel made it expressly known in April of 2017, shortly after service of Defendants’ AOR and before agreeing to any Questioning dates, that his instructions were to apply to dismiss for delay. I would therefore not have found this to be a waiver under R.433(2)(

b) if that were an issue. Rule 4.31 [ 25 ] Under Rule 4.31, I am able, although not required, to dismiss Barlot’s claim if its delay has resulted in significant prejudice to Atrium. To assist, significant prejudice is assumed to result if the delay has been inordinate and inexcusable. The Court of Appeal sets out the questions to be asked as follows: 1. Has Barlot failed to advance the action in a reasonable time frame? 2. Is the delay inordinate? 3. If inordinate, does Barlot have an acceptable excuse for the delay? 4. If the delay is inordinate and inexcusable, has Atrium demonstrated significant prejudice? 5.

If Atrium relies on the presumption of significant prejudice has that been rebutted? 6. If there any compelling reason not to dismiss the action, if all other factors weigh in favour of doing so? I have combined some of these arms of the test as indicated in the headings used below.

Inordinate Delay [ 26 ] Inordinate delay is delay which is in excess of what is reasonable having regard to the nature of the issues in the action and the circumstances of the case ( Steparyk v. Alberta 2014 ABQB 367 affirmed 2015 ABCA 125 ). One approach is to compare the actual timeline in question to that of a reasonably-paced lawsuit of the same complexity ( Humphreys v Hanne , also cited as Humphreys v. Trebilcock 2017 ABCA 116 at paras. 150-156 ). [ 27 ] There is a growing trend, at least in Masters Chambers (see ML Bruce Holdings Ltd. v.

Ceco Developments Ltd, 2015 MC at para.38) to say that a starting point to assess inordinate delay could be where an action is 10 years or more from its commencement to the eve of trial. This seems a reasonable rule of thumb but one that must necessarily be considered within the factual circumstances of each case. For example, many lawsuits are simply too complex or involve parties with particular or unique challenges to be able to reach trial within 10 years.

Nor can one ignore the institutional delays in our own courts with which parties must sometimes contend. [ 28 ] I must assess the overall pace of this lawsuit in the context of its claims, its complexity and its history. This case involves damages alleged to have arisen from the termination of a commercial tenancy, whether by abandonment or eviction. Barlot insists that certain valuable items were left in the premises in the possession of the landlord. Atrium insists that nothing of value was left and that, in any event, it was acting within its rights.

This action is not an overly-complicated or document intensive matter and much of the fact- finding required at trial will depend on the viva voce testimony of the principal witnesses. [ 29 ] I find the delay in Barlot’s pursuit of his action to be unreasonable, particularly its pace since the transfer of the action to this Court in May of 2014. In 3½ years, Barlot has quantified its damages and not done much else.

While that was sufficient, in my view, to avoid the application of the “drop dead” Rule in 4.33, it is not sufficient for the broader and more general review of the action mandated under Rule 4.31. [ 30 ] Quantifying damages does not exclude the ability to proceed to document production or Questioning.

Since the provision of that information in July of 2015, over two years ago, the plaintiff has not pushed the defendant to Questioning, which would have been the next logical step. [ 31 ] Over six years into this litigation, the parties have yet to retain experts and commission expert reports, to complete any Questioning on undertaking responses, if any, and to

schedule the trial. There does not appear to be a plethora of witnesses or documents or particularly difficult legal issues to explain the near imperceptible progress here. This is particularly unacceptable when the trial is conceptually half conducted. Once transferred to this Court, one would have expected the plaintiff to take advantage of the momentum and move quickly after May of 2014. Instead, it all but stopped moving. Inexcusable Delay [ 32 ] Is the delay inexcusable? There are cases (for example, Forest Resource, supra at para 49) that say that any inordinate delay must also automatically be inexcusable.

However, that does not follow logically in my view. Inordinate delay is a temporal measure of what is reasonable or unreasonable but inordinate delay may still be excusable. [ 33 ] With respect, the idea that inordinate delay must automatically be inexcusable offends the basic principles of statutory

interpretation, which require meaning to be given to all words if possible. Lastly, the Rule says the delay must be both inordinate and excusable, using the conjunctive.

Both logic and construction suggest that examining whether or not the delay is excusable is a separate part of the Rule 4.31 analysis. [ 34 ] However, once the delay is found to be inordinate, the burden of proving it is nonetheless excusable can and should shift to the non-moving party, here the plaintiff ( ML Bruce Holdings, supra at para. 47). [ 35 ] Barlot points to the fact that it retained new counsel as an excuse for the delay from May of 2014 to July of 2015. I cannot agree that retaining new counsel amounts to a legal excuse for doing nothing to advance a lawsuit.

While change of counsel may be a fact to explore in determining whether inordinate delay can be excused, it appears to be a relatively high bar (see Humphreys v Hanne , supra at paras.170-174). [ 36 ] Mr. Barlot’s Affidavit simply outlined the steps taken by Barlot’s new counsel once retained, without any further explanation of why things were delayed or how switching law firms excused the delay. Generally, the plaintiff itself must bear the consequences of its choices and bear the ultimate responsibility to pursue its claim.

If new counsel is retained, they take the lawsuit “as is” and if there has already been significant delay, as here, counsel must be alive to the elevated need to move things forward. [ 37 ] Further, while I am sympathetic to Barlot’s argument that matters were delayed by a third party document processing company, again, the responsibility for that must rest with Barlot. At a minimum, one would have expected to see some communication with Atrium’s counsel explaining the reason for the delay, if unavoidable. [ 38 ] Another excuse may be the conduct of the moving party/defendant.

As in many cases involving delay, fingers get pointed between counsel and indeed there is authority for the proposition that if counsel for a defendant is non-responsive to communications from the plaintiff while pursuing dismissal for delay, that is a factor to consider ( 221198 Alberta Ltd. v. Dobrescu 2017 ABQB 460 at para. 19 ). [ 39 ] In this case, while there are some indications that Barlot’s counsel was trying over the last few months to

schedule Questioning without success, the fact is that Atrium’s counsel did respond to specific proposed dates for Questioning. Also, as mentioned earlier, he advised Barlot in a timely way of this application.

[ 40 ] Thus, I find that Barlot’s delay has been both inordinate and inexcusable. Prejudice [ 41 ] However, that is still not the end of the inquiry. I must examine the prejudice caused to Atrium by Barlot’s delay. Rule 4.31 creates a rebuttable presumption, namely that delay which is inordinate and inexcusable is presumed to have resulted in significant prejudice to the moving party, Atrium. This then puts the onus on Barlot to show some evidence that the delay has not caused the presumed prejudice. I find that it has done so. [ 42 ] In Humphreys v.

Hanne, supra , the Court of Appeal overturned the decision of the Chambers Judge and dismissed an action for delay. The Court went through a number of examples of presumed prejudice (witnesses who disappear, documents that are lost before trial, erosion of witnesses’ memories). With respect, I am not sure that this kind of analysis is necessary in the face of a statutory presumption, nor is it clear why there would be a requirement to connect presumed prejudice to the delay.

If the delay is inordinate and inexcusable, the significant prejudice required to be shown by the moving party under Rule 4.31(2) is presumed because of “that” delay. [ 43 ] However here, even accepting the presumed prejudice to Atrium, Barlot asserts that there are no missing witnesses, witnesses that may not be available for trial or whose memory is particularly frail, none of which is contradicted by Atrium. In fact, the Affidavit filed by Atrium’s director, Mr. Olin, makes it clear that the fundamental facts remain clear in his mind.

Further, while Atrium says that it is prejudiced because the items that Barlot claims were taken are not in its possession and therefore cannot be valued, it properly concedes that this was always the case and is not related to the delay. [ 44 ] I find that, in all these circumstances, Barlot has rebutted any presumption of prejudice as a result of the delay and so dismiss Atrium’s application under Rule 4.31.

Security for Costs [ 45 ] Atrium applied, in the alternative, for an Order requiring Barlot to post security for costs in order to be able to continue to pursue this claim. [ 46 ] The Alberta Business Corporations Act , s.254, reads as follows: 254.

In any action or other legal proceeding in which the plaintiff is a body corporate, if it appears to the court on the application of a defendant that the body corporate will be unable to pay the costs of a successful defendant, the court may order the body corporate to furnish security for costs on any terms it thinks fit. [ 47 ] Although there are some exceptions, our Court seems to accept that where the plaintiff is a corporation, the tests for security for costs found in Rule 4.22 does not apply but rather, only that contained in the Business Corporations Act as set out above ( Amex Electrical Ltd. v. 726934 Alberta Ltd , 2014 ABQB 66 at para. 58 ). [ 48 ] Under s.254, the court has discretion as to whether or not to order security for costs once the applicant has proven, on a balance of probabilities, the respondent’s inability to pay the costs if unsuccessful.

In this analysis, I may consider the nature and value of assets available, the merits of the claim and defence, the timing of the application and the possibility that an order would prevent the respondent from proceeding with its claim. [ 49 ] In support of its application, Atrium points to Barlot’s financial difficulties back in 2009; the same financial difficulties which may have played a

part in the tenancy dispute that is at the heart of this action. I agree with Barlot that evidence regarding its finances from 2009 is too dated to be reliable. Atrium’s only current evidence is a bare statement by its officer that he has no knowledge of any assets that Barlot has in Alberta and a procedure card showing voluminous albeit somewhat dated court actions involving Barlot. [ 50 ] However, we do have additional evidence available. Specifically, in John Barlot’s Affidavit and marked as exhibits to Mr.

Olin’s cross-examination are the aforementioned financial statements and documents for Barlot’s operations to and including 2015. [ 51 ] The recent financial history of the corporate plaintiff is illuminating. In 2013 and 2014, it had assets of approximately $20,000 each year, with debt of approximately $600,000. Its expenses were more than double its revenues each year. In 2015, Barlot lists assets of $1.03M described as “accounts receivable” but which actually appears to be the receipt of a legal settlement.

This is the only significant asset held by Barlot in the years 2013-2015 and yet, despite that significant influx of cash, the retained earnings of Barlot at year-end fiscal 2015 were only $93,336.

Its hard assets (consisting throughout of computers, furniture and equipment) were, by 2015, only worth approximately $15,000. [ 52 ] Therefore, the most recent financial information of this company shows that it has consistently operated at significant deficits, has limited revenue compared to expenses and has only once had a minimal positive earnings position and that due to a one-time cash injection which was quickly and virtually completely spent.

Given that financial history and the fact that the most current information shows only $15,000 in hard assets (as part of a downward trend), I find that, on a balance of probabilities, Barlot will likely be unable to pay the costs of this action if unsuccessful. [ 53 ] I will also address the timing of this application. While Atrium brings this application some six years into litigation, the fact is that precious little has happened in those years. Even though I did not dismiss Barlot’s claim, I have noted that it has not prosecuted its claim with reasonable diligence.

It certainly does not lie in the respondent’s mouth to now complain that Atrium’s application is too late for consideration. [ 54 ] I am concerned, not just about the slow progress made by Barlot in advancing this claim but also with its expanding claims. If

it actually pursues a claim for $5.6M all the way to trial, the necessity of expert evidence and increased trial time seem likely. In that event, Atrium’s draft Bill of Costs may very well be understated.

Lastly, Barlot maintains that it can pay costs and has made no argument that an order for security for those costs will impact its ability to pursue this claim. [ 55 ] While I do not accept Atrium’s argument that a security for costs order is an automatic or even logical common alternative to dismissal for delay, in these circumstances, I find it appropriate to order the payment by Barlot of $27,705.75, which may be paid into court or held in trust if the latter is agreeable to the parties.

Procedural Order [ 56 ] As mentioned, I also intend to make a procedural order under Rule 4.33(3) setting out steps to be taken and the deadlines for doing so. I encourage counsel to agree on terms of such an order but in default of such agreement, counsel are directed to make further submissions thereon, including the bringing of any motions to finalize pleadings and/or timelines to proceed to trial. Heard on the 20 th day of October, 2017. Dated at the City of Calgary, Alberta this 6 th day of December, 2017. M.H. Hollins J.C.Q.B.A. Appearances: Christopher P. Rappel for the Applicant (Defendant) Christopher M.

Darwish for the Respondent (Plaintiff)