McKay v Prowse, 2018 ABQB 975

Court of Queen’s Bench of Alberta Citation: McKay v Prowse, 2018 ABQB 975 Date: 20181129 Docket: 0903 13422 Registry: Edmonton Between: John Russell McKay Plaintiff/Appellant - and - John Cameron Prowse and Prowse Chowne LLP Defendants/Respondents _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice J.M. Ross _______________________________________________________ Introduction [ 1 ] The Plaintiff appeals the decision of a Master ( 2017 ABQB 694 ), granting the Defendants’ application to dismiss this action under Rule 4.33 of the Alberta Rules of Court . Background

[ 2 ] The application concerns a negligence action by John McKay against his former counsel for their conduct of his lawsuit in the Federal Court of Canada alleging patent infringement by Weatherford Canada Ltd. [ 3 ] The patent relates to a refrigeration process for de-lining (removing worn lining or elastomer from) metal pipes (stator housing or tubes). The Federal Court found that the patent was valid (dismissing Weatherford’s counterclaim for a declaration of invalidity), but that it had not been infringed by Weatherford. The Federal Court dismissed McKay’s claim for patent infringement in November 2007.

An appeal to the Federal Court of Appeal was dismissed in November 2008. [ 4 ] The Federal Court construed the McKay patent protection to apply to: “a process in which a temperature below -50 C is applied to a stator housing until a certain event occurs, being that the elastomer shrinks and pulls away from the stator housing” (para 14 of the trial decision). [ 5 ] The Federal Court examined demonstrations of the patent and Weatherford processes to determine whether the Weatherford process infringed the patent protection by using essential elements of the patent process.

There were four demonstrations of the Weatherford process: three that were videotaped (on February 15, 2007, May 9, 2007 and May 14, 2007, and one that was observed by both parties’ experts, but not videotaped (on May 18, 2007). The Court commented that features of the demonstration evidence and the expert evidence based thereon were relevant to the determination of whether there infringement (para 22 of the trial decision).

The Court went on to describe the demonstrations and discuss arguments based thereon; finally concluding that McKay had not proved that the Weatherford process used essential elements of the patent process. [ 6 ] McKay commenced this negligence action against his former counsel on August 27, 2009. The allegations by the Plaintiff in the negligence action include allegations that the Defendants did not deal properly with the videotaped demonstrations in the Federal Court action.

It is alleged that the demonstrations were recorded without the presence of McKay’s expert, were not provided to McKay’s expert in advance of the trial, and were entered as exhibits at the trial without objection by the Defendants. [ 7 ] The last actions in this negligence action that are agreed to constitute a significant advance in the action are the service by the Plaintiff of a Notice to Admit Facts in June 2013, and the service by the Defendants of a Reply to Notice to Admit Facts on July 12, 2013.

The issue in this application is whether there was a significant advance in the action in the three years following July 12, 2013. [ 8 ] McKay (through a corporation) brought a second patent action in the United States for alleged infringement of U.S. patents by Weatherford’s American entities.

While this action was based on U.S. patents, which varied in some respects from earlier Canadian patents, the Canadian and U.S. patents related to the same refrigeration process. [ 9 ] Between June and November 2013, overlapping events occurred in the Canadian negligence action and the American patent infringement action. [ 10 ] In the Canadian action, in communications between counsel during June and July 2013, the parties discussed the possibility of resolving the suit through settlement.

In September 2013, they scheduled a settlement meeting, which took place on November 26, 2013. [ 11 ] Meanwhile, in the American patent action, a “Markman” decision issued on June 14, 2013, construing the language in the patent claims. An expert report respecting the calculation of damages was prepared on September 26, 2013. The American suit was settled on November 21, 2013.

The American settlement agreement and the expert report in the American action were subject to non- disclosure orders to protect Weatherford’s confidential information. [ 12 ] In the negligence action, on March 14, 2014, the Defendants requested a calculation of damages based on the settlement of the American suit. [ 13 ] On May 30, 2014, the Plaintiff provided a calculation of damages. The Plaintiff claimed that $75 per use of the patent process was a reasonable royalty rate, and that the total damages were $774,000, reduced by $100,000 to reflect the Defendants’ taxed bill of costs.

The Plaintiff offered to settle for $260,000. The proposed damages amount is noteworthy in that in the Statement of Claim the Plaintiff claimed damages for “lost licensing fees” in the amount of $9,760,000. [ 14 ] On August 7, 2014, the Defendants requested supporting evidence for the calculation of damages. [ 15 ] On August 12, 2014, the Plaintiff provided a redacted copy of the expert report from the American litigation, noting the report’s conclusion that $70 U.S. was a reasonable royalty figure.

On August 20, 2014, the Plaintiff provided a Weatherford brochure referring to production at its Edmonton facility as having exceeded 9000 units for 2007.

The Plaintiff indicated that these documents would support a damage quantum of $675,000. [ 16 ] On September 9, 2014, the Defendants requested an un-redacted copy of the expert report, and a Supplemental Affidavit of Records including documents from the American action that the Plaintiff intended to rely on. [ 17 ] On October 8, 2014, the Plaintiff responded that they could only provide the redacted report and reiterated the settlement offer. [ 18 ] On October 14, 2014, the Defendants requested all “producible documents...if this matter goes to trial,” and indicated they might be interested in arbitration. [ 19 ] On November 21, 2014, the Plaintiff provided names of potential arbitrators. [ 20 ] On November 27, 2014, the Defendants repeated the request for a Supplemental Affidavit of Records including documents from the U.S. action. [ 21 ] On January 27, 2015, the Plaintiff inquired whether the Defendants would be interested in mediation.

[ 22 ] On July 7, 2015, the Plaintiff filed a Supplemental Supplemental Affidavit of Records. The documents produced from the U.S. action included: 1. Document 364: an undated and unattributed chart purported to outline overhead costs and profit margins for McKay’s company; 2. Documents 380 to 384: letters from McKay’s U.S. counsel to Weatherford’s counsel dated August and September 2012, regarding an August 29, 2012 demonstration of Weatherford’s process conducted in the U.S. action; 3. Documents 385 to 466: The redacted expert report from the U.S. action; 4.

Document 374: a cover letter dated April 5, 2007 from Weatherford’s counsel to McKay’s counsel in the Canadian patent action describing the February 15, 2007 video as “a DVD of Weatherford’s stator delining process as recorded on February 15, 2007”. [ 23 ] Items 1 through 3 are documents prepared in the context of the U.S. patent action that are alleged by the Plaintiff to be relevant to issues in the Canadian negligence action, including the calculation of damages and the treatment of the videotaped demonstration evidence. [ 24 ] Item 4 is a document prepared in the context of the Canadian patent action.

It pre-dates the original Affidavit of Records. However, it did not come into the possession of the Plaintiff until it was produced in the U.S. action, as it had not been produced by the Defendants in the negligence action. [ 25 ] On November 17, 2015, the Plaintiff sought to

schedule questioning on the Supplemental Supplemental Affidavit of Records, and a response to the possibility of mediation. [ 26 ] On April 25, 2016, the Plaintiff applied to the American court to vary the protective order respecting the expert report, seeking to disclose the report to counsel in the Canadian negligence action. His application was denied by the American court on June 28, 2016. [ 27 ] On November 14, 2016, the Plaintiff again sought to

schedule questioning, and a response to the possibility of mediation. [ 28 ] On November 17, 2016, the Defendants filed an application to dismiss the action. [ 29 ] The application was heard on October 4, 2017. On November 17, 2016, Master Schulz granted the application finding that there had been no significant advance in the litigation in the three years preceding the filing of the application. Standard of Review [ 30 ] It is agreed that the standard of review is correctness: Bahcheli v Yorkton Securities Inc, 2012 ABCA 166 , at para 30 . Rule 4.33 [ 31 ] Rule 4.33(2), often referred to as the “drop dead rule”, provides:

(2) If 3 or more years have passed without a significant advance in an action, the Court, on application, must dismiss the action as against the applicant … Master’s Decision [ 32 ] In finding that the settlement discussions did not significantly advance the action, Master Schulz stated: [18] The parties attended a settlement meeting in November 2013, following which there was an exchange of correspondence about JDR or mediation and numerous requests for documentation to substantiate the claim being advanced by the Plaintiff.

While the Court encourages the parties to participate in settlement discussions, the case law is clear: unsuccessful settlement discussions, or settlement discussions that do not narrow the issues or obtain agreement on some of the factual issues such as quantum or liability, are not a material advance in the action ( See 525812 Alberta Ltd v Purewal , 2004 ABQB 938 at para 16-17 (Slatter, J. as he then was); Krieter v Alberta , 2014 ABQB 349 at para 18 (Master Hanebury); Huynh v Osman , 2013 ABQB 218 at para 23 (Gates, J.). Similarly, the mere scheduling or the attempt to

schedule such a step is not an advance ( Weaver QB at para 11-15). [19] Counsel for the Plaintiff urges that the repeated correspondence surrounding the settlement discussions and the attempts to set up either JDR or mediation take this case outside the ambit of Rule 4.33, a rule that was intended to capture cases that have languished for a period of three or more years.

He argues that Rule 4.33 was intended to remedy a situation where a case has been abandoned, not a situation as here where the parties were actively trying to determine a method of out-of-court resolution (See Turek v Oliver , 2014 ABCA 327 at para 5 ; Ursa Ventures Ltd v Edmonton (City), 2016 ABCA 135 at para 10 ). [20] In Flock at para 19-26, the Court of Appeal addressed this argument, referring it to as “lulling” the Respondent into waiving reliance on Rule 4.33. The Court points out that a standstill agreement cannot be inferred; it must be express. Silence does not amount to acquiescence to delay.

Attempts at settlement that do not narrow the issues or obtain agreement on factual issues do not justify a delay or amount to a standstill agreement. Simply put, the case law does not interpret Rule 4.33 in the manner that counsel urges it to be interpreted. While I might sympathize with counsel who is attempting to move a matter along through settlement, the case law is clear. Counsel must practice with one eye on settlement and another on the requirements of the Rules of Court .

[33] As to the filing of the Supplemental Supplemental Affidavit of Records, the Master reviewed the included documents anddetermined that none of them significantly advanced the action. She reasoned that documents from the U.S. action were not relevant, asthe U.S. patent action had not been pled in the Canadian action. Further, the expert report was of no value because of the heavyredactions. As to the cover letter for the February 15, 2007 video, she held that this added nothing, because it was simply a cover letterfor a DVD which had already been disclosed.

Settlement Discussions as a Significant Advance Case Law [34] Slatter J (as he then was) in 525812 Alberta Ltd v Purewal, 2004 ABQB 938 considered whether settlement discussionsadvance in an action: [16] It is difficult to envision how settlement discussions can materially advance an action. If the settlement discussions are successful,the action will be settled, and the matter is at an end. If the settlement discussions are unsuccessful, they accomplish nothing, and do notmaterially advance the action.

Since the policy of the Court favours settlement, it would be unfortunate if merely entering into settlementdiscussions with the other party would in effect extend the time under the drop dead rule. This would discourage, rather than encouragesettlement discussions. There is the possibility that the action might not be settled in whole, but that the settlement discussions mightproduce a narrowing of the issues, an agreement on certain facts, or an agreement on parts of the action (such as quantum or liability).

Inthe latter case settlement negotiations might amount to things that materially advance the action, but there is nothing like that in thiscase. [17] While most actions are resolved by settlement, and the Court encourages parties to settle their own differences, settlementdiscussions are not themselves an excuse for not advancing the action. If settlement discussions are unsuccessful, that is no excuse forsimply doing nothing.

In this case there was a period of approximately 20 months between the last settlement discussions and the motionto strike, a delay that cannot be justified under any reasoning. [35] Purewal pre-dated the enactment of the present Rules of Court and Rule 4.33 in its current form. The Plaintiff/Appellantargues that the approach to settlement negotiations as a “significant advance in an action” should be reconsidered in light of thesechanges. [36]

Interpretation of the Rules finds guidance in the Foundational Rules, including Rule 1.2(1), which provides that the purpose ofthe rules is “provide a means by which claims can be fairly and justly resolved in or by a court process in a timely and cost effectiveway”. To achieve that purpose, Rule 1.2(3)(

b) requires parties to an action to “periodically evaluate dispute resolution processalternatives to a full trial, with or without assistance from the Court.” [37] Rule 1.2 was relied on by the Court of Appeal when it adopted a functional approach to determine whether there has been asignificant advance in an action under Rule 4.33: Ursa Ventures Ltd v Edmonton (City), 2016 ABCA 135at paras 18-19 see alsoWeaverv Cherniawsky, 2016 ABCA 152at para 18; Ro-Dar Contracting Ltd v Verbeek Sand & Gravel Inc, 2016 ABCA 123at para 14; Flockv Flock Estate, 2017 ABCA 67 at para 17, leave to appeal refused, (SCC).

The functional approach asks: “whetherthe advance in an action moves the lawsuit forward in an essential way considering its nature, value, importance and quality. Thegenuineness and the timing of the advance in the action are also relevant.” (Ursa Ventures Ltd at para 19). [38] Alberta courts have found that settlement discussions may advance an action by narrowing the issues. [39] In Montreal Trust Company of Canada v Talcorp Limited, 2013 ABQB 398, Park J held: [59] [I]t is my view that the settlement discussions in the March 22, 2007 meeting did cause a narrowing of the issues.

There was anagreement in principle on certain key aspects of the litigation…Confirmation of those agreements in principle can be seen in theemails… [60] It is evident an agreement in principle was reached subject to final calculations… [61] This agreement narrowed the issues and the scope and duration of the litigation. It was an agreement reached at a “withoutprejudice” meeting to negotiate possible settlement.

It was an agreement which is a thing done to significantly advance the action. [40] In Pearson v Parkland (County), 2014 ABQB 690, Lee J held: [34] Although the Parkland County settlement offer was never accepted in the present matter, I conclude that…the gathering of…information for settlement purposes…constituted a thing that materially advanced Ms. Pearson’s action. Counsel for Ms.

Pearson’s letter of April 4th, 2011 not merely assisted in the negotiations, but clearly resulted in a narrowing of issues that led to another thing that materially advanced the action, namely a bona fide non-nuisance value settlement offer from the Defendant July 5th, 2011. [41] I note that in both Montreal Trust and Pearson, the Justices indicated that they were applying the drop dead rule in a mannerwhich seeks to preserve a claimant’s right to litigate. I have chosen not to apply this approach.

It seems to me inconsistent with thefunctional approach to determining whether there has been a significant advance in the action, and the wording of Rule 4.33(2), whichprovides that if there has not been a significant advance, the Court “must dismiss the action”. [42] In Ro-Dar Contracting Ltd v Verbeek Sand & Gravel Inc, 2016 ABCA 123, rev’g 2015 ABQB 300, Master Wacowich

found that “the matter has been moving along fine” and accordingly dismissed the application to dismiss the action for delay. Jones J reversed the Master’s decision, characterizing settlement discussions as “nothing more than a brief flurry of activity, accomplishing little”. The Court of Appeal restored the Master’s decision, finding that Jones J had erred in over-emphasizing the outcomes of the actions taken . The Court of Appeal stated: [23] One of the issues in the litigation is how to calculate the amount the appellant is entitled to be paid.

The appellant’s position is that its payment would be based on its calculation of the weight of the gravel at the time it was crushed. The respondents’ position is that there would be an initial estimate of weight, but it would be adjusted based on the weight of gravel that was actually sold and shipped by the respondents. The appellant argues that the respondents’ calculation of how much gravel was sold represents an “admitted” portion of the appellant’s claim.

Since the stockpile of gravel was not completely sold until 2011, and since the respondents never disclosed in detail how much they had sold until October 22, 2012, the appellant argues that a “significant advance” occurred on that latter date. [24] The documents disclosed on October 22, 2012 included 44 pages of reports showing details of every invoice for gravel sold between 2008 and 2011.

The reports summarized about 2,000 invoices generated over three years… The invoices were directly relevant to a core outstanding sub-issue: the amount of gravel shipped. … [26] The chambers judge concluded at para. 99 that no application for

summary judgment resulted from the new documents… [27] The appellant also relies on the filing of the Supplemental Affidavit of Records. The filing of that affidavit, however, was not a substantial advance…If anything important happened, it happened when the new documents were sent on October 22. The subsequent filing of the affidavit was merely a formalistic step that was not sufficient, under the functional approach, to advance the action. [28] A significant advance does not have to be so definitive that it would support an application for

summary judgment... [29] The new information provided on October 22 was important to both sides. It confirmed that the stockpile of gravel had now been sold, which crystallized the amount that the respondents possibly admitted was owing. It also provided a firm amount against which the competing claims could be measured: the appellant’s measurement of the claim based on its estimates, and the respondents’ measurement of the claim based on actual deliveries.

The reasonable view is that this was a significant advance in the action. [ 43 ] In Paquin v Whirlpool Canada LP , 2016 ABQB 147 , Master Farrington held: [21] …I find that the at the very least, the exchanges of settlement offers…along with the exchanges of information in support of those offers constituted a sufficient advancement in the action for the purpose of responding to the Rule 4.33 application. While the settlement offers were global offers, they analysed individual aspects of the claim.

They clearly show the parties becoming closer on particular issues as the settlement discussion process unfolded and even agreement on some issues, bearing in mind that none of those agreements were in themselves binding. While there were no formal admissions on specific items, the differences on many items became insignificant. The parties also made progress in identifying the true issues in dispute, whether formally or otherwise. [22] From an overall resolution perspective, the parties’ discussions led them to a point where they were approximately $16,000 apart.

They started in 2012 when the defendants were not prepared to even allocate a specific amount to the plaintiff’s claim, and they progressed to a point where the parties had not only allocated specific amounts to the claim, but they may have well have been able to resolve the matter had this application not intervened. [23] I also find that the exchange of information that occurred within the settlement discussions and the answering of questions posed by the defendant’s counsel as part of those exchanges advanced the matter toward resolution.

The defendants argued on this application that the answers merely confirmed what was in the Statement of Claim, but the questions asked were directly related to the damages claimed, and were in fact similar to the type of information that would have been obtained in a traditional questioning session. Indeed, if the informal posing of questions was not designed to be a productive exercise, it is curious as to why the defendants were even asking the questions that they posed. [24] Hryniak urges proportionality in terms of the method of resolution of claims.

It was certainly understandable that plaintiff’s counsel engaged in good faith in the further exchange of information and offers when the parties appeared to be getting closer to resolution. … [28] Sometimes the parties’ interests can be better served by constructive dialogue than by taking adversarial steps. Toward that end, plaintiff’s counsel was doing exactly what Rule 1.2(2) directed him to do. On the facts of this case, it was reasonable for him to engage in the dialogue that was undertaken. That is not without limits, however, as Rule 4.33 clearly requires that demonstrable progress be made.

With hindsight, a standstill agreement or notice would have likely been prudent, but I am reluctant to second guess what appears to have been a reasonable assessment by plaintiff’s counsel that matters were progressing toward possible resolution and that further exchanges were warranted. There was demonstrable progress. [29] Rule 4.33 is meant to be used to dismiss languishing actions.

This is not, and was not, a languishing action. [ 44 ] In Delver v Gladue , 2018 ABQB 226 , Clackson J reversed the Master’s decision to dismiss the action based on delay, stating: [11] …[I]t bears noting that Rules 1.2(1), 4.1 and 4.2(

b) exhort all parties to attend to and to resolve their litigation in a timely and cost- effective way. [12] In my view, proposing a trial of an issue and attempting to settle on quantum amounted to reasonable efforts to do just that. While neither was successful, either could have been and either would have advanced the litigation. Plaintiff’s counsel acted sensibly in making

both proposals and neither were colourable attempts to extend an expiring period for action. [ 45 ] However, most recently in Sutherland v Brown , 2018 ABCA 123 , the Court of Appeal affirmed the lower court decisions to dismiss the action for delay, stating: [11] The determination of whether there has been a significant advance towards resolution of an action must be viewed in this context: “steps that serve to narrow the issues, complete the discovery of documents and information, or clarify the positions of the parties might well significantly advance the action. ‘Outcomes’ should not be overemphasized”: Ro-Dar at para 20.

However, outcomes are not irrelevant as the functional approach requires the court to “view the whole picture of what transpired in the three-year period, framed by the real issues in dispute, and viewed through a lens trained on a qualitative assessment.

This necessarily involves assessing various factors including, but not limited to, the nature, value and quality, genuineness, timing, and in certain circumstances, the outcome of what occurred”: ibid at para 21, citing Nash v Snow , 2014 ABQB 355 at para 30 , 590 AR 198. [12] The Chambers Judge rejected the plaintiff’s submission that the Settlement Offer (which contained an admission of contributory negligence of 50 per cent) advanced the action towards “resolution in any manner – settlement, JDR, arbitration, mediation or trial”. [13] The circumstances of this application are distinguishable from those in Ro-Dar where this Court recognized that that the production of new information (documents that disclosed how much gravel had been sold) can significantly advance an action. [14] Progress towards settlement may, in some cases, constitute a significant advance in an action for the purposes of rule 4.33.

For example, in Paquin … [15] In this case the Master considered whether the Settlement Offer significantly advanced the action and concluded that it did not have that effect: ...when I take a look at the contents of the settlement proposal, I find that the contents don’t really contain any admissions that are useful within the litigation process itself. So estimates without calculations or without backup material are not helpful...

I think the situation would be different if it was like the one that was before Master Farrington where there were offer, counter offer, counter counter offer, counter counter counter offer, and it was going back and forth. I think it would be different in that situation, because then there were advances whereas in this case, there was a detailed offer made, and I don’t question the seriousness of that offer, but the response of the recipient was basically to reject it. There was no discussion why or there was no counter offer made.

So in other words, they were clearly indicating that they were not prepared to enter into negotiations, so I don’t consider that to be an advance in the settlement process. [16] The Chambers Judge agreed with the Master that the Settlement Offer did not move the action forward and concluded “at the end of the day, taking a functional and pragmatic approach here, as a very broad

interpretation of resolution in any manner – settlement, JDR, arbitration, mediation, or trial – which covers I think the whole field, nothing happened here. It did not move the things toward conclusion and that is the problem.” [17] The Chambers Judge made no extricable error of law in interpreting rule 4.33. His decision, that it was appropriate to uphold the Master’s decision and dismiss the action, is entitled to deference and was reasonable.

Analysis [ 46 ] I accept that genuine settlement negotiations occurred in this case: from June through September 2013 there was mutual agreement to pursue settlement discussions; a settlement meeting was held in November 2013; in May 2014, the Plaintiff made a serious settlement proposal; and the parties corresponded about the basis for the calculation of damages from May until November 2014.

These communications took place on a timely basis, well in advance of the drop dead date. [ 47 ] However, the Defendants were not satisfied with the documents produced by the Plaintiff in support of the damage calculation, and never countered the Plaintiff’s settlement offer. The Plaintiff attempted to respond to the Defendant’s concern by means of an application in the American court to vary the non-disclosure order, but his was not successful.

I cannot conclude that the parties reached any type of agreement regarding the amount of damages or the basis for calculating damages. [ 48 ] I take from the case law, particularly the Court of Appeal decisions in Ro-Dar and Sutherland , that genuine but unsuccessful settlement negotiations alone do not constitute a significant advance in an action.

There must be something additional, in the form of a narrowing of issues or production of relevant information. [ 49 ] I considered whether the Plaintiff’s offer – which asserted damages far less than those claimed in the Statement of Claim, and further reduced that amount to account for liability issues – might constitute a significant advance. I concluded that it did not because it was a unilateral without prejudice offer. It did not contain admissions that could be useful within the litigation process. It did not lead to a counter offer or “back and forth” process.

As a result, the parties did not reach even informal agreement on any of the issues in the lawsuit. [ 50 ] As to the additional documents provided in the course of the settlement negotiations, these were produced in the Supplemental Supplemental Affidavit of Records, which will be considered below. Supplemental Supplemental Affidavit of Records as a Significant Advance [ 51 ] The Master applied the test in Weaver v Cherniawsky , 2015 ABQB 157 ; affd 2016 ABCA 152 , to determine whether the production of documents constituted a significant advance.

The filing of the supplemental affidavit itself was not a significant advance

(see also Ro-Dar at para 27). The test requires the Court to review the documents produced and consider “the value of the document in the litigation and whether it moved the matter closer to resolution” ( Weaver per Shelley J (QB), at para 20). The parties agree that the Master applied the correct test, but disagree regarding how she applied in relation to the documents described above. [ 52 ] The Master held that documents from the U.S. action were not relevant. Among the reasons she gave were that the U.S. action had not been pled in the Canadian negligence action.

I agree with the Plaintiff’s submission that this is not the test. While the patents filed in the two countries were not identical, they related to the same de-lining process. It is clear from the settlement negotiations that the parties both regarded the U.S. settlement and information supporting it as potentially relevant in the Canadian litigation. [ 53 ] However, there are other reasons why the produced documents are at best marginally relevant, as explained in the Affidavit of J. Cameron Prowse. [ 54 ] The redacted expert report from the U.S. action is described by Mr.

Prowse as follows (from the Affidavit of J. Cameron Prowse dated November 23, 2016): 11. (ii) The useful information in the [expert] Report has been redacted. Although the bare opinion on what would be a reasonable royalty rate is disclosed, the Report says that opinion is based upon the analysis in

Schedule “B”. But

Schedule “B” has been entirely redacted, so the analysis is not disclosed and it is therefore not possible to test the analysis or the opinion. Additionally, all numbers in the Report specific to Weatherford have been blacked out; (iii) The opinion provided on the reasonable royalty rate also appears to be, at least in part, based upon costs and margins of Weatherford related to their U.S. facility, which numbers are also redacted.

Because of the redactions, and because no other information has been provided it is not possible to test the royalty rate for reasonability based upon the costs and margins of Weatherford’s Strathcona facility; (iv) The redacted Report references calculations for a reasonable royalty based upon de-lining of stators in the U.S. and de-lining of stators in Canada for use in the U.S. Had the Federal Court in the action that is the subject of this litigation found infringement in Canada, the de-lining in Canada even for use in the U.S. would have attracted damages. But since Mr.

McKay settled the action in the U.S. he has presumably accepted compensation for any de-lining that took place in Canada where the stators were then shipped to the U.S. But no specific information about this has been disclosed [by] the Plaintiff; (

v) There is nothing in the redacted Report to indicate how many stators were de-lined in Canada for use in Canada. In fact, the number of stators de-lined cryogenically has been redacted. 12. The Report contains no numbers that could be reliably extracted, or tested, and the basis for the opinion has been redacted leaving nothing more that could be offered to a Court than a bare opinion without analysis or support. The redacted Report does not meet the requirements for an expert report for use in Court in Alberta in that it does not contain the information upon which the expert’s opinion is based.

That information has all been redacted. [ 55 ] This assessment of the redacted report is unanswered by the Plaintiff. I am satisfied that production of the expert report in its redacted form does not significantly advance the action. [ 56 ] Other documents produced by the Plaintiff alleged to be relevant to assessment of damages fall short for similar reasons. An undated and unattributed chart said by the Plaintiff to outline overhead costs and profit margins for McKay’s company has no demonstrated relevance.

If the figures contained therein are relevant, there is no explanation as to why they were not produced earlier. That is also the case for the publicly available Weatherford brochure which the Plaintiff provided in support of its settlement proposal. That brochure describes production at the Edmonton facility in 2007. It does not indicate how many stators were de-lined in Canada for use in Canada.

If it has any relevance, there is no explanation as to why it was not produced earlier. [ 57 ] The August and September 2012 letters from McKay’s U.S. counsel to Weatherford’s counsel relate to an August 29, 2012 demonstration of Weatherford’s process. This demonstration took place after the conclusion of the Canadian Federal Court action.

However, the Plaintiff argues that the following comments of his American counsel in the September 4, 2012 letter are relevant: We have suspected there was a fraud perpetrated on the Canadian trial court form the filing of this case in the United States...we believed the demonstrations Weatherford presented to the Canadian trial court did not accurately represent the Weatherford process and Weatherford knew or should have known they were inaccurate. … Numerous representations were made by counsel for Weatherford to the Canadian trial court at trial that the demonstrations were “representative” of the Weatherford process.

The same representation was made … in correspondence dated April 5, 2007, which stated…that the February 15, 2007 video was a DVD of “Weatherford’s stator delining process”… The August 29, 2012, demonstration, of which you have all the data, shows that the February 15, 2007, video was not the Weatherford process.

Specifically, the Canadian trial court relied on that video to find that the temperature on one stator was -47C…The data obtained…on August 29, 2012, shows that throughout the cryogenic refrigeration unit…the temperature was -175C or lower, a more than 300% discrepancy. [ 58 ] This letter outlines a theory espoused by counsel in the U.S. action regarding an alleged fraud by Weatherford in the Canadian Federal Court action. There is no explanation as to how a fraud by Weatherford, if proved, would advance the claim by the Plaintiff against the Defendants.

There is no finding or evidence of fraud; only an allegation based on a comparison of a demonstration that took place years after the Canadian action, with one of four demonstrations presented to the Federal Court in the Canadian action. The information simply does not have the reliability or relevance to constitute a significant advance in the negligence action. [ 59 ] I agree with the Master that the April 5, 2007 cover letter pertaining to the February 15, 2007 video adds nothing. The video

had already been produced and, as stated by McKay’s American counsel, numerous representations had been made at trial in the Canadian Federal Court action that the demonstrations were “representative” of the Weatherford process. The trial judge described them as demonstration of the Weatherford process. The fact that the Defendants, in their Reply to the Plaintiff’s 54-point Notice to Admit Facts, chose not to admit that the February 15 video “was allegedly a depiction of the stator de-lining process” is not sufficient to make this additional representation a significant advance in the negligence action.

Conclusion [ 60 ] While my reasons vary somewhat from the Master’s reasons, I find that she correctly concluded that neither the documents nor the settlement discussions significantly advanced the action, and that the Defendants’ application should be granted and the action dismissed pursuant to Rule 4.33. The appeal from her decision is dismissed. [ 61 ] The parties may speak to me regarding costs if they are unable to agree. Heard on the 6 th day of September, 2018. Dated at the City of Edmonton, Alberta this 29 th day of November, 2018. J.M. Ross J.C.Q.B.A.

Appearances: Corinne S Petersen and Jennifer E Halloran of Kingsgate Legal for the Plaintiff/Appellant J Patrick Peacock, QC and Elena Semenova of Peacock Linder Halt & Mack for the Defendants/Respondents