2023 QCCA 692, 2023 QCCA 692

Aviva, compagnie d'assurance du Canada/Aviva Insurance Company of Canada c. City of Montréal 2023 QCCA 692 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-029663-218 (500-11-057164-192) DATE: May 30, 2023 CORAM: THE HONOURABLE GUY GAGNON, J.A. ROBERT M. MAINVILLE, J.A. STEPHEN W. HAMILTON, J.A. IN THE MATTER OF THE BANKRUPTCY OF LES CONSTRUCTIONS ET PAVAGES JESKAR INC.: AVIVA, COMPAGNIE D’ASSURANCE DU CANADA / AVIVA INSURANCE COMPANY OF CANADA APPELLANT – Plaintiff v.

CITY OF MONTRÉAL RESPONDENT – Defendant and MNP LTÉE, in its capacity as Trustee to the Bankruptcy of LES CONSTRUCTIONS ET PAVAGES JESKAR INC. IMPLEADED PARTY JUDGMENT [ 1 ] This appeal raises the question of whether the Appellant’s proceedings in the Commercial Division of the Superior Court are subject to the six-month delay for inscription under

Article 173 of the Code of Civil Procedure (“ C.C.P. ” or “ Code ”), with the result that failure to inscribe within that delay means that the Appellant is presumed to have discontinued its action under

Article 177 C.C.P. [ 2 ] In first instance, in a judgment rendered on July 27, 2021, Mr. Justice Gary D.D. Morrison concluded that Articles 173 and 177 C.C.P. did apply to the Appellant’s proceedings, and therefore declared that the Appellant was subject to the presumption that it had discontinued its action. The Appellant appeals from that judgment. *** [ 3 ] The context in which the question arises can be summarized as follows. [ 4 ] The Appellant had provided completion bonds on behalf of Les Constructions et Pavage Jeskar Inc. (“Jeskar”) to the Respondent and was granted a hypothec over Jeskar’s claims.

When Jeskar ran into financial difficulties, the Appellant provided additional financing to help Jeskar complete its contracts. Jeskar nevertheless filed a notice of intention to make a proposal which became a bankruptcy. The Mise-en-Cause is Jeskar’s trustee in bankruptcy. [ 5 ] When the Appellant sought payment from the Respondent for Jeskar’s work, the Respondent contested some of the amounts that the Appellant alleged were due to Jeskar.

It also alleged that Jeskar had obtained certain contracts by fraudulent means and that Jeskar owed it compensation. [ 6 ] The Appellant ultimately sued the Respondent on August 2, 2019, claiming that the Respondent owed Jeskar more than $4 million and also seeking $1 million in compensatory damages and $1 million in punitive damages. The Appellant instituted the action in the Commercial Division. [ 7 ] It is not necessary to describe all the proceedings in this file. It is sufficient to mention a few key events. [ 8 ] In a judgment rendered on October 24, 2019, Justice Michel A.

Pinsonnault dismissed the Respondent’s motion to transfer the

case to the Civil Division and ordered the parties to agree on a case protocol. [1] A case protocol was eventually signed by the parties and accepted by Justice Martin Castonguay on December 2, 2019. [ 9 ] On January 15, 2020, Justice Pinsonnault rendered another judgment in relation to several procedural issues.

He authorized the examination of representatives of the Appellant and of Jeskar, ordered that the defense be filed 30 days after the Respondent received the Appellant’s undertakings from the examinations, and postponed sine die until after the Respondent filed its defense a request from the Appellant to examine the Respondent’s representatives.

He advised the parties that he would remain seized of that request and any other incidental matters that might arise before the filing of the defense. [ 10 ] The Respondent proceeded to examine the Appellant’s representatives in March 2020 and received the undertakings on November 6, 2020, such that it was required to file its defense on December 7, 2020. On December 2, 2020, it filed a request to extend that deadline to January 15, 2021. The Respondent also complained to the Appellant that certain undertakings were not complete.

The request to extend the deadline was heard by Justice Pinsonnault on December 23, 2020. He took act of the Appellant’s undertaking to provide the Respondent with additional responses to the undertakings by January 6, 2021.

The defense was filed on December 23, 2020. [ 11 ] The parties did not agree on the scheduling of the remaining steps in the file, and the Appellant filed a request for directions on March 29, 2021, with a view to establishing a schedule. [ 12 ] On April 1, 2021, during the hearing on the request for directions, the Respondent took the position, for the first time, that the Appellant was deemed to have discontinued its action on January 4, 2021 following the expiration of the six-month delay for inscription under

Article 173 C.C.P. [2] The hearing was suspended so that the Respondent could file a written application.

It then filed its de bene esse application to note the Appellant’s default and to declare that the Appellant is deemed to have discontinued its action. [ 13 ] On July 27, 2021, Justice Morrison rendered judgment on the application, declaring that Appellant is subject to the presumption that it had discontinued its action on January 4, 2021. [ 14 ] Following Justice Morrison’s decision, the Appellant filed both a notice of appeal of the decision before this Court and an application to be relieved of its default to inscribe within the delays before the Superior Court.

The application in Superior Court was suspended, pending the outcome of the appeal. *** [ 15 ] There are specific rules governing proceedings in the Commercial Division of the Superior Court set out in the Regulation of the Superior Court of Québec in civil matters (the “ Regulation ”) (Sections 63 to 67) [3] and the Directives de la Cour supérieure pour le district de Montréal (the “ Directives ”) (Sections 209 to 221). [4] The parties to this appeal do not contest the validity of these provisions nor their application to litigation in the Commercial Division. [ 16 ]

Section 210.1 of the Directives sets out the general rule on the procedure to be followed in the Commercial Division: Une instance en Chambre commerciale est régie par la procédure établie par la loi particulière et, à

titre supplétif, par le Code de procédure civile et le Règlement de la Cour supérieure du Québec en matière civile ; [ 17 ] The general rule is that proceedings in the Commercial Division follow the procedure set out in the Code and the Regulation .

However, when the proceedings are taken under specific legislation such as the Bankruptcy and Insolvency Act or the Quebec Business Corporations Act , then any procedural rules in that legislation apply with the Code and the Regulation applying in suppletive fashion. [5] [ 18 ] In this case, the there is no “ loi particulière ” governing the litigation and therefore the Code , including its rules governing case protocols and Articles 173 and 177, should in principle apply. These provisions state: 173.

Le demandeur est tenu, dans un délai de six mois ou, en matière familiale, d’un an à compter de la date où le protocole de l’instance est présumé accepté ou depuis la date où le tribunal a accepté ou établi le protocole , de procéder à la mise en état du dossier et, avant l’expiration de ce délai de rigueur, de déposer au greffe une demande pour que l’affaire soit inscrite pour instruction et jugement. 173.

The plaintiff is required to ready the case for trial within six months , or one year in family matters, after the date on which the case protocol is presumed to be accepted or after the date on which the court accepted or established the case protocol , and, before that strict time limit expires, to file a request with the court office to have the case set down for trial and judgment.

Le tribunal peut néanmoins, lors d’une conférence de gestion, prolonger ce délai si le degré élevé de complexité de l’affaire ou des circonstances spéciales le justifient. Il peut également le faire, même par la suite avant l’expiration du délai de rigueur, si les parties lui démontrent qu’elles étaient en fait dans l’impossibilité, lors de cette conférence, d’évaluer adéquatement le délai qui leur était nécessaire pour mettre le dossier en état ou que, depuis, des faits alors imprévisibles sont survenus. Le délai fixé par le tribunal est aussi de rigueur.

Nevertheless, if warranted by the high level of complexity of the case or by special circumstances, the court may extend the time limit at a case management conference. Even after the case management conference, the court may extend the time limit before it expires, if the parties show that it was impossible in fact, at the time of that conference, to properly assess how long they would need to ready the case for trial, or that circumstances unforeseeable at that time have since occurred. The new time limit set by the court is also a strict time limit.

Si les parties ou le demandeur n’ont pas déposé le protocole de l’instance ou la proposition de protocole dans le délai imparti de 45 jours ou de trois mois, le délai de six mois ou d’un an se calcule depuis la signification de la demande. Le tribunal ne peut alors prolonger ce délai que si l’une ou l’autre des parties était en fait dans l’impossibilité d’agir. If the parties or the plaintiff have not filed a case protocol or a proposed case protocol within the prescribed 45-day or three-month time limit for doing so, the six-month or one-year time limit under this

article is counted from service of the application. In such an instance, the court cannot extend the latter time limit unless it was impossible in fact for one of the parties to act. 177. Faute de demander l’inscription dans le délai de rigueur, le demandeur est présumé s’être désisté de sa demande à moins qu’une autre

partie n’ait demandé l’inscription dans les 30 jours de l’expiration du délai. 177. A plaintiff who fails to file a request for setting down within the strict time limit is presumed to have discontinued the application , unless another party files such a request within 30 days after the expiry of the time limit. Le tribunal peut lever la sanction contre le demandeur s’il est convaincu qu’il était en fait dans l’impossibilité d’agir dans le délai imparti. Dans ce cas, le tribunal modifie le protocole de l’instance et fixe un nouveau délai qui ne pourra être prolongé que si un motif impérieux l’exige.

The court may relieve the plaintiff from this sanction if it is satisfied that it was impossible in fact for the latter to act within the time limit. In such an instance, the court modifies the case protocol and sets a new time limit, which cannot be extended except for compelling reasons. [Soulignements ajoutés] [Emphasis added] [ 19 ] However, Sections 212.4 and 212.5 of the Directives provide that no case protocol is necessary in proceedings in the Commercial Division, except in oppression cases: 4.

Une demande de la nature d’un recours en oppression est sujette au dépôt d’un protocole de l’instance, utilisant à cette fin le formulaire « Protocole de l’instance (en matière civile) ». Toute divergence dans l’établissement du protocole ou de la demande d’inscription peut faire l’objet d’un

Avis de gestion notifié à toutes les parties et présenté en salle 16.10; 5. Toute autre demande en Chambre commerciale n’est pas sujette au dépôt d’un protocole de l’instance, mais elle ne sera portée au rôle pour audience au fond qu'à la réception d’une « Demande commune de dossier complet » (voir aussi les articles 215.3 à 215.5 ci-après). [ 20 ] Moreover,

Section 215.3 of the Directives requires filing a “ Demande d’inscription pour instruction et jugement par déclaration commune ” under Articles 173 and 174 C.C.P. in oppression cases but not in other matters, where a “ Demande commune de dossier complet – Matière commerciale ” is required: 3.

L’audition au fond d’un recours en oppression est sujette au dépôt d’une « Demande d’inscription pour instruction et jugement par déclaration commune » (articles 173 et 174 du Code de procédure civile), alors que l’audition au fond de toute autre demande en Chambre commerciale est sujette au dépôt d’une « Demande commune de dossier complet – Matière commerciale », quelle que soit la durée prévue de l’audience (voir aussi les articles 211.4 et 211.5 ci-haut). Leur contenu doit être conforme au formulaire approprié, disponible sur le site internet de la Cour supérieure; [ 21 ] The deemed discontinuance under

Article 177 C.C.P. can only apply where the plaintiff is late filing a “request to have the case set down for trial and judgment / demande pour que l’affaire soit inscrite pour instruction et jugement ” pursuant to

Article 173 C.C.P . Moreover, that delay is calculated from the date that the case protocol was filed or, if the parties had the obligation to file a case protocol but failed to do so, from the date of service. Because the Directives only require the parties to sign a case protocol and file a “ Demande d’inscription pour instruction et jugement par declaration commune ” in oppression cases, the result is that, under the Directives ,

Article 177 C.C.P. could only apply in the Commercial Division in oppression cases. [ 22 ] However, in this case, a case protocol (which was not required under

Section 212.5 of the Directives ) was nevertheless ordered

by Justice Pinsonnault on October 24, 2019, and one was in fact signed by the parties and accepted by Justice Castonguay on December 2, 2019. [ 23 ] The question becomes whether the order that the parties complete a case protocol and the filing of a case protocol subjected the proceedings to the application of Articles 173 and 177 C.C.P. , notwithstanding that the Directives provide for the contrary. [ 24 ] It is not clear whether Justice Pinsonnault intended to make Articles 173 and 177 C.C.P. applicable to this case. He does not address the question directly in his judgment.

His comments are limited to the following: [64] Bien qu’une gestion particulière ne s’impose pas à l’heure actuelle, rien n’empêchera les parties de procéder à la conclusion d’un protocole de l’instance qui manifestement s’impose eu égard aux faits particuliers de l’espèce, à la complexité du dossier et des enjeux y soulevés. [65] Ce n’est pas parce qu’un dossier relève de la Chambre commerciale que la conclusion d’un protocole de l’instance est automatiquement proscrite.

Chaque dossier doit faire l’objet d’une gestion non seulement efficace, mais également réaliste et juste en fonction des enjeux propres à ce dossier, et ce, dans le respect des droits des parties en cause et des règles de la proportionnalité. [66] Tant en Chambre commerciale qu’en Chambre civile, il n’est jamais question de « brimer » les droits d’une

partie aux dépens de l’autre par souci de procéder de manière expéditive. Chaque dossier doit être traité comme un cas d’espèce qui doit être apprécié en fonction des faits et des circonstances qui lui sont propres toujours dans le respect des règles de la proportionnalité. [ 25 ] One might be tempted to assume, because case protocols and Articles 173 and 177 C.C.P. are so closely related, that Justice Pinsonnault must have intended that these articles apply when he ordered the filing of a case protocol. The case protocol is the starting point for the six-month delay in

Article 173, and

Article 177 is the consequence of failing to meet the delay under

Article 173. Moreover, the form for a case protocol refers to

Article 173: item 6 asks the parties to indicate whether “ Toutes les parties demandent la prolongation du délai pour la mise en état du dossier (art. 173 C.p.c.) ”.

However, it may be that Justice Pinsonnault merely intended that the parties use the form of a case protocol without bringing with it the application of Articles 173 and 177 C.C.P. [6] It would have been helpful if he had made his intention clearer to the parties to allow them to know with certainty which procedural rules applied. [ 26 ] It would appear from the emails that were exchanged between counsel in the preparation of the case protocol both before and after the Pinsonnault judgment rendered in 2019 that they understood that Articles 173 and 177 C.C.P. applied to their case.

Counsel discussed when the six-month delay started to run and whether it was appropriate to ask in the case protocol for the extension of the delay. Justice Morrison relies on an email sent by the Appellant’s counsel on November 6, 2019, in which he referred to both of those issues and clearly assumed that Articles 173 and 177 C.C.P. were applicable.

Further, when the parties completed the case protocol, they set out the delay for the Respondent to file transcripts and exhibits as being “ Au plus tard à l’inscription pour instruction et jugement ”. [ 27 ] The Appellant argues that the Court should also consider the judgment rendered by Justice Pinsonnault on January 15, 2020, and the subsequent conduct of the parties. [ 28 ] In the January 2020 judgment, Justice Pinsonnault dealt with several procedural issues. Notably, he postponed sine die the Appellant’s request to examine the representatives of the Respondent until after the Respondent filed its defense .

He advised the parties that he would remain seized of that request and any other incidental matters that might arise before then. The transcripts of the hearing indicate that he told the parties that it would be sufficient to send him an email, rather than make a formal application. [ 29 ] The Appellant argues that Justice Pinsonnault essentially took over the management of the file and “created a roadmap to bring the file to a hearing on the merits”, such that the peremptory six-month delay in

Article 173 C.C.P. was “simply unnecessary in the circumstances”. [ 30 ] The Appellant adds that the conduct of the parties after January 15, 2020, is consistent with the conclusion that

Article 173 C.C.P. did not apply: • When the Respondent sought an extension of the delay to file its defense on December 2, 2020, it sought an extension until January 15, 2021, which is beyond the end of the six-month delay; • In the discussions among counsel in January and February 2021 relating to the scheduling of further examinations, no one raised the issue that the six-month delay had expired; • The Appellant filed a request for directions to establish a

schedule on March 29, 2021; • It was not until the request was presented in court on April 1, 2021, that the Respondent raised for the first time that the six-month delay had expired some three months earlier. [ 31 ] In these circumstances, the Court is of the view that Justice Pinsonnault’s order that the parties file a case protocol was not intended to also order that the parties be subject to the six-month delay set out in

Article 173 C.C.P. and require them to file a request to have the case set down for trial and judgment . As a result, the sanction for missing the six-month delay set out in

Article 177 C.C.P. does not apply to this case. [ 32 ] This conclusion flows from the fact that the Directives do not require the filing of a request to have the case set down for trial and judgment in this case because this is not an oppression case.

If Justice Pinsonnault had intended to derogate from the Directives and subject the case to this procedural obligation, he would have done so expressly given the importance of the consequences that flow from missing the delay to file the request to have the case set down for trial and judgment. [ 33 ] Furthermore, any ambiguity in Justice Pinsonnault’s intention in October 2019 is resolved by his subsequent judgments in this file, which tend to indicate that it was not his intention to impose the six-month delay in

Article 173 C.C.P on the litigation. In the

judgment rendered in January 2020, he postponed sine die the Appellant’s request to examine the Respondent’s representatives and chose to remain seized of the request and any other incidental matters that might arise. This demonstrates his intention to maintain the procedural flexibility afforded to matters in the Commercial Division under the Directives , rather than impose the more rigid formalism of the Code that is often unmanageable and impractical in the context of commercial matters.

In a subsequent case management judgment rendered on December 23, 2020, he took note of the Appellant’s engagement to provide the Respondent with answers to undertakings from its pre-trial examination no later than January 6, 2021. This date surpasses the six-month deadline, clearly indicating that Justice Pinsonnault did not intend for the case to be subject to the six-month delay of

Article 173 . [ 34 ] The appeal will therefore be granted and the Respondent’s de bene esse application to note the Appellant’s default and to declare that the Appellant is deemed to have discontinued its action will be dismissed. [ 35 ] Finally, the Court adds that, if it had concluded that Articles 173 and 177 C.C.P. applied in this case, it would have been inclined to return the matter to the Superior Court so as to allow it to relieve the Appellant of its default because of the uncertainly surrounding the application of Articles 173 and 177 C.C.P. to the present case as a result of the Pinsonnault judgment, combined with the consequences for the Appellant, which clearly never intended to discontinue its action.

Although the parties’ conduct in 2019 suggests that they believed the six-month delay applied to the litigation, their subsequent conduct is to the opposite effect. In that regard, the Court regrets that the Appellant did not make such an application presentable de bene esse before Justice Morrison at the same time as the Respondent’s application. It probably would have avoided a substantial expense and much wasted time. As a result, event though the appeal is granted, the Appellant shall not be entitled to costs.

FOR THESE REASONS, THE COURT: [ 36 ] GRANTS the appeal; [ 37 ] SETS ASIDE the judgment rendered on July 27, 2021, by the Superior Court, District of Montreal (the Honourable Gary D.D. Morrison); [ 38 ] DISMISSES the "Demande de bene esse de la défenderesse, Ville de Montréal, pour faire constater que la demanderesse est présumée s’être désistée de sa demande en justice”; [ 39 ] THE WHOLE , without costs. GUY GAGNON, J.A. ROBERT M. MAINVILLE, J.A. STEPHEN W. HAMILTON, J.A. Mtre Matthew Maloley Mtre Stephen M. Raicek Mtre Audréanne Noël DE GRANDPRÉ CHAIT For Appellant Mtre Michel P.

Synnott Mtre Anthoine Préfontaine RACICOT CHANDONNET For Respondent Mtre Marc Duchesne Mtre Kevin Mailloux Mtre Frédérique Duchesne BORDEN LADNER GERVAIS For Impleaded party Date of hearing: April 27, 2023