RIVIERA DEVELOPMENTS INC. v. JO-KER VENTURES LTD., 2003 ABQB 306

Riviera Developments Inc. v. Midd Financial Corp., 2003 ABQB 306 Date: 2003 0403 Action No. 9303 07890 IN THE COURT OF QUEEN'S BENCH OF ALBERTA JUDICIAL DISTRICT OF EDMONTON BETWEEN: RIVIERA DEVELOPMENTS INC. AND JO-KER VENTURES LTD. Plaintiffs - and - MIDD FINANCIAL CORP. Defendant _______________________________________________________ MEMORANDUM OF DECISION NO. 5 (Action No. 9303 07890 RE: Rule 244.1(1)) of the HONOURABLE MADAM JUSTICE A.B. MOEN _______________________________________________________ APPEARANCES: M. Brent Tyson Wentworth Law Offices for the Plaintiffs Riviera Developments Inc.

Hubert (Fred) Johnson for the Defendants-by-Counterclaim Hubert (Fred) Johnson and Kerico Services Ltd.

Bradley J. Willis Willis & Bokenfohr for the Defendant (Plaintiff by Counterclaim) Midd Financial Corp. Murray Olsen Lovatt Olsen for the Defendant Jeffrey Johnson INTRODUCTION [ 1 ] In this most recent

chapter of this case, the Plaintiff, Riviera Developments Inc. (“Riviera”) applies, pursuant to Rule 244.1, to strike the defence of Midd Financial Corporation (“the Defendant”) because it claims that five years have passed during which nothing has been done by the Defendant to materially advance the action. [ 2 ] The Defendant cross-applies for dismissal of the action of the Plaintiffs, Riviera and Jo-Ker Ventures and an order directing that the Default Judgment obtained by the Plaintiffs be vacated, on the basis that more than five years have expired from the time that the last thing was done by the Plaintiffs that materially advanced the action. [ 3 ] I note that Jo-Ker Ventures did not join in Riviera’s application and was not served with the Defendant’s Notice of Motion, so any order I make cannot apply to it. [ 4 ] Riviera submits that Veit J. made an Order on May 19, 1994 which placed the onus of furthering the litigation on the Defendant.

It submits that this role reversal is what makes Rule 244.1 apply against the Defendant in this case. [ 5 ] The Defendant disputes Riviera’s

interpretation of Veit J.’s Order and submits that Rule 244.1 can never be read to apply to a defendant. Therefore, it applies to have Riviera’s Statement of Claim struck because Riviera did not take any steps in this action for over five years. [ 6 ] I find that Veit J.’s Order did place the onus of furthering the litigation on the Defendant, and the Defendant failed to take any steps in the action for over five years. I find that Rule 244.1 applies to the Defendant in these circumstances.

Therefore, I grant Riviera’s application, and dismiss the Defendant’s application. [ 7 ] In addition to the application by Riviera to strike the Statement of Defence, there was an application by Jeffrey Johnson regarding the release of certain shares being held by him pursuant to Veit, J’s Order. Jeffrey Johnson is not a party in this action but was a defendant in the other action - 9503 12987. I grant this application for the reasons set out below. BACKGROUND [ 8 ] On April 16, 1993, the Plaintiffs in this action filed their Statement of Claim against the Defendant.

Default Judgment was registered by the Plaintiffs on May 19, 1993. Subsequently, a number of steps were taken to enforce the judgment. In July 1993, an application was made by the Defendant to set aside the Default Judgment; the Master denied the application and it was appealed to the Court of Queen’s Bench. Veit J. gave judgment in that matter on April 21, 1994. Veit J. did not set aside the Default Judgment, but rather

stayed execution of it on condition that certain property be preserved. The relevant parts of her Order, dated May 19, 1994, are set out below. [ 9 ] In accordance with Veit J’s Order, on May 24, 1994, the Defendant filed a defence. It also filed a counterclaim that had not been authorized by Veit J.. Defences to the counterclaim were filed on September 19, 1994. [ 10 ] Subsequently, on January 31, 1995, the Defendant made an application before Veit J. for reconsideration of her earlier Order because of a perceived bias on her part.

She declined to hear the matter but gave leave to the Defendant to appear before another Justice to hear the matter. Roslak J. dismissed that application on March 16, 1995. [ 11 ] The Procedure Record for this action reveals no further steps were taken in this action until October 24, 2001 when Marceau J. gave an Ex Parte Order granting leave to Midd Financial to appear by agent, Robert Matheson. Given that the Order was ex parte , it was challenged by the Plaintiffs and set aside by Mason J.. DISCUSSION A. Riviera ’ s Application 1.

Interpretation of the Order [ 12 ] The May 19, 1994 Order of Veit J. (“the Order”) states in part: 1. IT IS ORDERED that the Defendant (Applicant) have leave to file a Statement of Defence in the within proceedings notwithstanding the Default Judgment entered against it the 19 th day of May, A.D. 1993. 2. AND IT IS FURTHER ORDERED THAT the following terms be imposed upon the Defendant (Applicant) in respect of the future conduct of this action. a.

The Defendant (Applicant) shall file its Statement of Defence within 15 days after entry and service of this Order, and conduct further steps in this action within such time limits as are set by agreement between Counsel or as determined by further Order of this Honourable Court; c. In the event that the Defendant (Applicant) is successful in its claim, it shall not recover interest on any Judgment obtained for the period May 19, 1993 to April 21, 1994. d. That further enforcement of the Default Judgment herein is stayed pending the disposition of this action.

a) Riviera’s Position [ 13 ] Riviera says that by the words of the Order, Veit J. made it the Defendant’s obligation to conduct further steps in the action. It says that the Order effectively reversed the onus of advancing the action from the Plaintiffs to the Defendant. [ 14 ] In answer to the submission on the part of the Defendant that Riviera still had a positive obligation to proceed with the action,

Riviera says that its action has been completed. Process was served, a Default Judgment was entered and execution on that Judgment had been effected. The Order did not set aside the Default Judgment and froze the shares which had been transferred to Riviera in execution of the Default Judgment. In short, there was nothing left for Riviera to do.

b) The Defendant’s Position [ 15 ] The Defendant rejects Riviera’s

interpretation of the Order and submits that it was incumbent upon Riviera, in this, as in all cases, to move the action along. The Defendant submits that the Order merely required it to comply with “time limits as are set by agreement between Counsel or as determined by further order of this Honourable Court.”

c) Conclusion on

Interpretation of the Order [ 16 ] The following provisions of the Order make it clear that the Defendant was to assume conduct of the action:

a) Default Judgment was not set aside, and the shares that were seized were not ordered to be returned;

b) subs. 2(

a) provides that “[t]he Defendant shall...conduct further steps in this action...”; and

c) subs. 2(

c) states “[i]n the event that the Defendant (Applicant) is successful in its claim ....” [ 17 ] This conclusion is bolstered by Veit J.’s Reasons for Decision, where she states at page 12 that,“[i]t is appropriate to set stiff terms within which [the Defendant] must now continue the action .” (emphasis mine) [ 18 ] I take it from this language that it was her intention to reverse the onus for advancing the action from Riviera to the Defendant. In effect, by obtaining Default Judgment, the Plaintiffs had done all they needed to do to recover the amounts the Statement of Claim alleged were owing.

In the Order, Veit, J. gave the Defendant an opportunity to show that there was no debt owing, evidenced by her reference to the Defendant’s “claim.” [ 19 ] I do not accept the Defendant’s argument that all the Defendant had to do was comply with time lines as set by agreement or Order. As stated above, the effect of the Order was to require the Defendant to show why Riviera was not entitled to enforce the Default Judgment. The Defendant was required to take the steps necessary to prove this claim. 2.

Application of Rule 244.1 to the Defendant [ 20 ] Rule 244.1 (1) of the Alberta Rules of Court reads as follows: ... where five (5) or more years have expired from the time that the last thing was done in an action that materially advances the action, the Court shall , on the motion of a party to the action, dismiss that portion or part of the action that relates to the party bringing the motion. (Emphasis added)

a) Riviera ’ s Position [ 21 ] Riviera argues that Rule 244.1 may apply to a defendant in the proper circumstances. It refers to the judgment of the Court of Appeal in Alberta v. Morasch , 2000 ABCA 24 , at para 5 , in which the Court seems to suggest that it might apply to a defendant:

The Rule is written in absolute terms and is mandatory ... Once it is established that a “thing” has not been done in five (5) years to materially advance the action the Court “shall” dismiss the action. The absence or presence of prejudice to another party is not a consideration ....Similarly, the sterling reputation of the litigant, the strength of his action or defence, and the justification for the delay are all irrelevant to a R. 244.1 application. Of course, although mandatory, a R. 244.1 dismissal is not automatic.

A party must apply to the Court to trigger the dismissal. (Emphasis added) [ 22 ] Riviera submits that, in the unique circumstances of this case, in which the onus of conducting the action was placed on the Defendant, Rule 244.1 applies, and the Statement of Defence should be struck out.

b) The Defendant ’ s Position [ 23 ] The Defendant submits that Rule 244.1 could never apply to a defendant. It argues that

Part 24 of the Rules of Court only applies to prosecution of an action and not to defence of an action. The Defendant relies upon the heading associated with

Part 24 which reads “Delay in Prosecution of Action.” The Defendant further submits that the wording of R.244.1(1) refers to an “action” and that “action” does not include a Defence. Further, it points to the use of the word “dismiss” in the Rule, arguing that a Statement of Defence is struck, rather than dismissed. [ 24 ] The parties could not find a case where Rule 244.1 (1) had been invoked against a Defendant. The Defendant says that the decision in Morasch was made in the context of the dismissal of the Plaintiff’s wrongful dismissal action.

It suggests that the reference to “defence” in paragraph 5 of that case can only be obiter dictum and only inserted to make the point that no equitable relief is available under the Rule. [ 25 ] The Defendant submits that Morasch must be read in the context that has been long established that a Defendant has no onus to prosecute an action: Wyant Estate v. St. Arnault (1985) 43 A.L.R. (2d) 317 (ABQB); Lethbridge Motors Co. v. American Motors (Canada) Ltd. (1987) 1987 ABCA 150 (CanLII) , 53 A.L.R. (2d) 326 (ABCA) at 331 .

c) Conclusion [ 26 ] With respect to the Defendant’s reliance upon the headings associated with

Part 24, I note that usually headings are not to be used to interpret legislation.I have nothing before me to suggest that the headings in the Rules of Court are to be used to interpret those Rules. [ 27 ] The language of the Rule itself uses the word “party.” The Rule does not distinguish plaintiffs from defendants, leaving me to believe that the drafters of the Rule intended it to be broad. Given the language of the Rule, it is not surprising that the Court of Appeal suggested in Morasch that it might apply to a defence.

For this reason, I conclude that Rule 244.1 may apply to defendants in appropriate cases, however rare. [ 28 ] I suggest that appropriate cases will be rare, since normally the plaintiff has the onus to prosecute an action. For the rule to apply, that onus must have shifted to the defendant. [ 29 ] This is such a case. The Order gave the Defendant conduct of the action, thus bringing into play the rule. Nothing was done for a period of over five years. For this reason, I allow Riviera’s application to strike the Statement of Defence and proceed with execution of the Default Judgment. B.

The Defendant ’ s Application [ 30 ] The Defendant’s application is dismissed, since, as concluded above, the Defendant was ordered to take conduct of the action

rather than the Plaintiffs, and failed to do so. C. Jeffrey Johnson’s Application [ 31 ] Veit, J. ordered by para 2. e. the following: That the Shares of Tyson Energy Limited, transferred by the Order of Master Quinn dated 25 th June, 1993 and Fiat of Master Funduk dated 30 th July, 1993 to the Plaintiffs (Respondents) Riviera Developments, Inc., be delivered to and thereafter held in trust by , M.

Brent Tyson solicitor for the Plaintiffs, (Respondents), pending the final disposition of this action. [ 32 ] The application before me to release the shares was made by Jeffrey Johnson, not a party to this action but a defendant in the related action - 9503 12987. He had come into possession of the shares upon the execution of the Default Judgment prior to Veit, J.’s Order. Since that time, the shares have been held by Jeffrey Johnson.

Those shares were the property of Riviera and not Jo-Ker. [ 33 ] Given that the Order was that the shares be held “pending the final disposition of this action”, and that I have disposed of the action as against Riviera Developments, there is no longer a need for the shares to be held and I order that they be released. CONCLUSION [ 34 ] I grant the application of Riviera to strike the defence as against it as a result of the Defendant’s failure to take any steps in the action, as ordered.

It follows that the Defendant’s application is dismissed. [ 35 ] I note that this Order does not apply to Jo-Ker Ventures Ltd.. [ 36 ] I vacate the Order of Veit J. pertaining to the stay of execution as it relates to Riviera, and it follows that Riviera may proceed to execute on its judgment. [ 37 ] I vacate the requirement by Veit J. to hold the shares of Tyson Energy Limited in trust. [ 38 ] Costs are awarded to Riviera and to Jeffrey Johnson. Costs in the action are to be taxed by the taxing officer. HEARD on the 18 th day of December , 2002.

DATED at Edmonton, Alberta this 3 rd day of April , 2003. __________________________

J.C.Q.B.A.