Introduction
On June 16, 2016, revisions were made to Rule 4.33 of the Alberta Rules of Court, commonly known as the "Drop Dead Rule". The revised Rule 4.33 now provides for a "suspension period", and parties may enter into an agreement, or may apply to the Court for an Order, which specifies that a certain period of time shall not be included in the computing of the three year time period under the Rule.
While it remains to be seen how the revised Rule will be interpreted and applied, it contains important changes which may have implications to parties who currently have standstill or tolling agreements in place and will impact how such agreements must be made in the future.
Amendments to Rule 4.33
Rule 4.33 is intended to encourage timely and cost-effective litigation and is designed to bring an end to actions that have become inactive and should be deemed to have been abandoned.
Former Rule 4.33 provided that if three or more years had passed without a significant advance in an action, the Court, on application, must dismiss the action in whole or in part unless certain exceptions applied. One of those exceptions was where the parties had expressly agreed to the delay. In such cases, the application to dismiss for long day would not be warranted.
However, the Court was often faced with a decision as to whether such agreements, be they standstill agreements or simple "take no steps" letters, met the requirements under the Rule and if so, what the temporal boundary was as contemplated by the agreement. For example, was the agreement to take no steps to apply indefinitely, or just until counsel had the opportunity to meet with the client or examine the evidence?
The revised Rule 4.33 attempts to codify, and hopefully clarify, the requirements that must be met in order to suspend the running of the clock under Rule 4.33. The revised Rule 4.33 provides that in order for an agreement to stop the clock from running to be effective under the Rule:
- The agreement must be in writing; and
- The time period for which the calculation of time is suspended must be clearly enunciated and either end on a) a specific date or b) the happening of a specific event (defined as the "Suspension Period").
The Rule suggests that the Suspension Period may be carved out of the computation, in that the time before the Suspension Period is put in place, and after the Suspension Period expires, will all count towards calculating the three year time period.
Importantly, if a Suspension Period is agreed to, the respondent must give all other parties to the action written notice setting forth what the Suspension Period is, when it was agreed to and by whom. Notably, this may mean that an agreement amongst third party plaintiffs and third party defendants to toll third party claims or processes pending steps in the main litigation will be required to be disclosed to the plaintiff.
If a plaintiff cannot reach agreement with another party to enter into a Suspension Period agreement under the Rule, or if they don't want to seek the other party's consent or agreement, they can now apply to Court under subrule 4.33(9) for an order setting out a Suspension Period that shall not be included in computing the period of time. The Rule does not provide guidance as to the factors a court will or should consider.
Implications
Parties should review their current standstill or tolling agreements to ensure that they fit within the confines of the new Rule and in particular, that they end on a) a specific date or b) the happening of a specific event. Often such agreements run indefinitely until one party gives notice of termination, but it remains to be seen whether the latter would constitute a "specific event" as contemplated by the revised Rule, but we expect it would.
Further, the revised Rule permits a plaintiff to make an application to the Court for a tolling agreement, with or without the consent of the other party or parties. While it has yet to be judicially considered, it is unclear when and and on what terms, the Court would impose a tolling agreement on other parties under this discretion. We will be watching the cases under this Rule to see how this unfolds.
Finally, revised Rule 4.33 makes clear that when parties enter into agreements to avoid application of the drop dead rule, the agreement must be disclosed to all other parties to the action. It is yet to be judicially determined what the consequences of non-disclosure will be so parties should be cognizant of this disclosure requirement moving forward.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
