Canada: Alberta Court Of Appeal Cracks Down On Chronic Delay, Throws Case Out Of Court

On April 19, 2017, the Alberta Court of Appeal (Court) released its decision in Humphreys v. Trebilcock (Humphreys), which is perhaps the most comprehensive consideration to date of whether delay in the prosecution of a plaintiff's case warrants dismissal of an action. The Court reversed the lower court's decision and dismissed the action, finding that the delay was inordinate, unjustified and that the chambers justice had committed no less than four reversible errors.

The Court's condemnation of delay is consistent with recent jurisprudence from the Supreme Court of Canada addressing the systemic issue of delay in prosecution of crimes and the harmful effects of delay to the justice system as a whole. It also marked the first time the Court has addressed non-litigation prejudice resulting from delay.

BACKGROUND

The claim in Humphreys, commenced in December 2006, concerned a transfer and sale of assets by the defendants, which the plaintiffs claimed were fraudulent and in breach of the defendants' fiduciary duties as directors of the corporate sellers. The plaintiffs alleged that the defendants had engaged in oppressive conduct intended to cause harm and that the "egregious and high handed" behaviour was deserving of sanction and punitive costs.

The plaintiffs claimed against multiple defendants and by the time each defendant moved for the action to be dismissed in June 2016, the questioning process — a preliminary step in civil litigation — was not yet complete. At that point it had been almost 10 years since the action was first filed.

The defendants gave evidence that the delay not only resulted in litigation prejudice — depletion of memories of the events at issue and even the death of several key witnesses — but also created non-litigation prejudice which impacted their ability to conduct business and carry on their daily lives free from the stress and limitations that come from being involved in a lawsuit.

The lower court was not persuaded by the defendants' evidence and did not consider the plaintiffs' delay to be inordinate or inexcusable. The defendants appealed.

COURT DEFINES "DELAY" AND "SIGNIFICANT PREJUDICE"

The Court allowed the appeal and set out guiding principles for parties involved in civil litigation to pursue claims expeditiously. Failure to adhere to these guidelines may result in significant penalties and ultimately an action being dismissed.

Rule 4.31 of the Alberta Rules of Court (Rules) authorizes a court to dismiss a lawsuit if a party has prosecuted it at such a slow pace that delay has occurred and the delay has resulted in significant prejudice to the other party. If the party seeking relief proves inexcusable delay, this is considered proof of significant prejudice.

In Humphreys, the Court noted that neither "delay" nor "significant prejudice" is defined in the Rules, and that without functional definitions it is difficult to apply rule 4.31. The Court concluded that the "differential between two points" on a litigation timeline will constitute delay if it is "inordinate", which is extraordinary delay "exceeding in amount, quantity, force, intensity or scope the ordinary, reasonable or prescribed limits".

Whether a delay is inordinate will require an analysis of the facts and claims at issue on a case-by-case basis. The Court noted that while more complex cases necessarily take longer to prosecute, "no minimum time frame... protects a dawdling plaintiff". The Court noted that claims of a "harmful nature", such as fraud, will require a faster pace of prosecution than a case that does not allege fraud or a comparable wrong.

The Court found that "significant prejudice" in the context of delay will result if the time lapse causes serious impairment to a party's ability to produce evidence. This is litigation prejudice and is a non-controversial principle. Significant prejudice can also arise where the lawsuit threatens important or legitimate non-litigation interests of a party. For example, a business not being able to carry on its affairs with confidence due to an ongoing lawsuit can also constitute significant prejudice that will lead to delay and potentially dismissal of the action. That non-litigation prejudice is likely heightened in cases where serious claims are being advanced involving fraud allegations which, even if unproven, can cast negative consequences upon a defendant.

Non-litigation prejudice has been recognized and applied in other jurisdictions, but the Humphreys decision is the first instance of its adoption in Alberta. The decision is therefore a serious warning to litigants to consider not only the legal ramifications of the timing and execution of their actions, but also the commercial and personal consequences of delay to the opposing party.

While all parties to litigation are required to pursue their positions with speed and efficiency, the moving party typically bears the responsibly of moving a lawsuit forward by virtue of being the party that commenced the action. Once a defendant establishes that inordinate delay has occurred, the plaintiff must provide evidence that the delay was justified or unavoidable. Otherwise, the Court may dismiss the action entirely or make any other order it deems appropriate under the Rules.

CRACKDOWN ON DELAY ON THE RISE IN CANADIAN COURTS

The Court's condemnation of litigation delay is consistent with a broader policy position recently adopted by Canadian courts, including the Supreme Court of Canada. Delay in the prosecution of court actions has been rising steadily. The 2016 R. v. Jordan decision of the Supreme Court of Canada is referred to in Humphreys and, though it deals with criminal rather than civil prosecutions, echoes similar themes. Three recent decisions from the Court of Appeal for Ontario have had a similar effect on the interpretation of the civil procedure rules against delay in that province.

The Humphreys decision stands as a warning to litigants in Alberta that there are real consequences to parties who employ stall tactics, are deleterious in their approach or who simply fail to pursue their legal claims with speed and efficiency. While the facts in Humphreys involved delays of many years, hopefully litigants will take heed of this decision and the Court will be more willing to impose sufficient remedies for delay, particularly given the significant backlog of cases in Alberta.

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