Murphy v. The Queen, 87 DTC 5375, [1987] 2 CTC 162 (FCTD)

Jerome, A.C.J.:—This application came on for hearing at Toronto, Ontario, on April 21, 1987. The defendant seeks an order under Rules 440, 460 and 465(20) dismissing the plaintiff's action for failure to give full discovery and for want of prosecution.

The plaintiffs began this action by way of a statement of claim filed March 31, 1977. The claim was for negligent and malicious prosecution arising out of the defendant's reassessment of the plaintiff's 1968 and 1969 taxation years. The plaintiffs attribute the cessation of their business to this reassessment and the defendant's related conduct and claim a large sum as damages. Since 1977, there have been three attempts by the Crown to have this action dismissed, first as disclosing no cause of action and later for want of full discovery. Both the earlier applications were dismissed but in December 1984, I endorsed an order on consent that certain undertakings which had been given by the plaintiffs at examination for discovery be answered on or before February 18, 1985. After an extension of time, answers were given in April of 1985, but they were not complete. Repeated requests to plaintiffs' counsel for the undertakings to be completed brought no response. Finally, in June 1986, the Crown advised that unless answers were forthcoming by the 24th of that month, this application would be brought. At that point, they were informed by plaintiffs’ former counsel that his clients had changed counsel. A notice of change of solicitors was filed August 1, 1986.

This application was filed on July 10, 1986. Since that time plaintiffs’ new counsel has provided complete answers to the outstanding undertakings with the exception of the specifics of the damage claim. He reports with regard to the latter issue that they are in the process of obtaining expert evidence to substantiate the figure claimed.

The Crown's position in this application is that the long delays in prosecuting this action and answering the undertakings on discovery have prejudiced its defence. Two of the Crown's witnesses have left the public service and their testimony will be difficult to obtain. In addition, as of the date of the hearing, the Crown had yet to receive particulars of the damages claimed. After this lapse of time, evidence regarding the question of damages would be particularly hard to adduce. The failure to provide answers to undertakings as ordered by the Court in 1984 is said to be tantamount to contempt. In light of all these circumstances, the defendant alleges that the plaintiffs are not prosecuting this action with due dispatch.

In reply, the plaintiffs provide several reasons for the delays complained of. The most serious period of delay was between 1982 and 1985. At that time, the plaintiffs were seeking a resolution of the matter through political channels. They instructed counsel, however, to keep this action alive and perform all necessary steps. The other main reason for delay in this period was the failure of plaintiffs’ former counsel to communicate with his clients. The plaintiffs were not advised of the Crown's repeated requests for the undertakings to be answered until several days before the deadline provided in the Court order. This failure to communicate and the general neglect of the plaintiffs’ affairs became the subject of a complaint to the Law Society about plaintiffs’ former counsel. Distressed by the slowness with which the matter was proceeding, the plaintiffs took steps in April of 1986 to retain new counsel. Their current solicitor has taken action to ensure that the litigation will proceed with more dispatch.

The statutory provisions relevant to this application are Rules 440, 460 and 465(20):

Rule 440. Want of Prosecution

(1) If the defendant does not, within 3 months after the close of pleadings, receive notice of trial or have knowledge of an application for an order fixing the date for trial, he may, before notice of trial, or of an application for an order fixing the date for trial, apply to the Court to dismiss the action for want of prosecution; and on the hearing of such application, the Court may order the action to be dismissed accordingly, or make such other order on such terms as seem just.

(2) No application may be made under this rule unless the applicant is of the view that the plaintiff is not prosecuting the action with due dispatch, and, save in exceptional circumstances, unless, at least two weeks before service of the notice of motion, the applicant has served notice in writing on the plaintiff that, unless the plaintiff takes the necessary steps to bring the action on for trial, such an application will be made.

Rule 460. Failure to Comply

(1) If any party who is required by Rules 447 to 458, or by any order made thereunder, to make discovery of documents or to produce any documents for the purpose of inspection or any other purpose fails, without reasonable cause or excuse, to comply with any provision of Rules 447 to 458 or with that order, as the case may be, or fails to make reasonable efforts to give full discovery, then the Court may make such order as seems just including, in particular, an order that the action be dismissed, or, as the case may be, an order that the defence be struck out and judgment entered accordingly.

(2) When a notice of motion for an order under paragraph (1) has been filed and served, the party against whom the application is made may not, without leave of the Court, remedy any default on the basis of which relief is sought by such proposed motion.

Rule 465. Examination for Discovery

(20) If any individual to be questioned fails without reasonable excuse to attend and submit to questioning as required by this Rule, or to comply with an order under paragraph (18), the party being examined is liable, in the discretion of the Court, if a plaintiff to have his action dismissed, and if a defendant to have his defence struck out and to be placed in the same position as if no defence has been filed. The onus of proof of "reasonable excuse" for the purpose of this Rule is on the party being examined.

It would appear that the Crown has established a good case for having this action dismissed under one or all of these sections. However, it must be remembered that this remedy is a very drastic one. I have previously noted my reluctance to deprive plaintiffs of their substantive rights on purely procedural grounds. [See Rae Import Corporation v. Federal Pacific Lakes Line et al. (1984), 46 C.T.C. 30 and cases cited therein.] An action should be dismissed for procedural reasons only in the clearest of cases. Here, there are two circumstances that save this action. First, most of the prejudice to the defence which has resulted from the delay relates to the issue of damages. There does not seem to be any clear evidence that the defendant has been prejudiced on the question of liability. Consequently, this might be an ideal case for an application to try these two issues separately. In rare cases, this Court has found it useful to determine the issue of liability first, leaving the question of damages to a later date. The plaintiffs should be given an opportunity to make such an application. Counsel for the plaintiffs states he would be prepared to go to trial on the issue of liability alone before the end of this calendar year.

The second reason which leads me to dismiss this application is that the plaintiffs have recently retained new counsel. As noted, their current solicitor immediately set about to provide the defendant with all of the outstanding undertakings on discovery. This is not a step that the plaintiffs would have taken if they did not intend to press on with the matter. There is therefore reason to accept the theory that the previous delays were due to the difficulties the plaintiffs had with their former counsel. They have now placed this file in the hands of solicitors who are behaving in a fashion consistent with getting on to trial. Counsel has offered to submit to an order putting time limits on every future step.

In all the circumstances, therefore, while the Crown has established most of what it needs to succeed, I feel the plaintiffs should be given the benefit of the doubt. This is an extraordinary kind of action. The plaintiffs have a major hurdle ahead of them to establish liability, but they should be given an opportunity to make their case. If they succeed in persuading the Court as to liability, and if a further hearing is directed on the issue of damages, is quite likely that the trial judgment would limit and clarify the scope of the damages claimed. I will therefore dismiss this application and allow the plaintiffs to move for separate hearings of the two issues.

The Crown's application is dismissed. Costs in the cause.

Application dismissed.