Canada v. Cragg & Cragg Design Group Ltd., docket T-2942-94

Date: 19980722

Docket: T-2942-94

BETWEEN:

     HER MAJESTY THE QUEEN,

     Plaintiff,

     - and -

     CRAGG & CRAGG DESIGN GROUP LTD.,

     Defendant.

     AMENDED REASONS FOR ORDER

JOHN A. HARGRAVE,

PROTHONOTARY

[1]      The Defendant, to whom I will also refer as Cragg & Cragg, seeks dismissal of this action, either by reason of delay or for want of prosecution. In the alternative the Defendant seeks a stay. The action itself is an appeal of a decision of the Canadian International Trade Tribunal (the "Trade Tribunal") which set aside an assessment of the Minister of National Revenue.

SUMMARY

[2]      The Plaintiff has delayed substantially, without excuse. While this delay has meant hardship to the Defendant, I am not convinced there has been any prejudice by which the Defendant might receive less than a fair trial, that being a part of the usual test for want of prosecution set out in Birkett v. James [1978] A.C. 297 (H.L.). However, prejudice may come in different forms. In Department of Transport v. Chris Smaller Ltd. [1989] 1 A.C. 1197 (H.L.) at 1209, Lord Griffiths noted that the prejudice required may be of various kinds and is not confined to that which denies a fair trial: it may include business prejudice, for example that of delay hanging over a professional person. In addition, in certain circumstances, where delay is coupled with a very questionable intention or desire to proceed, prejudice to a defendant is not a necessary element: Grovit v. Doctor [1997] 1 W.L.R. 640 (H.L.).

[3]      I have concluded, given all of the circumstances that there has been inordinate and inexcusable delay, together with business prejudice. However, there is an additional reason why this action ought to be dismissed. Throughout the hearing of the motion counsel for the Plaintiff pressed the argument that because this is an appeal, in the form of a trial de novo, from a decision of the Trade Tribunal, whose proceedings are said to be completely irrelevant, the taxpayer has the burden of demonstrating that the Minister's assessment is wrong. Thus, so this argument goes, Cragg & Cragg is in fact in the position of a plaintiff, and therefore two propositions follow. First, Cragg & Cragg can not rely on any of the procedural rights and remedies allowed a defendant under the Federal Court Rules, and second, it was and is the obligation of Cragg & Cragg, not the obligation of the Crown as a plaintiff, to move the action along. The Plaintiff, being completely wrong on these assumptions, I can only conclude that the Plaintiff has no real desire or intention to proceed with this action. While this lackadaisical attitude on the part of the Crown seems to have prevailed from the very beginning of this dispute, I may not look at delay beyond the commencement of this action, but a late start does have ramifications:

"To justify dismissal of an action for want of prosecution the delay relied upon must relate to time which the plaintiff allows to lapse unnecessarily after the writ has been issued. A late start makes it the more incumbent upon the plaintiff to proceed with all due speed and a pace which might have been excusable if the action had been started sooner may be inexcusable in the light of the time that has already passed before the writ was issued." (Birkett v. James (supra) p. 322)

The House of Lords in Birkett v. James makes it clear that delay should be reckoned from when the action is commenced, but that if there has previously been delay there is an added obligation on a plaintiff to proceed diligently to bring the action to a trial: see also Biss v. Lambeth Area Health Authority, [1978] 1 W.L.R. 382 at 390 (C.A.) and Department of Transport v. Chris Smaller Ltd. (supra) at 1206 (H.L.). In this instance, the Plaintiff did wait until the very end of the appeal period before commencing this action, however, that was only a few months. But the Plaintiff has been neither quick nor diligent in dealing with the whole matter, going back at least as far as May of 1991. I would also comment, generally, that if tax is owing the Crown and the Department of Justice ought, in all instances, to get on with collection, but if no tax is owing, they ought to occupy themselves with more productive matters, for both procrastination and unnecessary proceedings are to the detriment of the taxpayer. In the result, I have applied Birkett v. James and Grovit v. Doctor, have allowed the Defendant's motion, and have dismissed the Crown's action both by reason of inexcusable inordinate delay and business prejudice and by reason of delay and a lack of intention to proceed. Here I should note that counsel who appeared on the motion for the Crown only recently took over the file and thus should not be blamed for past delay. I will now consider this in more detail.

SOME RELEVANT BACKGROUND

[4]      The Defendant, a family owned residential design and development firm, assembled substantial land in North Vancouver in 1989. They developed this parcel of land into an integrated eighteen building residential community called Illahee. Illahee is an integrated linear development, rather than a massive highrise, however it is strata-titled in the same manner as a condominium development.

[5]      The economics of the Illahee project depended, to a substantial extent, on a federal sales tax rebate, provided for in the Excise Tax Act, the rebate being either fifty percent or seventy-five percent of the tax, depending upon the state of completion of the project on the 1st of January 1991.

[6]      The Defendant did diligent research and made what would seem to have been proper inquiry of Revenue Canada to satisfy itself that if there was the appropriate degree of completion the Illahee project would receive the maximum rebate of seventy-five percent, a total of $427,237.50. This, the Defendant determined through its inquiry, would require the whole of the project to be fifty percent completed.

[7]      By the 1st of January 1991, eleven of the eighteen buildings and much of the common infrastructure, representing fifty-five percent of the cost of the project, were completed. The Defendant applied for the rebate as soon as Revenue Canada printed and released the necessary forms, 21 January 1991.

[8]      The Defendant says, contrary to the initial advice received, that Revenue Canada decided, on 26 February 1991, to grant a rebate only for those separate portions of the development which had been completed. This approach which , in the Defendant's view, treating a strata-titled linear condominium development in a different way from a strata-titled highrise condominium development, was contrary to what the Defendant had been led by Revenue Canada to expect. In the result the Defendant received a rebate of only $185,501.25, with $241,736.25 being disallowed. The Defendant notes that if it had been advised that the linear project would be looked upon by Revenue Canada in a way different from a vertical project, the Defendant would have revised its construction schedule and completed fifty percent of each building making up the whole of the development, rather than fifty-five percent of the whole project. This turn of events, coupled with the 1990 drop of the Vancouver real estate market, presented a great financial difficulty for the Defendant.

[9]      Promptly, in May of 1991, the Defendant filed a notice of objection to the Minister's decision, hoping for a speedy resolution. Twenty-two months later, after many reminders the Minister, apparently without referring to Cragg & Cragg's notice of objection, denied the notice of objection. Cragg & Cragg appealed the Minister's decision to the Trade Tribunal on 19 October 1993.

[10]      The Defendant's appeal to the Trade Tribunal succeeded. However, it is interesting to note that the then counsel for the Minister neither cross-examined Mr. George Cragg nor called any evidence at the hearing before the Trade Tribunal, but merely suggested, at the end of the day, that Mr. Cragg's evidence should not be believed.

[11]      Just before the time within which to appeal the Trade Tribunal's decision ran out the Crown filed the present appeal in this Court on 12 December 1994. The Defendant filed its defence 30 January 1995. By the 1st of February 1996, no steps having been taken by the Minister in the year since the defence had been filed, counsel for the Defendant asked the then counsel for the Crown whether the Minister was going to continue with the action. It would seem that the then counsel for the Crown did not know the answer to that question, for the then counsel undertook to make inquiries. A year later, February of 1997, without explanation, the Crown filed a notice of intention to proceed and provided the Crown's affidavit of documents. The Crown refers to some correspondence it sent the Defendant, in 1997 and 1998, but none of it seems to have moved the action along. During some months in 1997 no steps took place, however that was as a result of family tragedy.

[12]      The Defendant filed the present motion 13 March 1998, to be heard later that month. Shortly after the filing and serving of this motion the Plaintiff provided the Defendant with a second notice of intention to proceed. While the motion was originally to be heard in March of 1998 it was rescheduled, by consent, for hearing 9 April 1998. Subsequently the parties filed further written material.

CONSIDERATION

[13]      To begin there are several preliminary submissions to be disposed of. I do not deal with all of the procedural points raised by the Plaintiff, only with those which might possibly have some merit.

[14]      The Plaintiff says it cured any delay by providing an affidavit of documents in February of 1997. This is wishful thinking.

[15]      The Plaintiff submits that the Defendant did not allow the Plaintiff appropriate time within which to proceed with the action before bringing the motion to strike out under Rule 440. Rule 440 requires, in usual circumstances, notice of two weeks before a motion to dismiss for want of prosecution. The purpose of the notice is to allow a plaintiff an opportunity to get on with the action. Thus the Plaintiff, in this instance, had some four weeks, between service of the motion and its hearing, within which to show initiative. The Plaintiff made no use of the four week period. This is an appropriate instance in which to waive compliance with the notice provision.

[16]      Next, the Plaintiff submits that the Defendant itself was in default under the Rules and thus ought not to be allowed to seek dismissal for want of prosecution. That is not a novel point. The previous conduct of a defendant is always relevant: Allen v. Sir Alfred McAlpine & Sons Ltd. [1968] 2 Q.B. 229 at 260 (C.A.). However, if such a rule were one of general application, few if any applications to dismiss for want of prosecution would ever be heard, let alone succeed. The case of Parfums Nina Ricci v. Modes Ricci International Ltd. (1985) 1 C.P.R. (3d) 142 (F.C.T.D.), to which the Plaintiff refers, merely notes that an application to dismiss for want of prosecution ought not to be brought where the defendant is in default of undertakings: the Nina Ricci case has nothing to do with a default under the Rules.

[17]      The Plaintiff also relies on Allied Old English Inc. v. Staud (1996) 64 C.P.R. (3d) 479. There the view of the Associate Senior Prothonotary is that a defendant in default ought not to be allowed to seek dismissal for want of prosecution. However that view is, by his own admission, only supported to some extent by the Nina Ricci case and moreover it is obiter in that the merits of the motion were considered and the motion dismissed as the defendant was unable to satisfy any of the three classic elements of the test enunciated by the Court of Appeal in Allen v. Sir Alfred McAlpine & Sons Ltd. (supra at 268) and by the House of Lords in Birkett v. James (supra at 318).

[18]      In the present instance, in looking at the merits of the Defendant's motion, I have taken into account delay on the part of the Defendant. However the Defendant's procedural breaches to this point are not such as to automatically bar the motion. Further, the Plaintiff should keep in mind that it is the duty of plaintiffs, generally, to move a proceeding along. This brings me to the final procedural point of any substance which the Plaintiff argues.

[19]      The Plaintiff's position is that it is the obligation of the taxpayer to prosecute the action against itself and therefore there can be no delay amounting to want of prosecution by the Plaintiff. Thus the Defendant may not rely upon the delay in an application under Rule 440. This rather convoluted argument is based on the fact that the present proceeding is an appeal by way of trial de novo from a decision of the Trade Tribunal, and that it is for the Defendant, as taxpayer, to show the Minister's assessment is wrong. On this argument it is for the taxpayer, who must upset the Minster's assessment, to call evidence first before the Federal Court. Counsel for the Crown then submits it is only logical that the Defendant, Cragg & Cragg, has the obligation to prosecute the action and to move it along.

[20]      Where counsel for the Plaintiff misses the point is that while the taxpayer must present evidence at an earlier stage that does not make the taxpayer into a plaintiff any more than a reverse onus of proof, or a shifting onus of proof, reverses the designation of who is plaintiff and who is defendant or the roles that each must play in getting an action ready for trial. To elaborate, it is not correct to say that a defendant taxpayer begins the case at trial. Rather, counsel for the plaintiff usually begins, where the case is a challenge of an assessment. Typically, a plaintiff calls evidence as to the Minister's assessment, but at that point may rest, for the onus is then on the taxpayer to show the assessment in error. There are a number of cases which support this usual procedure. For example, President Thorson of the Exchequer Court said, in M.N.R. v. Simpson's Ltd. (1953), 53 D.T.C. 1127 at 1129:

"It follows, under the circumstances, that while a Minister, being the appellant, may be called upon to begin he may rest on the assessment so far as the facts are concerned without adducing any evidence. The onus of approving the assessment to be erroneous, in fact, is on the taxpayer."

Mr. Justice Joyal quoted this passage in First Fund Genesis Corporation v. M.N.R. (1990), 34 F.T.R. 313 at 316. Similarly, in The Queen v. Lavers, [1978] C.T.C. 341 (F.C.T.D.) the Court adopted this passage from Simpson's case:

"I adopt the statement of Thorson, P. in the Simpson's case (supra), and accordingly advise the parties that the onus herein would be on the taxpayer to establish the correctness of the Tax Review Board's [decision] herein. I did call on counsel for the plaintiff to begin. He introduced as evidence the assessment made herein by the Minister relative to the defendant's income tax return for the 1974 taxation year. Counsel also referred to the agreed statement of facts signed by the parties. (page 344)

This shifting of onus in no way establishes a defendant taxpayer as a plaintiff. It is merely a recognition of the onus of proof that is reflected in the order of presentation of different aspects of the case. While the presumption of the validity of the Minster's assessment remains and while the taxpayer may be required to call evidence at an early stage at trial, when the Minister appeals the decision of the Trade Tribunal, that does not mean that Cragg & Cragg is either barred from using procedures available to a defendant or that Cragg & Cragg must, in matters leading up to a trial, take the role of a plaintiff. I now turn to the merits of the Defendant's motion.

[21]      The pre 25 April 1998 Rules were in effect when this motion was heard. Rule 440 provided for dismissal for want of prosecution, the test for which is well known. To succeed, a defendant must show there has been inordinate delay and, as a result, the defendant is likely to be seriously prejudiced. It is for a plaintiff to show an acceptable excuse for the delay. This test is set out in Allen v. Sir Alfred McAlpine (supra) at 268 and in Birkett v. James (supra) at 318.

[22]      This case is not complex. It ought to have been pressed on to trial well before now. I say this notwithstanding compassionate delay to accommodate the Defendant. Given all of the circumstances the delay, from the commencement of the action in December of 1994, broken only by the filing of the Plaintiff's affidavit of documents and by two notices by the Plaintiff of an intention to proceed, constitutes inordinate delay. The Plaintiff's excuse, that it was for the Defendant to move the action along, is not an acceptable excuse. However, as I have already suggested, the Defendant has not been prejudiced in the usual sense.

[23]      The most usual prejudice for which a court looks, in the context of want of prosecution, is prejudice that will prevent the Defendant from receiving a fair trial (see for example Birkett v. James, supra, at 318). Alternately, as in the Chris Smaller case, the prejudice may be business prejudice (supra at page 1209). In the present instance, I accept Mr. George Cragg's evidence that the Defendant has been damaged financially and that its ability to do business has been seriously hampered by the uncertainty resulting from Plaintiff's delay, which has prevented Cragg & Cragg from getting on with its business within a reasonable time. Mr. Cragg was apparently not cross-examined on his affidavit, although there was ample time. His evidence establishes at least the required likelihood of serious prejudice. Thus, at the conclusion of argument, my feeling, now put into words, was that the action ought not only to be dismissed for want of prosecution, but that the Defendant, with substantial help from the Plaintiff, had made a case for dismissal for delay and lack of intention to proceed, within the principles first set out by the House of Lords in Grovit v. Doctor (supra). At the conclusion of argument I therefore referred counsel to the House of Lords decision in Grovit v. Doctor (supra) and asked for written argument based on that case. As I say I had in mind that delay and a lack of real intent to pursue an action might be a relevant basis on which to strike out this action. Counsel also picked up Universal Graphics Ltd. v. Canada (1998), 135 F.T.R. 71 and Margem Chartering Co. v. Cosena S.R.L. (1998) 134 F.T.R. 141, which touch on Grovit v. Doctor. To these I will add the most current case of which I am aware, Arbuthnot Latham Bank Ltd. v. Trafalgar Holdings Ltd., The Times, 29 December 1997, a decision of the Court of Appeal. This last case perhaps adds nothing new, but does point to a trend, which I will touch upon later.

[24]      In Grovit v. Doctor the House of Lords questioned the concept that courts are powerless to give relief to defendants who have been long neglected by plaintiffs, unless defendants are able to show prejudice. The motions judge, who initially heard the matter, held that there had been an inordinate and inexcusable three year delay by a plaintiff who had no interest in actively pursuing the litigation and thus dismissed the action. The Court of Appeal agreed, finding it was improper for a plaintiff to commence and continue litigation, which it had no intention of bringing to a timely conclusion. By the time the appeal reached the House of Lords, the appellant was pursuing the matter with vigour. However, the House of Lords was satisfied that both the motions judge and the Court of Appeal had come to a proper conclusion.

[25]      Lord Woolf, who wrote the decision for the Court, first touched upon criticisms of the principles set out in Birkett v. James, in many instances felt to be unsatisfactory and inadequate. First, he noted a suggestion that "... the effectiveness of the court's power to strike out proceedings as a sanction against delay is undermined by the need to show prejudice to the defendant.", which delay brought the reputation and efficiency of the civil justice system as a whole into disrepute. Further, he noted that because of the difficulty in establishing prejudice, plaintiffs could usually ignore time restrictions "... with a reasonable degree of confidence that nothing very serious will happen in consequence." (page 643). Second, was the concern that the type of prejudice looked for was too restricted and paid little regard to anxiety caused to litigants as the result of delayed litigation. Third, to require a defendant to establish prejudice undermines the defendant's case in the event that the motion to strike out is unsuccessful, for it usually involves the defendant having to demonstrate that the recollection of the defence witnesses has been adversely affected. With this and other background material in mind, including that there ought to be better control over delay, the court turned to the facts, defamation arising out of a statement made some eight years earlier which the plaintiff, had he any desire to do so, could have brought to a quick conclusion.

[26]      In the House of Lords the case took an interesting turn. Counsel for the appellant completed his argument. The parties were then invited to withdraw so the House of Lords might consider whether it was necessary to call upon the respondents. At that point, counsel for the appellant sought leave to withdraw the appeal which leave was denied, Lord Wolfe going on to comment:

"Even without this surprising late development, I am satisfied that both the deputy judge and the Court of Appeal were entitled to come to the conclusion which they did as to the reason for the appellant's inactivity in the liable action for a period of over two years. The conduct on the part of the appellant constituted an abuse of process. The courts exist to enable parties to have their disputes resolved. To commence and to continue litigation which you have no intention to bring to a conclusion can amount to an abuse of process. Where this is a situation the party against whom the proceedings is [sic] brought is entitled to apply to have the action struck out and if justice so requires (which will frequently be the case) the court will dismiss the action." (page 647)

The House of Lords, in agreeing that the motions judge had been correct in dismissing the action, did so notwithstanding the vigour with which the appellant had conducted his appeal. The House of Lords concluded that at some point they would like the issue fully and properly argued, but went on to dismiss the appeal with costs.

[27]      In Universal Graphics (supra) I dismissed an action for want of prosecution where there had been a six year delay by an inattentive plaintiff, but clearly no prejudice. In the present instance, the delay is less, but in the circumstances it is a much more devastating delay. I now turn to the intention of the Plaintiff to bring this matter to a conclusion.

[28]      The Plaintiff put great stock in the naive assumption that she need not take any steps to move her own action along. This apparent error in procedure strains credibility and all the more so after at least one reminder from the Defendant about proceeding with the action, a reminder which was ignored for a year. As I have already pointed out, where there has been delay before the commencement of an action and here I have in mind both the 22 months it took the Minister to deal with the notice of objection between 1991 and 1993 and the last minute appeal of the Trade Tribunal's decision, it is incumbent on a plaintiff to get on with the litigation at a reasonably quick pace. This has not happened. The action has progressed little during the course of some 39 months. The inescapable conclusion is that the Plaintiff has no real desire or intention to proceed with this action.

[29]      I mentioned a more recent case, Arbuthnot Latham Bank Ltd. v. Trafalgar Holdings Ltd. It is a case in which the Court of Appeal struck out two appeals by reason of considerable delay. Lord Woolf, M.R., was of the view that delay, of itself, was not a consideration which was in issue in Birkett v. James. However, with the introduction, in England, of Court controlled case management, delay would, in his view, become an increasingly significant factor, not only from the point of view of prejudice to a litigant, but also in relation to other litigants and the prejudice which delay caused to the due administration of justice.

[30]      Bringing this into the Federal Court context, our Court may well apply the 1998 Rules so as to recognize that a wholesale disregard of the Rules and the time limits in the Rules will be regarded as an abuse of process with delay, as in the present instance, being a separate ground by which to dismiss an action, without the need to show either prejudice or that a fair trial is no longer possible. Perhaps the only additional consideration, when pure delay is involved, ought to be whether it is fair to dismiss the action in question. However, the Court may well also consider whether taking a permissive approach to delay is fair to other litigants who wish a share of the Court's time, to the Court, which must endeavour to administer justice properly with finite resources and to the taxpayer who must foot the bill for unnecessary delay.

CONCLUSION

[31]      In the present instance, there is nothing inherently unfair in dismissing the Crown's action. The Crown has had the use of the Court's facilities and services for some 39 months without either completing exchange of documents or commencing examinations for discovery. Many cases justifiably may take longer, but this is a relatively straight forward case, which has been needlessly delayed. I have considered whether the delay is inordinate and what ought to be the consequences when taken together with prejudice and with a seeming indifference to prosecuting the action.

[32]      Whether a given length of delay is inordinate depends very much on the circumstances of a given case. Here, all the circumstances considered, the Plaintiff is responsible for inordinate delay, without any reasonable excuse. Moreover, the Defendant not only is likely to have suffered serious prejudice, but on its unchallenged evidence, has in fact suffered serious prejudice. In addition, the Plaintiff has given every indication that she has no real desire or intention to bring this matter to a conclusion. The action is therefore dismissed both for want of prosecution and for delay.

                             (Sgd.) "John A. Hargrave"

                                 Prothonotary

Vancouver, British Columbia

July 22, 1998

     FEDERAL COURT TRIAL DIVISION

     NAMES OF COUNSEL AND SOLICITORS OF RECORD

HEARING DATED:          April 9, 1998

COURT NO.:              T-2942-94

STYLE OF CAUSE:          Her Majesty the Queen

                     v.

                     Cragg & Cragg Design Group Ltd.

PLACE OF HEARING:          Vancouver, BC

AMENDED REASONS FOR ORDER OF MR. JOHN A. HARGRAVE,

PROTHONOTARY, dated July 22, 1998

APPEARANCES:

     Mr. Jan Brongers          for Plaintiff

     Mr. Robert Anderson

     Mr. Rom Thoedorakis      for Defendant

SOLICITORS OF RECORD:

     Morris Rosenberg          for Plaintiff

     Deputy Attorney General

     of Canada

     Farris, Vaughan, Wills      for Defendant

     & Murphy

     Vancouver, BC