R & W Such Holdings Ltd., [1996] 1 CTC 53, 95 DTC 5512

Hargrave P.— This motion, in writing pursuant to Rule 324, is brought by the Crown to strike out the plaintiff’s statement of claim for want of prosecution or, alternatively, by reason of the failure of the plaintiff to provide an affidavit of documents.

Request for an oral hearing

The plaintiff has both requested an oral hearing of the motion and has provided affidavit material and written representations in response to the motion to strike out.

Leaving aside that an oral hearing of a motion to be dealt with in writing pursuant to Rule 324 cannot be requested merely by letter, but ought to be made by a formal motion (see Cardinal v. Minister of National Revenue, [1995] 2 C.T.C. 2942, 95 D.T.C. 5182), I have decided to deal with the plaintiffs written request for an oral hearing, filed June 7, 1995, at this point, rather than have both sides expend further time on the issue of an oral hearing.

The Federal Court of Appeal, in Gordon v. The Institutional Head of Matsqui Institution, [1973] F.C. 723 at page 724, set out the basic principle that a request for an oral hearing, of a motion intended to be disposed of in writing, must “...be supported by some substantial reasons for concluding that, in the circumstances of the particular case, the applicant cannot adequately present his application in writing”.

In Karlsson v. Minister of National Revenue, [1995] 2 C.T.C. 85, 95 D.T.C. 5344 (F.C.T.D.) at page 86 (D.T.C. 5345), I considered some of the substantial reasons that the Court has accepted where there has been a request for an oral hearing of a motion intended to be dealt with in writing:

There are a number of instances in which, pursuant to Rule 324(3), the Court will agree to a request by a respondent for an oral hearing including that the matter is complex (Enviro-Clear Co. v. Baker International (Canada) Ltd., [1987] 3 F.C. 268, 13 F.T.R. 244 (F.C.T.D.)); where the issues raise questions of public interest that are novel so that oral argument would be a great assistance to the Court (Molson Cos. Ltd. v. Registrar of Trade Marks (1986), 7 C.P.R. (3d) 421 (F.C.T.D.)); where an assessment of the credibility of witnesses and full legal argument is required (Viking Corp. v. Aquatic Fire Protection Ltd. (1985), 5 C.P.R. (3d) 51) (F.C.T.D.); where there is a substantial reason for concluding that the applicant cannot adequately present his application in writing (Gordon, supra); and, as set out by the Court of Appeal in Kurniewicz v. Minister of Manpower and Immigration (1975), 6 N.R. 225 at page 230, an oral hearing will be granted if the matter is urgent and can be disposed of more expeditiously if an oral hearing is directed, or if so many people are interested in the matter that to present it as contemplated by Rule 324 would prove cumbersome, or if the motion raises a question on which the court desires to hear oral submissions from counsel.

In the present instance, the plaintiff has not given any specific reasons why the motion ought not to be dealt with in writing. Certainly the background to the motion to strike out has been spread over a number of years, however, it is well set out in the affidavit material by both sides. The basic principles and the tests to be applied, in striking out an action for want of prosecution, are also well set out in the precedent cases. I can see no substantial reason why the present application cannot be dealt with by means of the written representations and supporting affidavit material which both the plaintiff and the defendant have filed.

Background to the motion to strike out

This action, which was commenced in October of 1983, arises out of a tax reassessment for the years 1977, 1978, 1979 and 1980.

The defendant’s affidavit material indicates a great deal of delay by the plaintiff, despite some effort on the part of the defendant, over the years, to move the matter along.

It appears that, for a substantial portion of this time, the litigation did not progress by reason of the management of R & W Such Holdings Ltd. by Wolfgang Such who, over a number of years, ran the company almost as a proprietorship with little or no regard either to requirements of governments, or to the rights of non-voting shareholders, or to the good of the company as a whole. As a result of this style of management, in 1992, the Alberta Court of Queen’s Bench appointed a receiver/manager to try to sort our the affairs of the company. All of this is set out in the December 23, 1993, reasons of the Honourable Mr. Justice D.B. Masson in Robert Such et al. v. R.W.-L.B. Holdings Ltd. et al., Alberta Queen’s Bench Action 9301-09986. As a result of those proceedings Wolfgang Such was removed as a Director and the non-voting shares, which constituted the majority interest in the company, became voting shares.

There followed, until October of 1994, some negotiations between the receiver/manager and the Department of National Revenue. Earlier this year, and continuing at present, Robert Such has been involved in litigation as to whether Wolfgang Such is capable of managing his affairs.

Robert Such, an accountant and now President and Director of R & W Such Holdings Ltd., sets out in his affidavit that he has retained new lawyers for the company, has abandoned part of the claim in this action, and has given instruction that the matter be set down for trial. He concludes by giving his view that the delay has been the direct result of the mismanagement of the company by Wolfgang Such as Director and Manager and more recently negotiations between the parties. Further, he is informed by counsel that the appeal has merit.

As to the status of the action itself, examinations for discovery were held in 1985 and 1986. The affidavit of H.G. MacKenzie, of the law firm now acting for the plaintiff, sets out that examinations for discovery and the undertakings arising from the discoveries had been completed and the matter is ready for trial.

Analysis

The filing of the plaintiff’s affidavit of documents on June 7, 1995, albeit late, deals with that portion of the defendant’s motion asking that the action be struck out for failure to produce documents. The effort that counsel for the defendant has put in to trying to obtain an affidavit of documents from the plaintiff can be compensated for in costs. However, I would also note that the defendant did not file an affidavit of documents until just last year.

Test for striking out

Dealing now with the remaining application to strike out the statement of claim by reason of want of prosecution, the three-part test to be applied is clearly set out by the Court of Appeal in Allen v. McAlpine (Sir Alfred) & Sons Ltd., [1968] 2 Q.B. 229, 1 All E.R. 543, at page 268-69 (All E.R. 561):

1. That there has been inordinate delay. It would be highly undesirable and indeed impossible to attempt to lay down a tariff — so many years or more on one side of the line and a lesser period on the other. What is or is not inordinate delay must depend upon the facts of each particular case. These vary infinitely from case to case, but inordinate delay should not be too difficult to recognise when it occurs.

2. That this inordinate delay is inexcusable. As a rule, until a credible excuse is made out, the natural inference would be that it is inexcusable.

3. That the defendants are likely to be seriously prejudiced by the delay. This may be prejudice at the trial of the issue between themselves and the plaintiff, or between each other, or between themselves and the third parties. In addition to any inference that may properly be drawn from the delay itself, prejudice can sometimes be directly proved. As a rule, the longer the delay, the greater the likelihood of serious prejudice at the trial.

The Federal Court of Appeal adopted this test in Canada v. Aqua-Gem Investments Ltd., [1993] 1 C.T.C. 186, 93 D.T.C. 5080.

Inordinate delay

The delay in this instance, whether one measures it from the taxation years in question, or merely from when the statement of claim was issued, in 1983, is clearly inordinate.

I would also note that the defendant appears, over the years, to have tried to move the matter along, and that adds to the burden of the plaintiff to make out a credible excuse.

Credible excuse for the delay

I am prepared to accept the litany of mismanagement by Wolfgang Such of the affairs of the plaintiff, as set out in the reasons for judgment in Such, supra, which appears to have amounted to a total disregard of the interests of the majority of the shareholders, who held non-voting shares, and the well-being of the company, as a credible excuse for the delay.

In recognizing the excuse, I have also taken into account the more recent actions of Robert Such, son of Wolfgang Such, who is a chartered accountant and now President and Director of the plaintiff company, in instructing new lawyers, who have apparently dealt with the outstanding discovery undertakings and have filed an affidavit of documents, thus putting the parties into a position to apply for a trial date.

Serious prejudice to the defendant

In the event that I am wrong in accepting mismanagement of the company’s affairs, by the holder of the majority of the voting shares, as a credible excuse, I have also considered whether there has been serious prejudice to the defendant.

The view of Lord Justice Salmon, in the McAlpine case, supra, referred to above that “As a rule, the longer the delay, the greater the likelihood of serious prejudice at the trial”, while a practical observation, is also a generalization. Without something more, I would hesitate to deprive the plaintiff of its day in Court.

The defendant has pointed to the passing of years and, impliedly, that the memory of witnesses might well have faded. However, the Crown’s affidavit material does not point to specific prejudice that the defendant would suffer if this matter were to proceed to trial. Indeed, examinations for discovery having taken place, a fading of the memories of witnesses may well not be a factor.

In this instance, I do not believe that the plaintiff ought to be prevented from having its day in Court. Indeed, Associate Chief Justice Jerome expresses his reluctance to deprive plaintiffs of substantive rights on procedural grounds in Rae Import Corp. v. Federal Pacific Lakes Line (1984), 46 C.P.C. 30 (F.C.T.D.), at page 31:

In two earlier decisions, Kawasaki Kisen Kaisha Ltd. v. Philipp Brothers Far East Inc. et al. (November 22, 1983 - Court No. T-3269-72), and Parfums Nina Ricci et al. v. Modes Ricci International Ltée et al. (May 1, 1984 - Court No. T-3325-80), I confirmed my own reluctance to deprive plaintiffs of their substantive rights on procedural grounds. It must never appear that the court accepts or encourages such delays and yet in complex litigation, they can scarcely be considered exceptional. Where they do occur, it is almost invariably attributable to solicitors rather than clients, and more often than not, the result of acquiescence on the part of both counsel. There will, of course, be those rare examples when the delays are inordinate, where they are caused by the plaintiff alone and where their effect is to deprive the defendant of the proper opportunity to present his case before the Court. In such circumstances, it may be necessary to foreclose the right of the plaintiff to go to trial by dismissal for want of prosecution. In their absence, it seems far more appropriate to compensate by way of costs, and where possible to expedite the trial, than to risk final determination of issues because of procedural developments for which the parties may not be directly responsible.

In the present instance, those who stand to benefit directly from these proceedings, the family members who are now in control of the plaintiff company, were not directly responsible for the inordinate delay and ought not to be deprived of an opportunity to prove their case. However, I must also consider the time and expense to the defendant, not only in trying to move the action along over the years, but also in preparing a substantial amount of material for this motion.

The order which will accompany these reasons, dismissing the present motion, will require that the plaintiff set the matter for trial by tendering to the defendant a signed joint application for time and place for trial and filing it within forty-five days. In addition, the defendant shall have the costs of this motion, set at $500.00, paid before the joint application is filed.

Order accordingly